[House Hearing, 113 Congress] [From the U.S. Government Publishing Office] AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND RELATED AGENCIES APPROPRIATIONS FOR 2014 _______________________________________________________________________ HEARINGS BEFORE A SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS HOUSE OF REPRESENTATIVES ONE HUNDRED THIRTEENTH CONGRESS FIRST SESSION ________ SUBCOMMITTEE ON AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND RELATED AGENCIES ROBERT B. ADERHOLT, Alabama, Chairman TOM LATHAM, Iowa ALAN NUNNELEE, Mississippi KEVIN YODER, Kansas JEFF FORTENBERRY, Nebraska THOMAS J. ROONEY, Florida DAVID G. VALADAO, California SAM FARR, California ROSA L. DeLAURO, Connecticut SANFORD D. BISHOP, Jr., Georgia CHELLIE PINGREE, Maine NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full Committee, and Mrs. Lowey, as Ranking Minority Member of the Full Committee, are authorized to sit as Members of all Subcommittees. Martin Delgado, Tom O'Brien, Betsy Bina, Pam Miller, and Andrew Cooper, Staff Assistants ________ PART 2 Page USDA Food Safety and Inspection Service.......................... 1 USDA Food and Nutrition Service.................................. 83 USDA Inspector General........................................... 267 U.S. GOVERNMENT PRINTING OFFICE 82-566 WASHINGTON : 2013 ----------------------------------------------------------------------- For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC 20402-0001 COMMITTEE ON APPROPRIATIONS HAROLD ROGERS, Kentucky, Chairman C. W. BILL YOUNG, Florida \1\ FRANK R. WOLF, Virginia JACK KINGSTON, Georgia RODNEY P. FRELINGHUYSEN, New Jersey TOM LATHAM, Iowa ROBERT B. ADERHOLT, Alabama KAY GRANGER, Texas MICHAEL K. SIMPSON, Idaho JOHN ABNEY CULBERSON, Texas ANDER CRENSHAW, Florida JOHN R. CARTER, Texas RODNEY ALEXANDER, Louisiana KEN CALVERT, California JO BONNER, Alabama TOM COLE, Oklahoma MARIO DIAZ-BALART, Florida CHARLES W. DENT, Pennsylvania TOM GRAVES, Georgia KEVIN YODER, Kansas STEVE WOMACK, Arkansas ALAN NUNNELEE, Mississippi JEFF FORTENBERRY, Nebraska THOMAS J. ROONEY, Florida CHARLES J. FLEISCHMANN, Tennessee JAIME HERRERA BEUTLER, Washington DAVID P. JOYCE, Ohio DAVID G. VALADAO, California ANDY HARRIS, Maryland ---------- 1}}Chairman Emeritus NITA M. LOWEY, New York MARCY KAPTUR, Ohio PETER J. VISCLOSKY, Indiana JOSE E. SERRANO, New York ROSA L. DeLAURO, Connecticut JAMES P. MORAN, Virginia ED PASTOR, Arizona DAVID E. PRICE, North Carolina LUCILLE ROYBAL-ALLARD, California SAM FARR, California CHAKA FATTAH, Pennsylvania SANFORD D. BISHOP, Jr., Georgia BARBARA LEE, California ADAM B. SCHIFF, California MICHAEL M. HONDA, California BETTY McCOLLUM, Minnesota TIM RYAN, Ohio DEBBIE WASSERMAN SCHULTZ, Florida HENRY CUELLAR, Texas CHELLIE PINGREE, Maine MIKE QUIGLEY, Illinois WILLIAM L. OWENS, New York William E. Smith, Clerk and Staff Director (ii) AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND RELATED AGENCIES APPROPRIATIONS FOR 2014 ---------- Wednesday, March 13, 2013. DEPARTMENT OF AGRICULTURE FOOD SAFETY AND INSPECTION SERVICE WITNESSES ELISABETH HAGEN, UNDER SECRETARY, FOOD SAFETY, UNITED STATES DEPARTMENT OF AGRICULTURE ALFRED V. ALMANZA, ADMINISTRATOR, FOOD SAFETY AND INSPECTION SERVICE Introduction of Witnesses Mr. Aderholt. Good morning. I want to welcome all the members of the subcommittee to the first of several hearings that we will conduct oversight for the agency and programs under our jurisdiction of this Subcommittee. I want to emphasize that I look forward to working with each and every member of the subcommittee as we move through our hearings, and then into this year's appropriations process later on in the spring. The USDA's Food Safety and Inspection Service work to ensure that our nation's supply of meat, poultry, and processed eggs are safe, wholesome, and correctly packaged and labeled. I want to welcome back to the subcommittee Dr. Elisabeth Hagen, USDA's Under Secretary for Food Safety, and Mr. Al Almanza, the administrator for the Food Safety and Inspection Service. Opening Statement When we have had you before this Subcommittee in the past, it has been to review the President's budget request for the Food Safety and Inspection Service. The President has indicated that his budget submission is late and may not be delivered until April the 8th. Having said that, we still have oversight responsibilities to carry out. And given the state of play on current budget issues, we are in a position to discuss with our panel the activities of the Food Safety and Inspection Service. Dr. Hagen, the work that you and all the men and women of FSIS perform on a daily basis on the behalf of consumers and taxpayers is unquestionably some of the most important work of the Federal Government across the spectrum. Mr. Almanza, you started as an inspector, so you have seen firsthand the importance of the work that FSIS performs. I want to thank both of you for your work, for all the FSIS employees, their work that keeps the nation's food supply safe and wholesome. At this time I would like to recognize the ranking member, Mr. Farr, and see if you have any opening comments. Mr. Farr. Well, thank you very much, Mr. Chairman. Congratulations on your chairmanship and your first reign of this Committee, we look forward to these hearings. We are all faced with sequestration. We are having a lot of questions about it. I guess the real impact I would like to hear you tell us is what needs to be done to give you a little more flexibility. Will that happen? I know that 80 percent of the cut is in salaries. I mean 80 percent of your budget is salaries and benefits. So you do not have a lot of wiggle room. But is there anything Congress can do--we have just given a lot of wiggle room to the Defense Department, and we ought to be able to give some room to the Ag Department, particularly for first responders, which is what your ag inspectors, meat inspectors, poultry inspectors, are. So, everybody is saying you have to live with this sequestration, however, it is just a decision. That is a wrong decision. We made it and we can change it. So if you have some ideas of how we can improve it, I would appreciate that. That is all. Mr. Aderholt. Thank you. Under Secretary Hagen, before I turn the microphone over to you, I would like to say there is a lot of debate surrounding sequestration, as Mr. Farr had just mentioned. I do not agree with the position that the Secretary staked out on the issue as he has been traveling across the country. And FSIS budget has increased by nearly $75 million since 2008 to over $1 billion. And while I realize this is a salary-intense agency, I hope that there is a reasonable and responsible way to meet the challenges of sequestration, while at the same time minimizing the impact on frontline inspectors and the industry alike. With that, I will turn it over to you, Dr. Hagen, and then to Administrator Almanza. And so, without objection, the text of your full statements will be included in the record. Dr. Hagen. Opening Statement Ms. Hagen. Thank you. Mr. Chairman, Ranking Member Farr, and members of the subcommittee, I am Dr. Elisabeth Hagen, Under Secretary for Food Safety. With me today is Al Almanza, the Administrator for USDA's Food Safety and Inspection Service. We thank you for the opportunity to discuss the agency's policies and programs. When I appeared before this Subcommittee last March, I discussed the FSIS strategic plan, which set specific goals for fiscal year 2011 through 2016, including annual benchmarks for reducing illnesses from meat and poultry. However, before highlighting some of our progress, I would like to outline our efforts to mitigate the effects of sequestration on consumers, industry, and the regulated industry and employees. Although the final funding levels for fiscal year 2013 are not yet determined, the projected FSIS sequestration amount is estimated to be $52.8 million, based on OMB assumptions. By law, FSIS is required to examine and inspect all livestock and poultry slaughtered and processed for food. At the end of fiscal year 2012, our frontline team included more than 8,600 dedicated employees and more than 6,200 establishments nationwide. Eighty percent of total FSIS funding is applied towards salaries and benefits, primarily for frontline personnel. An additional 15 percent is allocated to frontline travel, fixed support costs, and other inspection services. Given this formula, and given the advanced stage in the fiscal year, furloughs are unavoidable under a $52.8 million sequestration scenario. I would like to make clear that furloughs will affect all FSIS employees, not just inspectors. Furloughing only non-frontline personnel would not produce a large-enough cut to meet the sequester requirement. Therefore, the current plan is for an across-the-board furlough for all employees for 11 days. In order to minimize the impact on our employees and the marketplace, we intend to apply the furloughs on non-consecutive days, to the extent possible. USDA and FSIS have taken extraordinary measures to reduce expenditures, including big cuts in conference and travel spending. While these measures have produced noteworthy results, they simply are not enough to meet the sequester requirements. Despite funding challenges, FSIS continues to meet current and new statutory obligations. For example, we implemented an important part of the last farm bill when we signed our first cooperative interstate shipment agreement with Ohio last year and agreements with North Dakota and Wisconsin earlier this year. In addition to meeting our statutory obligations, we are always asking ourselves how we can better protect consumers. We know from CDC reporting that foodborne Salmonellosis rates have remained stagnant for years. And despite important steps and promising trends in FSIS data, Salmonella illness estimates from meat and poultry reflect this trend. These numbers tell us that we must better align our activities with risk in order to reduce illness burden. That is why, this past December, we set new requirements for establishments to reassess their HACCP plans for ground poultry products to account for several recent Salmonella outbreaks caused by these products. This action will improve companies' ability to identify hazards and better prevent illness. We are also developing a raw chicken parts baseline in order to collect data on the prevalence of key pathogens in the poultry products most commonly purchased by consumers. In order to better align our activities with identified risks, we have proposed to modernize poultry slaughter inspection in a way that focuses our inspection activities and our workforce on those things that matter most for public health protection. Currently, many FSIS plant personnel are focused on looking for visible defects, despite the fact that we know that it is the pathogens they cannot see that are the true risk to consumers. Under this new proposed system, FSIS would focus on critical food safety tasks. The tasks related to quality assurance would be turned over to the company. FSIS would continue to inspect every carcass, as required by law. We estimate that the new poultry inspection system would prevent at least 5,000 illnesses per year. The need for modernizing our food safety system is evident. As our scientific knowledge of what causes foodborne illness evolves, we must ensure that our regulatory tools correspond with that current knowledge. Our proposal will help the agency respond to these challenges with greater efficiency. We estimate that taxpayers will save approximately $90 million over the next 3 years, and that industry and consumers will enjoy a shared benefit of $250 million annually. The implementation of the Public Health Information System also provides us with another important tool to do our work better. This system supports a comprehensive, data-driven approach to inspection, allowing us to identify food safety threats more rapidly and more accurately. We must also ensure that our in-commerce activities best align with risk. For example, FSIS is developing a proposed rule to require retail operations to maintain accurate grinding records, which would greatly improve our ability to trace contaminated product from retail to its source. While our primary focus is ensuring that industry produces safe food, we can also prevent foodborne illness by collaborating with our federal and state partners and educating consumers. In this past year we have worked with federal partners and stakeholders on issues of pre-harvest food safety and consumer education, and we have sought opportunities to leverage resources when possible. In one visible example, FSIS, HHS, and the Ad Council have continued our work on the Food Safe Families campaign, which educates consumers about the risk of foodborne illness, and how to prevent it. For an investment of $2.8 million, the Ad Council has run a national, multi-media campaign worth an estimated $46 million. We are using many different tools to prevent foodborne illness in the most effective and efficient ways possible. Government can and should deliver more than people expect, and we are committed to doing so. Thank you for the opportunity to appear before you today, and we look forward to your questions. [The information follows:] [GRAPHIC] [TIFF OMITTED] 82566A.001 [GRAPHIC] [TIFF OMITTED] 82566A.002 [GRAPHIC] [TIFF OMITTED] 82566A.003 [GRAPHIC] [TIFF OMITTED] 82566A.004 [GRAPHIC] [TIFF OMITTED] 82566A.005 [GRAPHIC] [TIFF OMITTED] 82566A.006 Mr. Aderholt. Thank you. Mr. Almanza. Mr. Almanza. I do not have prepared remarks; I'll just submit them for the record. [The information follows:] [GRAPHIC] [TIFF OMITTED] 82566A.007 [GRAPHIC] [TIFF OMITTED] 82566A.008 [GRAPHIC] [TIFF OMITTED] 82566A.009 [GRAPHIC] [TIFF OMITTED] 82566A.010 [GRAPHIC] [TIFF OMITTED] 82566A.011 [GRAPHIC] [TIFF OMITTED] 82566A.012 [GRAPHIC] [TIFF OMITTED] 82566A.013 [GRAPHIC] [TIFF OMITTED] 82566A.014 [GRAPHIC] [TIFF OMITTED] 82566A.015 Mr. Aderholt. We will proceed with the hearing under a five-minute rule. Members will be recognized for five minutes in order of seniority at the dais at the beginning of the hearing, and then in order of appearance, alternating between the majority and the minority. We may have several rounds of questioning to allow ample time for everyone. So I would ask that everyone in the room, if you do have an electronic device, if you could cut that off or put it on silent so that it will not disrupt the proceedings as we move through the Q&A. FURLOUGHS I would like to cut through some of the rhetoric that has surrounded FSIS furlough issue, and really try to figure out what the whole story is here, as it relates to frontline employees and the mandatory work that they perform in order to assure, as you mentioned, that America's meat, poultry, and egg products continue to be the safest in the world. Secretary Vilsack traveled the countryside, telling folks that furloughs could last up to 15 days, that many of those dates would be consecutive, and the economic loss to the economy could be upward to $10 billion. More recently, however, the Secretary told the House Ag Committee on the authorizing side that the furloughs could now be 10 to 11 days. You are, of course, the under secretary for FSIS. Could you tell the subcommittee what your assessment of the furlough situation would be? Ms. Hagen. Mr. Chairman, at this point the correct answer is that we are looking at 11 days. Now, that number has some flexibility. As we look for continued opportunities to save money as we put hard hiring restrictions in place, it is certainly possible that we could see that number get a little bit smaller. But 11 days is what we are looking at here. Mr. Aderholt. Could you clarify for the committee? Will these furloughs be consecutive? Will they spread out over a period of time? And what is the period of time that you are anticipating these furloughs to occur. Ms. Hagen. Sure. Thank you, Mr. Chairman. At this point it is absolutely our intent to try to make these non-consecutive days. We want to minimize the impact on the marketplace, we want to minimize the impact on our employees. This is very difficult to absorb for anybody. And so, to the extent that we are able, we intend to spread these furlough days out over non-consecutive days. As we discussed when we met in your office, we do have some constraints when it comes to our collective bargaining agreements, requirements that we have in terms of notifications, in terms of the right to oral conferences, things like this, that put us in a bit of a different position than some other agencies. But at this point in time, that is what we are looking at: eight, hopefully non-consecutive days. And we think that this would likely start mid-summer some time. Mr. Aderholt. When a furlough day occurs, will the entire FSIS workforce who are anticipating in the furlough have to take the same day, or will you be able to manage furloughs in a responsible manner that will stagger USDA operation, and so that would minimize the impact? Ms. Hagen. At this point we are looking at furloughing everybody on the same days. We actually think that is the most responsible and we think it is the most equitable. It is hard, when you look at how integrated inspection is in this day and age, all the support that is required for frontline inspection, to think about furloughing administrative staff at a different time from frontline inspectors, or trying to roll the furloughs throughout the country, it is hard to think of how we would have an equitable impact on the regulated industry. If we were to do it by just class or establishment size or geographic location, someone is going to get the short end in that deal. Mr. Aderholt. As you mentioned in your comments, the furloughs would begin, you say, somewhere mid-July? Some time in July? Ms. Hagen. That is what we are anticipating, Mr. Chairman, based on the requirements that we have in our collective bargaining agreement. It is just an estimate, and things could always happen sooner if we are able to move through that process more quickly. But that is what we are estimating. FURLOUGH DAYS FOR INSPECTORS Mr. Aderholt. Correct me if I am wrong, but if we are talking primarily about people who make somewhere in the range of $32,000 to $40,000 per year, if this is the case, then how many days per pay period will inspectors have to be furloughed? Ms. Hagen. At this point we are looking at two days per pay period. Is that right? One day per week. Mr. Aderholt. One day per week. Can you give the subcommittee a scenario in which FSIS could move through the furlough days earlier in the fiscal year to minimize the impact that it would have, both to the inspector and also to the industry? Ms. Hagen. Is it all right if I ask Mr. Almanza to take that? Mr. Aderholt. Please. Mr. Almanza. So as we move through the process, we have a bargaining agreement that we have to comply with. And in that time we have already notified the union of the notice to bargain. That would be 15 days in which we come to an agreement as to when the bargaining would occur. We have not been notified as to whether we will bargain or not. The union has not notified us of that. We are anticipating bargaining to occur, if they request bargaining, some time in April. So, if that comes to an agreement rather quickly, then we could expedite the notification of our employees, which is a 30-day period. We notify all our employees of what the agreement with the union is. And then we start with the oral conferences of the employees that request them. Mr. Aderholt. Mr. Farr. FURLOUGH IMPACT ON TRADE Mr. Farr. Mr. Chairman, I have to say that walking in this building, this whole process of sequestration just infuriates me. It was totally unnecessary, it is a partisan tool, it was picked up, and now we are implementing. We had people waiting in line to get into this building, trying to come in here to petition their government, and they can't get in. They have to wait a half-hour. It is like waiting for voting. This country is just falling apart with this cut, squeeze, and trim mentality that we have in this House--right now. And here we are, with this key requirement in our country that meat and poultry has to be inspected before people can consume it, a great thing. And we are talking about how do we lay these people off. It seems to me that the consequences are, just like the lines outside, you are going to have a scarcity of resources-- you are not going to have as much meat processed and poultry processed. Therefore, price is going to go up. Supply and demand. Is this going to put a greater pressure on imports? Are the imported product going to be able to come in a lot cheaper because they don't have to wait in line to get the inspections? We have some great concerns about imports, and Ranking Member Rosa DeLauro is chairing her own committee right now. She beat on the Chinese chicken to the point that it would infuriate you. But I just think that what frustrates me is that this isn't necessary, and that as we learn the problems we can make corrections. I come from a state that went through this because of partisan gridlock, took a two-thirds vote to make any decision. The state couldn't get those votes, went into furloughs. Have you learned any lessons from California? I mean they have a lot of first responders. And does this furlough affect those states with equivalency agreements--in a few states you have your meat inspection contractor through the state. Isn't that correct? I mean you have given the authorities for the states to run the federal program. So what happens to those states in furloughs? You have a contract with them. Are they exempted? Again have we learned? What happened in California, politically, is that people got so fed up with it they threw all the Republicans out of office and they--went out and voted for taxes by statewide ballot. And so I think some day we are going to get over this, too. But I am concerned--as you know, as this Committee's Ranking Member, which is responsible for the budgets of the USDA and FDA, we are here talking about how we are going to manage food safety through a lot of uncertainty and chaos, which has got to create market disruption and all kinds of unintended consequences, like possibly states that are going to be severely affected by it. So, if you could answer those questions, I would appreciate it. Ms. Hagen. Thank you, Mr. Ranking Member. I think the points that you wanted us to address were imports and how states would be affected and whether we had learned any lessons from a state like California. Import inspection will be affected, just as domestic inspection will be affected. So I think there will be market disruptions, and I can't speculate on whether there will be a desire to bring more food into the country. But import inspections will be impacted as well, because those inspectors will also be furloughed. As far as have we learned anything from California---- Mr. Farr. So does that reduce the amount of imports? Ms. Hagen. It means that I-Houses will be shuttered on the same days that--or that our activities will not be able to be performed in those I-Houses on the same days that other establishments will not be operating. Mr. Farr. Does that have some treaty issues and treaty violations? Are we going to now, like we did with that damn cotton in Brazil, have to pay--what was it, $150 million a year to offset WTO violations? Ms. Hagen. I would have to take that question back to our colleagues at the Department. But I can tell you that import inspections will be impacted. Just as domestic products cannot leave establishments without the mark of inspection, imported product cannot leave those import houses without having gone through our system and having been looked at by our inspectors. Regarding your question about whether we have learned any lessons from California, this is a blunt instrument. We don't have the flexibility to be able to do things differently than we are doing them. We have taken just really unbelievable number of steps in order to reduce our spending and to just do things more effectively and efficiently at FSIS. We reduced our fiscal year 2013 budget allocations. We have dramatically reduced conference and travel spending. We have eliminated positions at headquarters. We have, you know, put a hard hiring freeze on. We have done all kinds of things. But that is not going to give us the money that we do not have under sequester. That is not going to give us any kind of flexibility to be able to do what we cannot do. And the last thing, I wanted to address your question about whether it impacts states. Absolutely, this will impact states. And when we have to cut every line item across the board, we will be impacting our support to state programs. [The information follows:] Furlough Impact on Imports As I stated in my testimony, given FSIS' budget allocations, furloughs would be unavoidable under a sequestration scenario. In turn, furloughs would affect FSIS import inspections and limit available meat and poultry coming into our country. It is possible that an impact on meat and poultry imports due to furloughs may be construed as an international trade issue. Mr. Farr. Are there legal liabilities for doing that? Ms. Hagen. Our legal team has looked at these issues repeatedly and feels that our interpretation of the statutes is correct. Mr. Farr. So the states cannot sue for you not living up to your contract obligations? Ms. Hagen. To your specific question, Mr. Ranking Member, I would have to take that back and get an answer. But certainly our legal team has looked at these issues from multiple different perspectives. [The information follows:] Furlough Impact on States The authorization language for the primary cooperative state meat and poultry inspection program authorizes FSIS to reimburse ``up to'' 50 percent of approved state expenses. FSIS could therefore legally reimburse state costs at a lesser percentage than 50 percent. Mr. Aderholt. Mr. Latham. SEQUESTRATION IMPACT Mr. Latham. Thank you, Mr. Chairman, and congratulations on your new position here, and the ranking member. Welcome. You know, when the President insisted upon sequestration and the Budget Control Act, were you notified? Were you told to make any preparations? Did they consult with you to find out what the ramifications were going to be? Ms. Hagen. Did the President personally consult with me? Mr. Latham. Did anyone from the White House consult with you as to what was going to happen when his policy went into place? Ms. Hagen. Certainly, Congressman, everybody in the Administration has been aware that there was the threat of sequestration for some time now. And, as I just outlined, we have taken a lot of steps to be able to prepare, not just with the threat of sequestration, but just to manage our fiscal house better than we have, you know, in years and decades past. So certainly, people were prepared that this could happen. But I think no amount of preparation can put us in a position to be able to absorb $53 million in cuts 6 months into a fiscal year. Mr. Latham. Have you been told to make it as painful as possible, like other parts of the USDA? Ms. Hagen. Absolutely not. Absolutely not. Mr. Latham. Because, you know, the statement was that, well, it is going to be all this terrible stuff out here. We want to make sure that it is as bad as possible. Have you ever been told that? Ms. Hagen. I am not aware that any statements like that have been made within USDA. And certainly no statements like that have been made to me. As I have told the members of the subcommittee this morning, we simply don't have the flexibility to do anything else at this point. Mr. Latham. When there was a threat of a government shutdown, Mr. Almanza said that what would happen--because if the government shut down--I am quoting--``would impact business. We are making plans for an orderly shutdown, but food safety will continue in the absence of appropriations.'' Is--there is no contingency plan out there. There was no-- and if you have an emergency, is there a plan? Ms. Hagen. Congressman, there is absolutely a plan, but it is a completely different scenario when we are talking about a lapse in appropriations, where we expect that eventually funding will be provided and people can be reimbursed. In this situation we are looking at mandatory, permanent cuts. Mr. Latham. Right. Ms. Hagen. And we are prohibited by law from spending money that we don't have. We also can't have people work for free. Mr. Latham. When did you start making decisions as to when these policies were going to be put in place? And I still do not understand why you cannot have rolling furloughs that you would not disrupt inspections. Ms. Hagen. So we have been doing as much financial planning as we can. Mr. Latham. Since when? Ms. Hagen. Really since Mr. Almanza and I have been a team in the Office of Food Safety. For the last three years we have been trying to manage things in a conservative fashion. Mr. Latham. Having to deal with sequestration? Ms. Hagen. As I said, no amount of financial planning could prepare us to be able to absorb $52.8 million in cuts 6 months through a fiscal year. Mr. Latham. Have you talked to the White House, why they insisted on it? Ms. Hagen. I have not personally talked to the White House. I think that Congress can solve this problem. Mr. Latham. But the President proposed and insisted it be in the Budget Control Act, but you haven't talked to him about the ramifications. Ms. Hagen. I think the President is well aware of the ramifications. Mr. Latham. But you haven't talked to him? Ms. Hagen. I have not spoken to the President personally about this, no, Congressman. FURLOUGH IMPLEMENTATION Mr. Latham. Why cannot you have rolling? Ms. Hagen. Well, there are a number of reasons. When you look at the complexity of what we do in the scheduling of 8,600 people in 6,200 establishments nationwide, ensuring--at this point we are not concerned about the safety---- Mr. Latham. So you are going to shut them all down at once, rather than to roll through it so that they can continue operations? Ms. Hagen. Well, if I may explain a bit of our reasoning behind that, at this point we are not worried about the safety of these products, and that is one thing that will protect producers and protect packers and processors, because the product cannot go out the door without the mark of inspection on it. So we are not worried about the safety of the product. When we begin moving people around to assignments that they have not had, training them for assignments that they don't normally work in, when we have to expend money on travel to move people to cover something like that, then we start to worry about food safety, and then we are looking at spending even more money that we do not have. But the main concern driving that is being fair and equitable, so that if we start in one part of the country or we start in one particular product class, or one type of establishment, and that particular sector gets impacted, if this gets worked out at some point along the way someone has taken a hit that someone else isn't going to take. So there was no way to produce a fair and equitable impact by rolling this across the country. So it is really those two issues---- Mr. Latham. So shutting down everything is fair and equitabler; working through it would not be. Ms. Hagen. This is not a situation that we ever wanted to find ourselves in. And so we are trying to manage it to the best extent that we can and in the fairest way possible. And part of doing that is doing non-consecutive days so that we can keep animals moving through the animal pipeline, albeit slower. We think that is a lot better than shutting down everything for consecutive days or consecutive weeks. Mr. Latham. I am out of time. Thank you, Mr. Chairman. Mr. Aderholt. Mr. Bishop. SEQUESTRATION MANDATE/FLEXIBILITY Mr. Bishop. Thank you very much. Dr. Hagen and Mr. Almanza, I certainly appreciate the tremendous challenge that your agency faces with regard to food safety. But what you are doing is really in compliance with the directive from Congress under the Budget Control Act. Is that correct? Ms. Hagen. That is correct, sir. Mr. Bishop. And what the Office of Management and Budget and what the President has undertaken is really compliance with the mandate from Congress. Is that correct? Ms. Hagen. That is correct, sir. Mr. Bishop. So it is really not the President's sequester, it is the responsibility that the--or the mandate that the congress has placed upon the executive branch to implement these cuts, these painful cuts, the cuts that may very well cause some real problems for the consuming public. You talked about the fact that in the implementation of the sequester the--you did not have the flexibility that would allow you to do it in a less painful manner. Are you familiar with the continuing resolution that the Senate has adopted, which includes the agriculture appropriations bill? Does that-- as compared to the CR that passed the House, does that provide any additional flexibility, were the Senate version to become law? Does it give you any more flexibility than the CR that came out of the House? Ms. Hagen. At this point, Congressman, we don't feel that we do have more flexibility. I understand there are discussions about ways in which that could be achieved, but no. Mr. Bishop. What I am asking is the bill that has been drafted in the Senate, as I understand it, includes Agriculture, among other agencies, which the House maintained the same level of funding for Agriculture as it did in, I think, 2012. Ms. Hagen. That is correct. Mr. Bishop. Prior to the implementation of the sequester. But for military construction and for defense some flexibility was given to reprogram some of the accounts which the agencies--those two agencies--indicated would be very, very helpful to them, although they would still experience pain. But it would give them a little bit more leeway to deal with what they had to do. And what I am asking is the Senate apparently is moving on a track and they have developed a CR which the Senate Appropriations Committee has taken up which includes Agriculture, and which, obviously, would include your agency. Would that piece of legislation that they are working on and the concepts that they are working on, would that give you more flexibility, since you mentioned in your testimony the lack--in response to the questions--the lack of flexibility, will that give you a little more flexibility than--not necessarily all that you would like to have, all the resources that you would like to have, but would it give you more flexibility to deal with the impending exigencies that you are faced with? Ms. Hagen. My understanding of that, of the Senate version of the CR, Congressman, is that it would not give us additional flexibilities. The funding levels are different, but it would not give us additional flexibilities. If I am incorrect in that interpretation, we will certainly correct that for the record. PROPOSED USER FEES Mr. Bishop. All right. Let me go back to the fiscal year 2013 budget. There was a proposal to generate approximately $13 million in new user fees--that was the submission from the Administration--as well as in the two previous budgets, which included a user fee to be collected from the establishments for additional inspections due to failure in performance by the covered establishment, and a food safety services user fee that would recover part of the cost for providing the FSIS services at the establishments and the plants. Are you--should we expect a similar proposal this year? Ms. Hagen. As you know, Congressman, I cannot comment on what is contained in the President's 2014 proposal. But you are correct, we have put up user fee proposals in previous years. Mr. Bishop. I am sorry? Ms. Hagen. You are correct that we have put up user fee proposals in previous years, but I cannot comment on what is in the 2014 request. Mr. Bishop. Were you to have the additional user fees, would that help your situation? Ms. Hagen. I don't see how user fees would help the situation, no. Mr. Bishop. Well, how would they have helped in the previous budgets that were submitted? Ms. Hagen. User fees were submitted--we had two different types, but the type I think that folks are most familiar with would be sort of a for-cause user fee, where if a plant was involved in an outbreak or an investigation and it required additional taxpayer-funded resources in order to solve the problem, solve the outbreak, that the plant could be charged back. Those user-fee proposals have never been approved by Congress. But that is not what we are--that is not the need that we are talking about for--here, when we talk about sequestration. Mr. Aderholt. Mr. Rooney. FURLOUGHS Mr. Rooney. Thank you, Mr. Chairman. I think that, you know, before I ask you a question, I think that this idea that we are getting into a back-and-forth over, placing or trying to infer that there is a blame game with sequester and the implications, I think that we can all agree that it is bad. None of us up here want to go through what we are talking about. And now we are trying to figure out the best way forward to deal with the situation. You know, we can drive ourselves crazy trying to figure out whose idea it was or who the blame should rest on, but the fact of the matter is that the people I think that are not only in this room but who are interested in this hearing would like to know how we are going to move forward. So with that I will just say or ask, if I could, during the past government shutdowns and preparations for shutdowns, FSIS declared inspectors ``essential employees,'' who would remain on the job, despite furloughing other positions. The Agency never indicated the inspection system would be incapable of operating in this manner for a short period. Moreover, the Agency routinely provides inspectors for weekends and overtime shifts. That being said, I think you sort of addressed some of this already, why does FSIS take the position that the inspection system cannot function temporarily without all supporting operations running at full capacity? Ms. Hagen. Thank you for your comments and your questions, Congressman. In the past we have designated or identified employees as being essential or excepted from a shutdown scenario. We are not talking about a shutdown scenario, we are not talking about a lapse in appropriation. We are talking about permanent mandatory cuts. We cannot--we are prohibited by fiscal law from spending money that we do not have. We do not have enough money to do the work. And we cannot ask people to work for free. So this is a different situation than we are in when we have a shutdown. And I think the second part of your question was about overtime. We are not aware of any mechanism by which inspectors could be paid in an overtime fashion because they are not considered to be in overtime status until they have worked 40 hours. So this is something that we have been asked, it is something that we have looked at, and it is the opinion of our legal team that that is not something that can be done. Mr. Rooney. Thank you, Mr. Chairman. Mr. Aderholt. Ms. Pingree. SEQUESTRATION Ms. Pingree. Thank you, Mr. Chair. Congratulations on being the new chair, and thank you for welcoming me to your Sub- committee. I am very pleased to be here and I was very pleased to visit your home state of Alabama. I did not expect I would coincidentally get to see your home state. It was nice, it was a great trip. So, thank you very much for being here today, and it is a pleasure to hear some of your testimony and some of the challenges that you are facing. I did not intend to weigh in on the sequester, and I appreciate how you have laid out, you know, what has got to be a very challenging situation. When you think about the essential needs of food safety and the importance to our country of having this food inspection system, and how you figure out going about those cuts, I do not have any better suggestions for you. And the only thing I would say to some of my colleagues-- and I appreciated Mr. Rooney saying this--you know, and I think it is appropriate to just try to figure out who is to blame, here. Congress voted for this act. I am actually very proud to say I did not vote for this. I did not believe that the Budget Control Act was the way that the Congress should conduct its business. And I think, like many Members of Congress, we had been hoping that we would come to a completely different solution, as in people would come to their senses about a right way to go about cutting our deficit, and we are not there yet. And it is, I know, an extreme burden on budgets across state government, and an issue that many of us are dealing with in our home states. So I am sorry you have to be in this situation. I see how dramatically different it is from a government shutdown. These are permanent, long-term cuts. And if we are going to care about the future of food safety in this country and some of the huge challenges that do mean life or death and how to handle them appropriately, we are going to have to pay a lot of attention to how we handle this in the future. I really want to use this opportunity to ask some substantive questions about the work you do. It is my first opportunity to really get to know your department better. And coming from the state of Maine, as many people do, we have lots of issues in our home state and are interested in how we interact with FSIS. SALMONELLA OUTBREAK We talked to you about this a little bit in December 2011. We had a pretty serious outbreak of Salmonella. They are all serious, but this one garnered a lot of attention in a grocery chain in our state, and affected several individuals in Maine and dozens around the country. Now, you conducted a thorough investigation of the outbreak and determined that, because of the current grinding rules in place, and because they were voluntary, there wasn't enough complete information to determine the origin of the contaminated beef. I found people who talked to me about this situation, in fact, were shocked, given our current system of food safety, that information wasn't available, and that, in fact, you could say to someone, ``We really just don't know where it came from.'' I know you brought this up today, and I know we are in the rulemaking process. I am very supportive of the idea that you are working on those rules, and I have also brought forward to the USDA some of the concerns I have of how you do this in a way that also treats the small retailers in a way that they are not unable to continue doing business. So, can we talk a little bit about this? I would love an update. I get asked all the time about when this rule is going to be finished. It is 15 months since that outbreak. And back in my home state people are saying, ``Hey, did you ever fix that problem? Does it require another piece of legislation?'' Where are we with that? Ms. Hagen. Thank you for your question, Congresswoman. Yes, we think this is important. For some time we have been aware of what an impediment poor record-keeping can be to solving an outbreak. It is a problem for public health investigators in order to--so we have people get sick associated with a retail chain. If we don't know what went into that product, we can't tell what the ultimate source is, we can't mitigate the scope of the impact to the extent that we would like to. It also is a problem for the retailer, because they end up with the liability from those illnesses and that contaminated product. So we do think it is important to have accurate record-keeping. We have been working with the regulated industry for some time to try to find ways that we can do this voluntarily. We think that it is time that a requirement be codified. And to your concern or question about doing this fairly with different size establishments, I think that the proposed rule that we will eventually put forward will take that into account, and will set forth what we think is important in accurate record-keeping, why we think it is important, and will allow flexibility on how different size and types of establishments get there. Ms. Pingree. Well, I appreciate that, and I will certainly be following that closely, since we have a variety of everyone, from large, international retailers based in our state to people who like to sell directly to the consumers who follow clean and healthy practices, but need to be able to continue that, and consumers who really want to have that opportunity. Again, given that it is 15 months since that outbreak, and in conversations that we had at that point, we gave our constituents the sense that, you are working on this. Can you give me just a little more of the timeline of the rule-making process, or where you are with developing a rule? Ms. Hagen. Sure. It is always hard to give a firm timeline, but this is a priority piece of policy for us. And we hope to have a proposal ready to head over to the Office of Management and Budget in the next few months. That is probably the best I can tell you. Ms. Pingree. Great. Well, we will certainly be staying in touch. And thank you very much. Thank you, Mr. Chair. Mr. Aderholt. Mr. Fortenberry. SEQUESTRATION BACKGROUND Mr. Fortenberry. Thank you, Mr. Chairman, for conducting this important hearing. And as our first official hearing under your leadership I want to say I look forward to serving with you and appreciate your willingness to be so generous in welcoming me to the committee. Dr. Hagen and Mr. Almanza, thank you for appearing today. I think it is important to back up and have a little bit of a history lesson here on the sequestration process. Over a year-and-a-half ago we bumped up against a debt ceiling which, in the past, has been a routine measure in which Congress undertakes to raise the amount of borrowing authority that the Administration can have. But given the fact at that time we were around $16 trillion in debt, the overall size of the output of the economy--this year we will probably approach $17 trillion--the debt ceiling became a focal point, an important focal point of a debate about the fiscal future of this country. And so, I voted to increase that debt ceiling. But there was a deal that was put in place that we were only going to increase it by an amount that was less than the amount of spending reductions that went into effect. The second negotiated point was that there was going to be a supercommittee, which was charged with the task of trying to break through the Administration's and the legislative branch's logjam on how do we properly reform our tax code, as well as undertake constructive spending reductions to get this fiscal house in order. The third part of that agreement was if the--to give an incentive to the supercommittee to act, and the rest of Congress, we would entertain a sequestration process, which is a big, fancy Washington word for automatic spending cuts, which were supposed to be so distasteful to everyone involved because they disproportionately affect military and military infrastructure, but your work as well as all the other what we call discretionary, non-defense discretionary components of the government, that there was going to be a real motive to get this done. Well, the supercommittee failed, and here we are. So we are having to deal with, yes, a clumsy way in which to go about the necessary reductions in spending, and we wish that were not so, and we will continue to look for a more appropriate way to get the fiscal house in order with the proper amount of flexibility to reduce spending in the right way. But we are where we are. So I think it is important that we all understand where this came from. It was the President's original idea, supported by Congress. So we are in full partnership on this. FURLOUGH IMPACT With that said, if you shut down your inspections on a continuous basis, will that disrupt the nation's food supply and undermine the food safety of our nation? Ms. Hagen. Thank you for your question, Congressman. I think it potentially will disrupt the nation's food supply. I cannot tell you to what extent, but I think there could certainly be shortages. We differ from FDA in terms of our statutory obligations for inspection. We are required to be in every slaughter and processing facility every single day. And for establishments that slaughter livestock and poultry, we have to be there for the entire duration of operations. So, this is an enormous economic impact if we have to furlough our entire workforce. We do not think that this is going to have a food safety impact, because the product still has to be inspected and passed. It cannot leave establishment, it cannot be slaughtered, it cannot be processed, and it cannot get the mark of inspection on it without our people there. So at this point I think what we are looking at is an enormous economic disruption, not only to the regulated industry, but to the people who work for that industry and to the consuming public. Mr. Fortenberry. All right. So, you have broken up the answer into two parts. Yes, safe food, but a disruption, potentially, on supply. So, with that said, why this format for dealing with the reductions that have been proposed to your agency? Ms. Hagen. We don't have any other format available to us, Congressman. We have--88 percent of our workforce is frontline workforce. And we have--80 percent of our budget goes to salaries and benefits, 15 percent of the budget on top of that goes to other fixed costs. That leaves us about five percent money to do operating expenses and supplies. We are halfway through a fiscal year. We are talking about nearly $53 million. There is no other way to come up with that kind of money, other than to furlough our workforce. Mr. Fortenberry. Now, if you did not do this continuous reduction or shutdown of inspections, and you asked--I think this gets into what you were inferring, Mr.--I am sorry, I am going to look at your name again--Almanza? Mr. Almanza. Yes. Mr. Fortenberry. In terms of union negotiations. What other flexibility do you have, in terms of overtime, which, as I understand it, would then be picked up by the industry? Ms. Hagen. We don't think that we have any other flexibility. Mr. Fortenberry. Well, that is kind of why we are here, to hear what other options there are. Because the twofold purpose of the agency, obviously, is safe food supply but an adequate food supply, as well. Ms. Hagen. If we thought there were other options we would have pursued them. We don't think there are any other options on the table. Again, when you look at how our budget is structured, and you look at where we are in the fiscal year and how large of a target we have to meet, these are mandatory, permanent cuts. We don't see any other way forward. BUDGET INCREASES Mr. Fortenberry. What is the increase of your budget that you have received over the last five years? Ms. Hagen. I would have to bring that number back to you. I don't have it with me. Mr. Fortenberry. It is substantial? Ms. Hagen. I don't know if I would call it substantial, no. But it has actually come down since 2010. Mr. Fortenberry. You have an answer to the question? Ms. Hagen. We don't have a strict percentage increase, but we can certainly get that for you, for the record. Mr. Fortenberry. Five years I would like to see, if you would, please. Ms. Hagen. Sure, we can do that. [The information follows:] FSIS Budget FSIS' budget has increased approximately $74 million, or 8 percent over the last 5 years (2008-2012). These increases are directly related to rising salary and benefit cost ($50 million) due to Federal pay raises and mission related increases which include but are not limited to the takeover of inspections for New Mexico; strengthening of humane handling; implementing the Cooperative Interstate Shipment program; integration of the Public Health Information System (PHIS), improving telecommunications and meeting cyber security mandates; and increased Food Safety Assessments. Mr. Fortenberry. Thank you, Mr. Chairman. I yield back. Thank you. Mr. Aderholt. Ms. DeLauro. EQUIVALENCY DETERMINATIONS Ms. DeLauro. Thank you, Mr. Chairman. I apologize, we are all running between various hearings, so--and I understand that the impact of sequestration has been discussed, it may continue to be discussed, so--but let me make a point before my questions. I continue to be concerned about the process used to announce changes to the equivalency of verification process. And so what I would like to do is to get a complete response to each question from the November 20, 2012 and the January 2013 letters, and that they be included in the record of this hearing. [The information follows:] [GRAPHIC] [TIFF OMITTED] 82566A.016 [GRAPHIC] [TIFF OMITTED] 82566A.017 [GRAPHIC] [TIFF OMITTED] 82566A.018 [GRAPHIC] [TIFF OMITTED] 82566A.019 [GRAPHIC] [TIFF OMITTED] 82566A.020 [GRAPHIC] [TIFF OMITTED] 82566A.021 [GRAPHIC] [TIFF OMITTED] 82566A.022 [GRAPHIC] [TIFF OMITTED] 82566A.023 [GRAPHIC] [TIFF OMITTED] 82566A.024 MECHANICALLY TENDERIZED BEEF RULE Ms. DeLauro. So, moving on, I was very, very delighted to see FSIS finally sent a proposed rule to OMB to label mechanically tenderized beef products. When do you expect the proposed rule to be published, in which quarter of this year? And I am going to ask you to answer quickly, because they only give me five minutes, so---- Ms. Hagen. Thank you---- Ms. DeLauro. Yes, when do you expect the rule? Ms. Hagen. It is nice to see you, and thank you for your questions. The rule has been at OMB since September, and we don't control how quickly it comes out of the OMB review process. They have asked for an extension. This is a high priority for us. We will keep trying to get this done. So I can't give you an estimate of when it will come out---- Ms. DeLauro. In this year? Which quarter of in year? Ms. Hagen. Yes, that was our intention. Ms. DeLauro. Okay. Okay, well, we will see what we can do in that respect, as well, to try to get that rule to be published. POULTRY SLAUGHTER MODERNIZATION RULE Second, the status of the proposed rule on poultry slaughter. Are you moving forward? And, if so, when will a final rule be published? Many of the public comments submitted to date raise serious food safety and worker safety issues. Can you address those concerns? And do you anticipate making substantial changes to the proposal, based on the public comments? Ms. Hagen. Thank you for your question. As you know, we did receive quite a few comments on the proposed rule, and it has taken us some time to get through all those comments. We are still in the process of comment review, and incorporating information that we did receive through the public process into what would be a final rule. I really can't speculate on how quickly something might move through the process. We don't control all the steps of notice and comment rulemaking. But to your--did you want to say something? Ms. DeLauro. Yes. Well, I am--again, do we have a time frame in which there will be a final rule published? Ms. Hagen. Well, we are still working on the final version of the rule at the Department. When it goes to the Office of Management and Budget, they then have 90 days to review it, coordinate interdepartmental review. They can ask for an extension. So that is the part of the process that we do not control. Ms. DeLauro. And what about substantial changes to the proposal, based on public comment? Ms. Hagen. As with any notice and comment rulemaking process we get some information that is really helpful, as we go forward and think about what the final version of a rule should be. So some of it has been incorporated. All of it will be addressed. Whether it will impact the final regulatory text or not is not something I can really talk about. POULTRY SLAUGHTER RULE--WORKER SAFETY Ms. DeLauro. You know, it is--well, anyway, the proposed rule indicates one facility would participate in a NIOSH study that is not complete. Will FSIS wait until that study is complete before moving forward? And are you amenable to including a requirement that is similar to that from SIP that plants that opt into this modernization open their doors to NIOSH? Ms. Hagen. Well, we are happy to be working with NIOSH, and we are happy to be consulting with OSHA on the worker safety concerns. As I think the subcommittee probably well knows, our statutory authority does not extend to rulemaking for worker protection. So we are happy to be working with the entities within the executive branch that have the ability to do that, and have the expertise to study the issue---- Ms. DeLauro. But my question is are you amenable to a requirement that plants who opt into this modernization of the increased speed lines, that they open their doors to NIOSH? Ms. Hagen. We don't think that we have the authority to require any non-food-safety--to place non-food-safety requirements on the---- Ms. DeLauro. What if we gave you the authority? Ms. Hagen. We do what Congress gives us the authority to do. Ms. DeLauro. But you don't have a view as to whether we ought to take a look at what is happening with these increased speeds? Ms. Hagen. We absolutely--that is why we have been working with NIOSH. We are delighted that they are started on their study. We have been consulting with OSHA for the better part of the last nine months about what we can do within the limits of our authority to ensure that this rule doesn't have unintended consequences. I will say that, you know, I spent my entire professional life trying to figure out how to reduce risk and protect people. And I would never put forward a rule that I thought would increase risk or reduce protections for anybody. Ms. DeLauro. That is what my hope is. And without the opportunity to be able to get a sense of what is happening-- there are all kinds of views that it is not going to do anything with regard to worker safety, that workers are not going to be in jeopardy, and yet there appears to be, potentially not on your part, but an unwillingness to allow for any evaluation, observation process by which, in fact, we changed these efforts, that we are going to see increased risk for workers. There are--it would just seem to me that there would be an openness to a process that allows for some structured evaluation of the outcome of a change in any kind of a rule. Thank you, Mr. Chairman. Mr. Aderholt. Mr. Valadao. SEQUESTRATION PLANNING Mr. Valadao. Thank you, Mr. Chair. Dr. Hagen, you mentioned earlier--well, a couple of times today--that the 52.8 million is a lot to handle this late in the game. Most of my constituents in different agencies in my district have all planned in advance for sequestration, planned their budgets accordingly. I'm curious, did you plan for this? Did you budget for this accordingly, or did you wait for the last minute and kind of take a wait-and-see approach? Ms. Hagen. Thank you for your question, Congressman. There are certain things that we couldn't do until the Act went through, until the President signed the order. We couldn't talk about furloughs with our employees. They certainly knew this was a possibility, but we couldn't give a notice to bargain, and things like that. So this is--you know, this is five percent of our budget six months into the fiscal year. So I think to characterize it as not having planned for it is not accurate and isn't fair. We have been taking a very aggressive approach to managing our spending, really, for the last three years, at least during the time that I have been in this job. And, as I mentioned already, we took a lot of proactive steps. We have reduced travel spending by 16 percent to the tune of $5.4 million from fiscal year 2011 to fiscal year 2012. We reduced conference spending by 33 percent. The Administrator and I directed that the fiscal year 2013 allocations for the CR be decreased because we knew that this was potentially coming. We have had hiring restrictions in place for our non-frontline staff for several years. We have actually eliminated over 150 positions at headquarters. We have had process improvements from everything from how we do sampling in the laboratories to how we educate consumers. We have been holding frontline vacancies, we have been doing non-permanent hires. We have been taking, I would say, very aggressive steps to prepare for this. But no amount of preparation can put us in a position to still be able to get the work done with this kind of a hit at this point in the fiscal year. Mr. Valadao. Well, the cuts are permanent, unless something changes here in Congress, obviously. How do you plan on handling this in the future? Ms. Hagen. Well, we will obviously be having a lot of discussions about this. But as we have discussed already this morning repeatedly, plants cannot operate if we are not there. We have to be able to pay our people to do their work. We cannot compromise food safety. So this is going to take a lot-- these are tough decisions that we are going to have to make. Mr. Valadao. All right. Thank you. Mr. Aderholt. Mr. Yoder. EFFICIENT SPENDING Mr. Yoder. Thank you, Mr. Chairman. Dr. Hagen, I appreciate you coming here today. Certainly Americans are very concerned about the result of some of the pending sequester changes here in Washington, D.C. And so it is important that we have an open conversation about the best way to implement what is federal law in a way that is least impactful on our constituents. And I would like to follow up a little bit on the questions that Mr. Valadao was asking related to how we implement these changes. I guess, first of all, do you believe that there are any wasteful uses of resources in your department? Ms. Hagen. As I have just outlined, we have been very aggressive about taking a look at everything that we do, from not just an operations standpoint, but from a policy standpoint. I have--people have heard me say hundreds and hundreds of times, ``We need to do things better than we have done them before,'' and that means the way that we spend money, and that means the way that we achieve results for the people that we are here to serve. So, we have found just innumerable opportunities to be able to do our business better than we have done it before. And even though these have gotten us a lot of results--and, in fact, we have been able to cut the number of necessary furlough days almost in half because of the work that we have been doing over the last year--it still doesn't get us to where we need to be at this point in the fiscal year to be able to absorb this. Mr. Yoder. You described some of the steps you have taken in your testimony today, travel, various items. Can you describe other things you have done, hiring freezes, those sorts of things? How many folks have you hired in the last year? Ms. Hagen. Sure. And actually, if I can have Mr. Almanza help me with this, because he really manages the day-to-day for the agency, but I will say that for the last couple of years we have very conservatively managed hiring, particularly what we call non-frontline, or headquarters personnel, and eliminated over 150 positions. We have always hesitated to put any kind of a hiring freeze on frontline employees, for obvious reasons. I don't know if you want to give some more details. Mr. Almanza. One of the steps that I have taken is that any position above the front line, it is kind of very structured in that I have to approve it. And I realize that--and, quite frankly, it takes a lot of time having to have people explain to me why that job is important, and we have eliminated a number of jobs. Probably over the last three years, somewhere closer in the neighborhood of 230 non-frontline jobs. We closed five district offices as well. That realized us a bit of savings, as well. So, yes, it is a little bit backwards in that me having to approve positions as they are filled, but we just felt that we were taking every step that we could to try to eliminate our overhead. Mr. Yoder. So your testimony, then, would be that we have taken, just to use your words, every step that we could to eliminate overhead, to reduce costs, and essentially, that the budget in your agency is operating at essentially the minimal amount necessary to carry out its functions? Mr. Almanza. Well, there is always room for trying to improve, and that is why we are looking at a number of different ways of--even in our headquarters staff--of reorganizing our headquarters staff, and looking at streamlining some of our program areas, possibly even eliminating some program areas, and looking at how we can do things more efficiently. But yes, we are always looking for those efficiencies, sir. Mr. Yoder. I note that in fiscal year 2009, the FSIS spent approximately $10.6 million for 1,525 vehicles and in fiscal year 2013 the request was nearly $14 million for 2,147 vehicles. And yet the amount of facilities that the FSIS inspects has been relatively flat over those years. Are there other areas of your budget that have gone up over those years? I know this question was asked earlier by Mr. Fortenberry in a more broad sense. Are there specific areas of your budget beyond the vehicles that have gone up dramatically over those several years, while facilities have remained flat? Ms. Hagen. Well, I would point out that the fleet is used for frontline travel, so we have inspectors traveling around, inspecting products. I mean there are always ups and downs in every budget. And one of the things that has been really important to us for the last few years is to make sure that we always have offsets for anything that we want to do that is new. So you really haven't seen our budget increase very much at all over the last couple of years. We have spent money on implementation of the Public Health Information System, because we think we need to do things in a modern way if we are going to have a modern system. That is one example. So, yes, there are places where we have spent more money. And, to the extent possible, we have always tried to offset it with savings somewhere else. Mr. Yoder. Well, I guess if I might just conclude, Mr. Chairman, I think the American people are very concerned that the implementation of the sequester is being done in a way that is a greater impact on the daily lives of our citizens, as opposed to a way that might reduce the cost of an agency that is less impactful: reducing vehicles, reducing positions that are not frontline. And I think there is a healthy dose of skepticism in our country that a five percent reduction in any agency would result in the types of reductions that would have such a potential dramatic impact on the daily lives of citizens. And so I guess it is my hope that you could provide us with additional alternatives and look long term at how we can implement these reductions in a way that have less of an impact on the American people. Thank you, Mr. Chairman. FURLOUGH TIMELINE Mr. Aderholt. Mr. Almanza, let me follow up. We were talking about the furloughs a little bit earlier. Of course mentioned that the unions were, of course, looking out for their members. Would they want to start the furloughs earlier in the fiscal year, or would they want to move that back to later in the fiscal year? Mr. Almanza. Well, I certainly cannot speak for the unions, Mr. Chairman. I would say that it really depends on whether they decide to engage in bargaining or not. And that will either move the time frame up for the notification of employees, or delay it, depending on what--how long the bargaining sessions are. Mr. Aderholt. But one would think they would probably want to start the furloughs earlier than later, would be my assumption. Mr. Almanza. I would assume that, but I certainly would not want to speak for them. FURLOUGH IMPACT ON INDUSTRY Mr. Aderholt. The impact of the furloughs alone has been estimated somewhere around $10 billion. I don't want to minimize the impact to the industry, but certainly not being an economist, could you give us some idea of how you came up with the $10 billion figure and how that was derived? Ms. Hagen. We can certainly give you a more detailed explanation for the record. But as I understand it, we looked at, you know, what we would be losing in production on a daily basis, and we went from there. I think the regulated industry would have an even more accurate estimate of what the impacts may be, since they are the ones that are really keeping track of their production. Mr. Aderholt. If you could submit that for the record, it would be helpful---- Ms. Hagen. Sure. [The information follows:] Furlough Impact on Industry FSIS utilized published data from the Census Bureau's 2011 Annual Survey of Manufacturers to determine the annual dollar value of the meat industry ($192.2 billion). The activities included in the dollar value are: meat slaughtering, meat processing, poultry slaughtering and processing, and meat byproduct processing. The estimated impact on the meat industry was calculated by dividing the estimated annual value of the meat industry ($192.2 billion) by the 260 workdays in a year, times the number of projected furlough days (11-13 workdays). This equals $8 billion to $10 billion. Mr. Aderholt [continuing]. For us to know that, exactly how you come up with that number. POULTRY SLAUGHTER MODERNIZATION RULE Mrs. DeLauro had asked about the poultry slaughter modernization rule. We--there are several Members that are new to the committee this year. If you could, just maybe go--just briefly do a little bit of outline and discuss about the poultry slaughter modernization rule and just the impact that is, and just give a little bit--a quick overview. Ms. Hagen. Sure, thank you for the question. As I said, as our knowledge evolves about what makes people sick, our tools have to evolve to keep up with that. And we have a lot of people in the field working very hard, but looking for visible defects in poultry. We know that it is what you cannot see that actually makes people sick. So, this rule is about focusing the bulk of our resources in poultry slaughter inspection on those things that are most likely to impact public health. This is a very well-supported piece of rulemaking. I think that this is a win for stakeholders across the board. When you look at the number of illnesses that we can--at a minimum, we think we are going to reduce illnesses by 5,000 per year. When you look at the savings for taxpayers, $90 million saved over the course of 3 years because of the way that we are going to manage our resources, and when you look at the savings and the flexibility that the regulated industry will gain and will be able to pass on to consumers in the form of lower prices, we really think that this is a win across the board. Mr. Aderholt. Last December you reported to the committee that you would have to negotiate with the unions and work with the industry to arrange a conversion of the plants to this new system. And the date I think was mentioned--April 2013, which is upon us. Has FSIS started negotiating with the union and working with industry to arrange this conversion to the new system? Ms. Hagen. We don't have a final rule yet. And so we would not be able to implement a new system until we have a final rule. And we are not at that point yet. Do you want to add anything? Mr. Aderholt. So once that rule is--you get the new rule, then you will start working on those negotiations. Is that correct? Ms. Hagen. That is correct. Mr. Aderholt. Mr. Farr. STAFFING SHORTAGES Mr. Farr. Thank you, Mr. Chairman. I wanted to follow up an observation the OIG made, kind of shocking, that they found out that you had gaps in inspections--inspections were missed, nationwide, on a daily basis--that they had to tell us, rather than the Department telling us, or admitting it. And then, also with the fact that you have a vacancy rate as high as, say in Chicago, of nine percent. If you are going to have a hiring freeze, what do you do about filling those vacancies in areas where you have a high percentage of vacancy? And then I want to add on to that. I want to talk to you about what you are doing in adding a new requirement, a new workload, in approving application for a New Mexico horse slaughter plant. But I will--if you could answer the first part, I want to ask more questions on the horse slaughter. Ms. Hagen. I am going to ask Mr. Almanza to address the vacancy issue, and either one of us can talk about the horse slaughter. Mr. Almanza. The vacancy issue is one that fluctuates, and there are some parts of the country that just have higher vacancy rates. But they fluctuate. And certainly we try to do everything to fill those jobs. In fact, the only jobs we have posted in USA Jobs are frontline positions. And we do everything that we can. It is just simply getting qualified available applicants to apply for those positions. We have absolutely no hold or freeze at all on any frontline positions within the Chicago district or any other district. Mr. Farr. Are a lot of those positions required to be doctors of veterinary medicine for inspection purposes? Mr. Almanza. No, sir. The vacancies that we currently have are CSI, consumer safety inspector, positions. We actually are having a lot of success with veterinary hires right now. And we are just not--we are not seeing a whole lot of vacancies in that area. Mr. Farr. So when the OIG pointed out this problem, of missed inspections and--which is another problem that they can see--but you think you have plugged--are you on top of that? Mr. Almanza. Yes, sir. HORSE SLAUGHTER Mr. Farr. Okay. Now, if there is a hiring freeze, and there is a shortage, and we are going to have to furlough people, what the hell are we doing approving an application for a New Mexico horse slaughter plant with Valley Meats, that has had an incredibly bad history of environmental animal welfare offenses, when 80 percent of Americans oppose horse slaughter? What are we going back into this business for? Ms. Hagen. Well, first, I will clarify that we have not approved any grant of inspection application for any facility at this point. The hiring burden would not be significant if we were to move forward with the resumption of horse slaughter inspection in the United States. We are talking about a handful of inspectors. So I don't think it is so much the resource burden. But we have a statutory obligation. Horses are considered to be livestock under the FMIA, the Federal Meat Inspection Act. There was an appropriations ban on the use of our budget for years. We could not inspect horse slaughter. That ban was lifted. We have an obligation to uphold the law. So we are moving forward with trying to develop a program that would protect public health to the greatest extent possible if we find ourselves in that position once again. Mr. Farr. And where does the meat from horse slaughter go? Ms. Hagen. Currently, most of that meat goes to Europe. Mr. Farr. And do we have a requirement under that, that we do the drug testing, like we have to do for cattle and chickens? Ms. Hagen. Well, again, there is no--currently there is no domestic slaughter of horses for food in this country. But we would take into account every public health concern that would be associated with this type of product. And it is part of what we have been doing for the last year, is developing methodologies for an extensive array of drug use, of drug residues. Mr. Farr. Well, that leads me to a concern I have--in this situation there are horses coming from different situations than just operational cattle ranches. You have horses coming from pets, you have horses coming from show horses, from racing horses, from draft horses, working horses. You have all kinds of different handling practices and medication given to those horses, particularly race horses, show horses. Have you and FDA developed protocols to determine what kind of tolerance levels for all the different medicines and drugs that could be used in horses in those different scenarios? Ms. Hagen. Well, any inspection program that we would begin for domestic horse slaughter would take into account all the public health hazards that we feel could occur. And, as you correctly point out, the main concern from a public health standpoint with horse slaughter is drug residues, as opposed to pathogens. I think you are correct, and---- Mr. Farr. Have you identified those drugs? Is that your responsibility, or FDAs? Ms. Hagen. Well, the national residue program together looks at drugs of concern that we think should be targeted and identified in food for human consumption. But we have developed a pretty extensive array of testing methodology, or of--I shouldn't say an extensive array. We have developed testing methodology for quite a number of potential drug residues that could be found. Mr. Farr. So those protocols are in place if you licensed the horse slaughter plant? Ms. Hagen. We are just about finished, but we have been working on validating not only the methods that we had used previously when we ran a horse slaughter program prior to the 2006 appropriations ban, but adding quite a number of additional drugs that we would have the capability to test for, as well. We wouldn't move forward with the program until we were ready with those methods. Mr. Farr. And I guess, lastly, how can you afford to do that if you are--if you cannot--if we don't have the personnel, with hiring freezes, as you have indicated, and furloughs? Why are we opening up a whole new line of inspections and requirements? Ms. Hagen. Again, this is work that has largely already been done. We have a statutory obligation to consider here. It is not something that we are advocating, it is something that we have a mandate to do, to inspect horse slaughter. I will say you are correct in that public opinion and perception has changed, I think considerably since 1906. The public level of discomfort about horse slaughter is significant. And the Administration recognizes that and thinks that that is a point of view that Congress should hear. But we are also very respectful of the fact that only Congress can change the law, and we intend to uphold the law if that is what we need, if we need to move forward with the program. Mr. Farr. Thank you. Mr. Aderholt. The gentleman from Nebraska. BUDGET HISTORY Mr. Fortenberry. Thank you, Mr. Chairman. Dr. Hagen, you had kindly offered to get the last five years of budgets, but I have since obtained that information. I know you have got a lot going on, and so I don't want to overburden your agency, but let me just review this with basically some rough calculations that I have made. If you look at a 10-year baseline, your budget has increased approximately 30 percent over 10 years ago. Five years ago it is approximately eight percent. The last three years it has actually gone down. So that, I think, should give us all some perspective on where we are. FURLOUGH OPTIONS I do want to return to your earlier comment that--regarding a complete shutdown for a certain period of days is the only way that you could accommodate these reductions while meeting, to the best of your ability, the twofold goal of safety, as well as uninterrupted supply. Talk to me about the flexibility that you have between slaughter and processing. It is my understanding that you are consistently present for slaughter; processing, you have more flexibility. And I think that goes to your earlier comment as to where you have tried to creatively, in the past, look at reducing certain types of budgeting. I am just trying to unpack this for you. We all have the obligation here to try to meet that dual goal of the uninterrupted supply that is delivered in a safe manner. So speak to that possibility as one area of flexibility that you have to implement these reductions. Ms. Hagen. I am not sure I understand the question, I am sorry. So you---- Mr. Fortenberry. The distinction between your mandate regarding slaughter and processing---- Ms. Hagen. Correct, that is correct. Mr. Fortenberry. You have to be present for slaughtering. Ms. Hagen. Yes. Mr. Fortenberry. You don't have to be present for--or you can manage that---- Ms. Hagen. We need to be there once per shift. And processing inspectors generally work on patrols, where they go to a number of different establishments in the same day. Mr. Fortenberry. But again, you are the experts here. We are trying to unpack the best way in which we can meet multiple objectives that are held in tension, a reduction of budgets without the disruption of food supply. Are there options there that would allow, again, the food supply to continue without the disruption that you referred to earlier? Ms. Hagen. Well, I think it is important to remember that all of these things are related. So what happens in slaughter impacts what happens at processing. That impacts the flow of live animals through the system. It impacts what happens in further processing and retailing. So simply tweaking one part doesn't necessarily have the desired impact on the remainder. I will tell you that we have examined--this is the last thing we want to be doing. The last thing we want to be doing is having all of our employees out of work for 11 days and having the regulated industry impacted in this way. This is not something that--it is not a position we ever wanted to find ourselves in. I think we have looked at all of the options, and I think we have come up with, really, the only viable set of options for us. We are going to continue to look for additional savings. If there is any way that we can reduce that number of days, we are going to do our best. But I think that we have really examined this from multiple different perspectives, and this is where we are. Mr. Fortenberry. It is my understanding that you had previously developed contingency plans for the potential reduction of--or a 5 percent potential reduction, 10, or even 15 percent reduction. Are those plans available? Ms. Hagen. I would have to take your request back to the Department. Mr. Fortenberry. That is my understanding. So if they are, we would like to see that, if possible. Ms. Hagen. I will certainly take that request back. [The information follows:] FSIS Reduction Scenarios FSIS looked, and continues to look for additional ways to reduce costs, and attempted to develop 5 and 10 percent reduction strategies. However, FSIS' options to reduce costs at these levels are limited due to statutory requirements for FSIS to be present at all times for livestock and poultry slaughter operations and once per shift per day for meat and poultry processing operations. Given these statutory obligations, to ensure food safety and fairness to industry, funding reductions at the levels in the Budget Control Act would have required furloughs across the board. Only the number of furlough days would have varied. CHINESE POULTRY Mr. Fortenberry. Let me change the subject a little bit and talk about overseas inspections. Ms. Hagen. Sure. Mr. Fortenberry. I would just like to learn exactly how that--not exactly, but in broad terms--how that process works, and your level of confidence that the products under your jurisdiction that are being imported in the United States are safe. In specific regard, what are your plans in terms of opening up inspections of poultry in China? Ms. Hagen. So the way that we handle import safety is through a three-part, three-component system. First, a country's system has to be determined to be equivalent. And that takes quite some time. That can take a year or more, because we have to ensure that the statutory and regulatory framework allow for the safe production of food in an equivalent fashion to what we do here, in the United States. We then have reinspection of product at the border, both physical, organoleptic inspection, and we have reinspection testing of a certain percentage of the products that come through at the border. And, as well, we do repeat audits of countries, once their initial equivalence has been determined. So, we are confident in our system, we think that this is a good way to approach it. We have been in the process of looking at whether China can have equivalency for processed poultry for some time now. Actually, for several years we have produced regular reports to Congress about our progress there. We actually have an audit team in China right now. They started their audit on March the 5th, looking at processed poultry for equivalency. Mr. Fortenberry. This would only be food safety. It wouldn't be other environmental standards, labor standards, basic business structure. Ms. Hagen. This is food safety. Mr. Fortenberry. Thank you, Mr. Chairman. Mr. Aderholt. Mr. Bishop. FURLOUGH OPTIONS Mr. Bishop. Thank you very much. I would like to go back to where Mr.--the line of questioning Mr. Fortenberry was exploring with regard to the lack of other options. I think I am understanding that you are saying that it is fairer and it will produce, in the long run, more safety to furlough all of the employees on a particular day, and just have less production in the overall system than it would be to try to keep it going and reassign individuals who may or may not be well trained for that particular job, because that could, in all likelihood, compromise safety. Could I just get you to just sort of slowly walk through why that is the best option or the only option, as opposed to doing it sequentially or any other way? The other options that you eliminated. I think you kind of said, ``Well, we have been through the options and we have looked at it and this is the only viable option.'' But can you kind of just go through that reasoning process, you know, for--I think I am following why you are doing that, but can you sort of go through that reasoning, step by step? Mr. Almanza. Sure, I---- Ms. Hagen. You know, I am going to let Mr. Almanza take a crack at it, in case I haven't been clear enough. A little tag team here. Mr. Almanza. So just for example, I will just kind of highlight one of the bigger plants that we have staffing of, say, 38 employees that are on the slaughter line. So we have half of them on the day shift, half of them on the night shift. So, if we chose to shut that plant down, we simply do not have 38 inspectors just to plug right in behind them. And so, if we start at any one part of the industry, I think, say the poultry industry or the beef industry, and try to replace the number of folks that are currently assigned to those assignments, we simply do not have the resources to do that, and never mind if we had to travel people. First of all, I do not know where we would get those people, but even traveling them would incur---- Mr. Bishop. Expense. Mr. Almanza. Yes, quite an expense. Ms. Hagen. I mean I would agree, and I just think that there is an essential fairness issue here for the regulated industry about who gets the hit first, or---- Mr. Bishop. What about the safety? Ms. Hagen. And I think once you start--as I said before, when we are shut down and nothing is getting the mark of inspection, this is a huge economic hit, but we are not concerned about the safety, because we believe in the integrity of our mark of inspection. I do have concerns, once you start moving people around into assignments they are not familiar with, product classes that they may not be familiar with, about whether we are really doing the best that we can do. And I think we start to worry about compromising our mark. WORKER SAFETY Mr. Bishop. Okay. Let me go back to--thank you very much-- go back to the conditions. I think that was a study by the Southern Poverty Law Center about conditions at the poultry plant. I think it is called ``Unsafe at These Speeds,'' which I think Ms. DeLauro referred to. And while worker safety is under the jurisdiction of OSHA, don't you have a very, very vital role to play in identifying potential problems? Because, as I understand it, because of the consequences of some of the speed at some of these processing plants, there is some contamination, some tuberculosis, staph infections for workers, which obviously could bleed over into the product. So, I mean, do you not really have to be on top of that, and won't this, the sequester, impair your ability to do that? Ms. Hagen. Well, thank you for raising the report by the Southern Poverty Law Center. I think that the report points out something that we all know and we need to be reminded of, that the conditions are tough, that these are very difficult jobs in the poultry industry, and we do not dispute that. We do not think that our modernization of poultry slaughter will make those conditions worse. I think that there is an incorrect assumption about individual worker pace and what will happen under this proposal. We have been doing this in 25 plants for over a dozen years, and our experience has been that plants handle the opportunity for increased line speeds through either staffing or through increased automation. So--and as you point out, we do not have the authority to set worker safety standards, but we are working with OSHA, we have been consulting with them, we have taken their advice, tried to incorporate it to the extent possible. In the final version of the rule that we are doing we are trying to increase training for our own employees to be able to recognize workplace hazards. We are very happy about the study that NIOSH is doing to look at the impact of line speed on worker safety. But I would point out that we are talking about line speeds at slaughter here. And most of the data cited in numerous reports has to do with line speeds in processing, which is not impacted by this proposed rule. Mr. Bishop. Thank you. I think my time has expired. Mr. Aderholt. Mr. Yoder. FURLOUGH OPTIONS Mr. Yoder. Thank you, Mr. Chairman. Dr. Hagen, if Congress were to pass legislation that would say that no frontline meat inspectors could be furloughed as part of the--what is it, 9,000--how many employees are in your---- Ms. Hagen. Right now we are looking at furloughing 9,212 employees. Mr. Yoder. How many of those are considered meat inspectors, or frontline employees? Ms. Hagen. That number, I have it written down just so I did not get it wrong today, I want to make sure that I gave you consistent numbers. Mr. Yoder. That that might come up? Ms. Hagen. Right, 8,136 is the number that we are using currently. Mr. Yoder. That are frontline? Ms. Hagen. That are frontline employees, yes. Mr. Yoder. The inspectors. Ms. Hagen. Not just meat inspectors. That includes people who run the samples at the lab, investigators who go out and are in commerce, folks that make sure that product is under compliance in commerce. So those are all frontline people. No administrative staff, no office workers, et cetera. Mr. Yoder. If Congress were to tell you that those individuals could not be furloughed, or that you had to--let me ask this question a different way--you had to continually operate meat inspection, regardless of the 95 percent budget that you are facing, roughly, going forward, how would you do that? Ms. Hagen. Well, we would have to have the resources to do it, first of all. And if Congress told us this is something that we would have to do, we would do what---- Mr. Yoder. You would have to do it with existing resources. Let's say that is what Congress passed legislation, signed by the President--or, let's say the President comes in and says, ``Dr. Hagen, we cannot have meat processing facilities backing up, we cannot have the flow of meat not being processed in a timely manner, this is going to cause untold, you know, unforeseen consequences in the economy, you have to figure out a way to do this,'' how would you do it? Ms. Hagen. So I will just remind you we still cannot spend money that we don't have, so we still have to operate within fiscal law. Mr. Yoder. So you have got 95 percent of your budget, and you are told you have to figure out a way to do it. What would your response be to the President or to Congress? Ms. Hagen. If Congress tells us that we have to do something, we do what we are authorized to do. I would certainly remind everybody that it is 2013 and we have an integrated system. So inspectors are not out there just working on their own without the support of policy and scheduling and administrative staff and, you know, scientific interpretation and sampling and all these other things that have to be done. Mr. Yoder. Sure. Ms. Hagen. So it is not---- Mr. Yoder. It is a complicated process. Ms. Hagen. Yes, one part does not--cannot operate without the other. But, you know, I would have to look at what was proposed. I don't really want to speculate on how exactly we would address the proposal---- Mr. Yoder. Well, I think it is, obviously, a very relevant question, because we are trying to determine how to move forward. And if this is the new reality, which is going forward the--you know, FSIS has to operate at a 95 percent budget while doing 100 percent of the facilities it used to do, and if Congress, you know, passed legislation that said those operations have to continue, how would you do that? Ms. Hagen. We would have to figure that out, I suppose. Mr. Yoder. Yes. What sort of things would you do? Ms. Hagen. At this point in the fiscal year, I don't know what else we would do. I think giving us the opportunity to plan--and that is one of the things that is so hard about this scenario, is, you know, given enough time, you can absorb this kind of a hit more easily. So, given enough time to plan, we would have to come up with a way to handle that. SEQUESTRATION PLANNING Mr. Yoder. Is it your testimony that when this passed in August of 2011 that there was some thought it might occur, but there was sort of a hope that Congress would somehow resolve this prior to the sequester being imposed, and so we were not operating as if it was a matter of fact? Ms. Hagen. I do not think it is just my testimony, I think it was everybody's hope that this would get resolved. I think everybody in America hoped that this would get resolved, and we would not find ourselves in the position that we are in now. So, if you are asking if we had our fingers crossed and just, you know---- Mr. Yoder. Right, sure. Ms. Hagen [continuing]. Hoped this wasn't going to happen, we still believe that there can be a solution to this problem. We still believe that Congress can solve this problem. We can plan, we can reduce, we can cut to the bare bones. But in the end, we have to have the money to be able to do our work. And we have to be able to pay our employees to do our work. So, as I have said, you know, no amount of planning and process improvement and cost efficiencies can prepare us to be able to handle something like this six months into a fiscal year. Mr. Yoder. Well, I know it is a foreign concept that we are in a position where we are actually dealing with less resources in one year than the next in an agency. It is different to the Federal Government. I will tell you that in state governments, city governments, we have had folks in our office all week from municipalities that have figured out a way to reduce spending and live within their budgets. And for some reason in Washington, D.C. that is a foreign concept. So, it doesn't surprise me that yourself and others have been assuming that this would never actually occur. Knowing that it has occurred, and knowing that it might be the law of the land that FSIS operates on 95 percent of its expected resources going forward, what are the long-term solutions to make your agency work more effectively and more efficiently so that you can continue to operate and provide the services the American people expect in a more cost-effective manner? Ms. Hagen. Well, I think that it is really hard to know where to begin with that. It is certainly not that we did not anticipate that this might happen. It is one thing to plan and to be fiscally responsible and to assume that budgets are going to get tighter and tighter. And I think what I outlined in my testimony is that I believe and Mr. Almanza believes that government can deliver more, and can deliver better, and do a better job for the American people than it has done before. So we certainly have taken that attitude all along. In terms of long-term planning, I think it has to do with some of this kind of phase two planning that Mr. Almanza outlined before, looking at whether we are really structured the way we need to be structured, and whether all the jobs that we have are jobs that need to be done, and whether there are nice-to-haves that can be eliminated. And we have really--we have been engaged in that process for the better part of three years. We will continue to engage in that process. But I don't have a specific, long-term plan to lay out for you today, but I would be happy to work with you on any ideas that you have. Mr. Yoder. Be happy to work with you on that, as well. Thank you, Mr. Chairman. Mr. Aderholt. Ms. Pingree. Ms. Pingree. Thank you, Mr. Chair. Thank you again to the panelists. I would say one of the tragic consequences of the unplanned sequester, or the sequester that is not the best way to go about cutting our deficit, is that we spend a relentless amount of time trying to figure out, now what should we do, and how to do it better, and how did we get to this position without planning. And I have to reinforce this. This was a bad way for Congress to go about doing it, and I, with all due respect to my colleagues, just am disappointed how much time we have to spend, as Members of Congress generally, or here in this Subcommittee, on something that now appears to be inevitable. And I appreciate how hard it is to figure out how to run a vital service like the food safety inspection without the resources that you were anticipating. I personally want to ask some of the questions that have been critically important to the farmers and the processors in my state and in New England, and I just want to ask you about a couple more. And I look forward to continuing the dialogue, even outside of this Committee. COOPERATIVE INTERSTATE SHIPMENT PROGRAM As I think I have mentioned to you earlier, I am very interested in the interstate sale of meat, and what some of the complications are in making that possible. On the one hand, so many of our food safety issues and some of the poultry rules you are updating reflect what goes on in, really, the big facilities and some extremely serious concerns that have to be dealt with, so that the majority of the meat supply in this country is safe and dependable. But I also see enormous growth in the number of people who want to buy food from a farmer who lives down the road, a farmer who lives down the road who wants to have processing facilities, huge shortages in small facilities and a lack of infrastructure in many places to adequately process that meat. So I know you are working on a lot of things around the rules and promotion of more of that. But I am interested in this concept of the interstate sale of meat, because it seems to be met with so much resistance, even when there is oversight by FSIS of state inspection, there seem to be ways to go about doing it, but I continually hear about how complicated it is. And even under the current program, there are very few states who are able to do it. So, can you just, with what time I have available, talk with me a little bit more about it, and I will engage in some other concerns I have? Ms. Hagen. Sure. As I mentioned in my testimony, we did sign agreements in the past year with Ohio, North Dakota, and Wisconsin. And we think this is a good program. I think that the major impediments--well, at least as we perceive it--is that states have to be not only on an equal-to, but at a same- as status as the federal program. And that can be a big burden for some states, because it costs money to be able to do that, particularly when it comes to lab capacity and other kind of infrastructural details. So, you know, we hope that the states that have opted to participate will share their experience and share their knowledge with other states that are interested. I know that Maine has expressed some interest in participating in the interstate program. This is a real win for processors, for slaughterers and processors in these states, because they get to open up entire new marketplaces by being able to ship their products across a state line with a federal mark of inspection. So anything that we can do to help facilitate that process, we are happy to talk. We have a whole office of outreach that is available to states and to processors in these areas to be able to look at what it takes to comply with the program. FEDERAL/STATE INSPECTION REQUIREMENTS Ms. Pingree. I am sure we can take an opportunity to dig in a little further on this and this whole issue, the complexity of equal-to and same-as. So, I mean, one thing that was brought forward to me is that a federally-inspected product only has to be equal to. And I would project that perhaps it is harder to determine what comes in federally. But we have different compliance with states. So why would we have that difference, when you can bring something in from a foreign country that is equal-to, but a state has to be same-as? Ms. Hagen. Because that is what the law says. That is how the provision was written into the farm bill. Ms. Pingree. Well, that is--okay. And similarly, you--just in thinking about what the future of that is, there is a lot of oversight already of how state inspection works. So it is not as if states are operating without a considerable amount of USDA and FSIS oversight on how they currently operate. Ms. Hagen. Correct. Ms. Pingree. Got it. All right. I will yield back. Thanks. Mr. Aderholt. Ms. DeLauro. BUDGET HISTORY Ms. DeLauro. Thank you, Mr. Chairman. I would just like to say one word about sequestration and FSIS. I have a long experience with FSIS, having served on this Committee for at least 16 years, and I have never known the FSIS budget to be a padded budget. In fact, I would just say that, quite frankly, I think the budget has not been adequately--has had adequate resources to carry out its mission, in terms of protecting our domestic food supply and the amount of product that we get in, with regard to meat and other products, from overseas. So, I think that, while agencies have to live and deal with the effects of sequestration, quite frankly, I think that Congress ought to re-evaluate the madness of sequestration, and the havoc that it is wreaking on the American people. It is not about our ideology; it is about what are the services that we provide to the American people, and keeping a food supply safe. We don't talk here about roads and bridges. We talk about life and death issues. BEYOND THE BORDER INITIATIVE With that, let me ask you about--because you know that this is a very big concern of mine--the status of the Beyond the Border pilot program. What food safety purpose does the initiative serve? Quite frankly--and you know this, that I do not see why the agency would seek to reduce or change an import inspection program that appears to be working, for the most part. It was import inspection at the border that found the E. coli in the product from XL Foods that, in fact, led to the largest meat recall in Canadian history. What is the status and the purpose that it serves? And I have a couple of other questions with regard to that. Ms. Hagen. Thank you for your question. The Beyond the Border initiative is a larger initiative. Food safety has a small part in that. It is looking at ways to streamline all kinds of operations that go on between Canada and the United States. So the Beyond the Border initiative, as it pertains to food safety, has to do with a pilot in which we would have one beef and one pork establishment on either side of the border that would be allowed to ship product essentially directly between those two establishments and complete the reinspection at the border inside of the United States. The status of the pilot is that it has not started yet. We are still in the process. We have identified one pork plant, but we have not started. We have not even identified the beef plants. It will be a pilot. And our role at FSIS in all of these discussions is to make sure that food safety stays front and center as we talk about the potential opportunities here. CANADIAN EQUIVALENCY AUDIT Ms. DeLauro. You have another audit with regard to the Canadian food safety, the equivalency audit that was conducted by FSIS in December---- Ms. Hagen. Yes. Ms. DeLauro [continuing]. Of 2012. When will that audit report be posted on the website? Ms. Hagen. The audit was completed in November, and we expect to have the report posted within the next couple of weeks, I think, next couple of months. I am sorry I do not have a specific date for you. And then, as you know, there is a 60-day---- Ms. DeLauro. Weeks or months are we talking about? Ms. Hagen. I think months. Ms. DeLauro. Was the XL Foods plant that implicated in the fall of 2012 in that largest meat recall in Canadian history part of the audit? Ms. Hagen. Yes. Ms. DeLauro. Will, then, the plant's individual audit report be posted, as well? Mr. Almanza. Yes. The ultimate one, the final one will. Ms. DeLauro. The final will have the specifics about --it-- we have so much difficulty with product coming in to the United States. And the shortage, I understand the shortage of inspectors. I have, from day one, wanted to increase the number of inspectors, both for domestic purposes and international purposes. But to look at a--this Beyond the Border, this pilot program, which lessens the opportunity for inspection of a supply, when we have information that led to the largest Canadian meat recall in history, that we would be looking at a way to somehow shortchange this process--and I would--I say it because it will be for trade reasons. This is one more time where our trade begins to trump our public health interests. And I won't go back to Chinese poultry and processing. I have spent years at that business. But that is the fact here, is that this is about trade, rather than about food safety as a part of it. Mr. Chairman, I just have one question. I will leave to go back to Labor HHS. INTERNATIONAL AUDITS I just want to know how many planned in-person international audits have been canceled as a result of sequestration. Ms. Hagen. We plan to complete 14 audits this fiscal year. Ms. DeLauro. And how many were you? Ms. Hagen. That has been our plan. Ms. DeLauro. And you are going to be able, with the sequestration, to---- Ms. Hagen. We think so. Ms. DeLauro [continuing]. To deal with the international audits? Okay. Thank you, Mr. Chairman. FUNDING ANOMALIES Mr. Aderholt. Dr. Hagen, OMB and the Department submitted some anomalies to the committee for consideration in the full- year CR. Those anomalies were submitted to provide some relief for certain programs throughout the Department. Just curious. Did FSIS submit any anomalies to the Department or to OMB for their consideration? Ms. Hagen. We did not, Mr. Chairman. Mr. Aderholt. Mr. Farr. LOCALLY-SOURCED MEAT Mr. Farr. Mr. Chairman, I want to follow up on Congresswoman Pingree's questions. There is a movement in this country, and particularly in California, to try--where the cattle ranchers are raising their own--they are not sending them to feed lots. They want to be able to process them locally. The problem you have now is the consolidation of slaughter plants and package meat wrap are, for economy of scale and what other reasons, costs, are very few. And so the distance to travel is extremely long and costly. We have, with the Department's help, certified a mobile slaughter unit. It has not been cost effective to operate because we cannot get the inspectors. We have some interest with some of the ranchers, being the Hearst Corporation and the Packard families, and things like that, who have ranches that are now kind of interested in creating an organic market for meats with a local slaughter plant. And the question is, with sequestration, can we--because we have been trying to develop the cost-effectiveness of getting an inspector. Obviously, you are going to have to ride circuit. But we do have inspections, and I think I, in my district, have about a dozen places now where meat is included in a product, so they--Monterey Pasta, and things like that--they have to have an inspector. Is it a different inspector that goes into a facility that is adding meat to a product than a slaughter inspection? And could--is there a way of working out--because we do not have any fees for service in this industry, do we? You do not charge user fees like the restaurant--like local governments do for inspecting restaurants, and things like that. Ms. Hagen. We do not. Mr. Almanza. For non-amenable species we do. Mr. Farr. For non---- Mr. Almanza. Non-amenable. Ms. Hagen. Things that are not covered under the act. Mr. Farr. Mm-hmm. Ms. Hagen. But did you realize that is the congressman's question? Mr. Farr. I am asking this question kind of very broadly because it is really part of a rural strategy which I think the Secretary has been very interested in trying to take rural America and bring business to it, rather than having every young person flee because of not having the infrastructure, and sort of rebuilding, reinvesting in rural America and I think in a way--not that our area is hurting, is a poverty area--but what it is trying to create is these new market niches in organic. My cattle ranchers have said, ``Look, the guy next door is growing grapes and putting them in a bottle with is own name on it. I grow cows, cattle, and I want to butcher them and wrap them. I can serve them on my ranch, but I cannot sell them to the customers on my ranch to take home.'' And I want to be in that process of being able to have a continuum of kind of local meat, just like you have local produce and local wines, and things like that. Ms. Hagen. You want to address the congressman's question about inspector resources there? Mr. Almanza. So we have a number of flexibilities with our inspection personnel. Basically those are CSI positions, consumer safety inspector positions, that can perform both processing and slaughter inspection procedures. We have a number of them. In fact, some of them that we currently have are assigned to the mobile slaughter positions that we have, or the facilities that drive around. Probably the--one of the things that we have to work with the mobile slaughter unit is that where they are going to be on a given day and kind of in order for us to use our resources appropriately, to be able to plan ahead so that if they are going to be in a certain part of the county, then we will have an inspector that is available---- Mr. Farr. Well, that is just scheduling. That is something we could work out. Mr. Almanza. Yes---- Mr. Farr. But the problem we are having is just sort of the inability to get those inspectors, because it is kind of a rural area. It is not in an urbanized setting. Mr. Almanza. Oh, I--when I started my career, I started in Dalhart, Texas. There is not much more rural than that. I mean, so we have them all over the place, in one-man operations and, like I said, 38 plant operations. So the rural piece of it, that really doesn't matter. We can accommodate those. Mr. Farr. All right. Well, I would like to work with you, and I know Ms. Pingree is interested in this in the northeast, to do the, you know, organic and farmers markets, and things like that. Mr. Almanza. Sure. Mr. Farr. I think it is opening up a new market opportunity for business people, and that is what we are all about. Thank you, Mr. Chairman. Mr. Aderholt. Ms. Pingree. LOCALLY-SOURCED MEAT Ms. Pingree. Thank you, Mr. Chair. I know we are wrapping up, so I will just reinforce what the ranking member said, and say I would like to follow up with you. I know today has really been so focused on, how are you going to deal with the imminent cuts and how you are going to just keep surviving and keeping food safe during a really complicated financial time. But again, going back to the concerns I hear from my district, my region of the country, and really from people around the country, is this growing new market that USDA, in its 2012 ERS report on slaughter processing options and issues for locally-sourced meat, said that there is 20 percent growth in this market. But, as we know, there is a lot of challenges out there for smaller facilities, some of the rules around custom processing. I would just love to spend a little more time sitting down with you and seeing how the Department is assisting with that, thinking about ways, we can, to any extent possible, be creative, or any of the things I should know that is not functional in legislative language, so we can be of assistance to those people who want to do it. I will leave it there for now, because I think it is time to end up for the day. But I appreciate your being here today-- -- Ms. Hagen. Happy to be here. Mr. Aderholt. Thank you. Well, Dr. Hagen, Administrator Almanza, thank you for being here today and for your testimony. We look forward to working with you. I know there has been some request for follow-up on some answers, and we---- Ms. Hagen. Sure. Mr. Aderholt [continuing]. Look forward to getting those as we move forward in the process. So, again, we appreciate your presence here today and shedding a little bit of light on the sequestration and how it impacts the food service and inspection service--Food Safety and Inspection Service. And again, we appreciate your testimony. And so, at this point, the hearing is adjourned. [Questions submitted for the record:] [GRAPHIC] [TIFF OMITTED] 82566A.025 [GRAPHIC] [TIFF OMITTED] 82566A.026 [GRAPHIC] [TIFF OMITTED] 82566A.027 [GRAPHIC] [TIFF OMITTED] 82566A.028 [GRAPHIC] [TIFF OMITTED] 82566A.029 [GRAPHIC] [TIFF OMITTED] 82566A.030 [GRAPHIC] [TIFF OMITTED] 82566A.031 [GRAPHIC] [TIFF OMITTED] 82566A.032 [GRAPHIC] [TIFF OMITTED] 82566A.033 [GRAPHIC] [TIFF OMITTED] 82566A.034 [GRAPHIC] [TIFF OMITTED] 82566A.035 [GRAPHIC] [TIFF OMITTED] 82566A.036 [GRAPHIC] [TIFF OMITTED] 82566A.037 [GRAPHIC] [TIFF OMITTED] 82566A.038 [GRAPHIC] [TIFF OMITTED] 82566A.039 [GRAPHIC] [TIFF OMITTED] 82566A.040 [GRAPHIC] [TIFF OMITTED] 82566A.041 Thursday, March 14, 2013. FOOD AND NUTRITION SERVICE WITNESS AUDREY ROWE, ADMINISTRATOR Introduction of Witness Mr. Aderholt. The subcommittee will come to order. I want to welcome everyone to today's hearing. This morning we will examine USDA's Food, Nutrition and Consumer Services mission area. Our witness is Ms. Audrey Rowe, Administrator for the Food and Nutrition Services at USDA. Welcome Ms. Rowe, glad to have you here this morning. We are pleased to hear from you, but of course, it is unfortunate that Under Secretary Concannon could not be here due to the decision by the department, but one day when the administration gets a budget for fiscal year 2014, we look forward to having the Under Secretary testify, but again, we are glad to have you here this morning and look forward to your testimony. Opening Statement It is critical that we conduct oversight to USDA's nutrition programs, since this mission area accounts for 77 percent of the total resources of the agriculture appropriations bill. In fiscal year 2012, the Federal Government spent over $106 billion to fund and operate the nutrition assistance programs. The Supplemental Nutrition Assistance Program, better known as SNAP, formerly known as food stamps, is a mandatory program. However it is an appropriated entitlement program that receives its annual allocation through this very bill. In fiscal year 2012, SNAP served an average of 46.6 million people per month. SNAP program level totaled $80.4 billion as compared to $40 billion in fiscal year 2008. This is a 100 percent increase in SNAP spending during President Obama's first term and is indicative of the Nation's uncontrolled spending on the mandatory side. While the administration claims that they are cracking down on fraud, waste and abuse in this program, there is a wide agreement that much more needs to be done. The Special Supplemental Nutrition Program for Women, Infants and Children or WIC, accounts for the single largest discretionary program in this bill. In fiscal year 2012 WIC's program level totaled $6.9 billion and served an average of 8.9 million participants each month. This program has maintained a fairly high level of bipartisan support, but as this program continues to consume a larger share of the smaller discretionary budget, we need to ensure sufficient oversight at the Federal level as eligibility for the program has expanded. And States need to be monitored more carefully in their efforts to manage the program. Child nutrition programs in total are expected to approach $20 billion this year. The National School Lunch Program, serving over 31 million school children each day, had a fiscal year 2012 program level of $11.6 billion. USDA has issued new school meal regulations as directed by the Healthy, Hunger-Free Kids Act, and more proposed rules are underway. Despite some increased flexibility allowed in the program, we continue to hear the challenges facing schools in implementing these new regulations. We all agree the USDA's food and nutrition programs were designed to provide a vital safety net for those in need. However, I am sure there will be a disagreement among us on how these programs are managed and operated on a daily basis. My goal is to assure the integrity of these programs and to make sure taxpayers dollars are spent wisely, as wisely as possible. Before I recognize Ms. Rowe for her opening statement, I would like to recognize the ranking member of the subcommittee, the distinguished gentleman from California to see if he has any opening remarks. Opening Statement Mr. Farr. Thank you, Mr. Chairman. This is one of the programs that I think is most important for this Nation. Indeed, we had a huge debate about health care in America and the cost of health care, and we learned very quickly that the biggest cost was because of people not taking care of themselves; too many people getting sick because of bad eating behaviors, and inactivity. We pointed out that the military is having a problem recruiting. Kids today aren't getting access to healthy foods. WIC--Women, Infants and Children--enrollees, essentially get access to preventive care. This is the place where we deal with that. And in light of your remarks about the integrity of expenditures, the wise expenditure, the wisest expenditure would be to grow healthy kids by getting them access to healthy foods, and this is the place that we do it. I think if we are going to really invest in an ounce of prevention for health care, sort of the first responders to a new healthy America, it has got to be in the government feeding programs. And when you look at what we do, we spend about $65 billion a year, two-thirds of this budget, on buying food. And we ought to be leading by example that the guidelines we develop for nutrition are implemented, and I don't think they are. I think we say one thing, and then we go out and buy the wrong things and feed them, whether it is to the military, whether it is to the people who are housed in other Federal institutions, hospitals, jails, so on, where the government is involved with the feeding. And so I have looked forward to seeing how we can use the power of this committee to make sure that that ounce of prevention really is reaching every child who is in need of food in order to have a healthy education. Thank you for your leadership. Mr. Aderholt. Thank you, Mr. Farr. I will now turn it over to you Ms. Rowe. Without objection, your full testimony will be included in the record and following your statement, we will then go into questioning. So thank you and you have the floor. Opening Statement Ms. Rowe. Thank you, Mr. Chairman, and members of the subcommittee, for this opportunity to speak to you today. As you know, we are facing great challenges. Food and nutrition assistance remains critically important to millions of Americans. And although the economy is recovering and more people are finding jobs, many still struggle to put nutritious foods on their tables. In 2011, nearly 17 million American households had difficulty getting enough food, and in over 6.8 million households, one or more people simply did not get enough to eat; they had to cut the size of the meals, they had to skip meals or even go a day without food at some time during the year. Programs like SNAP, the school meals program, and WIC are essential to many American families still facing economic disruption and hardship. The positive impact of these programs is felt in communities across the country and reflect the dedication of the State and local agencies that operate them in partnership with USDA. We must continue to work together to keep these programs strong and effective. At the same time, Federal resources are constrained, and we must ensure that each hard-earned tax dollar is used responsibly. Americans expect and deserve nothing less. This has been a priority at FNS, where we have reduced administrative costs while staying focused on our mission under the Secretary's Blueprint for Stronger Service to modernize service delivery, while improving customer experience. I am particularly proud of our effort to reengineer the SNAP retailer operations. We created a single, national integrated structure, resulting in enhanced oversight, greater consistency and efficiency, improved communication and better quality service. These changes maximize our resources and improve our ability to fight fraud. Program integrity is even more critical. While the vast majority of those involved in our programs are honest, any dollar lost or misused due to integrity problems cannot help feed a family in need. And waste or fraud can undermine public confidence in these vital programs. So we do not tolerate fraud or abuse. We take strong action against the small minority of bad actors who break the rules. Our approach looks across programs to focus on the greatest risk and takes advantage of best practices in one program to improve oversight of others. Our record today reflects real achievements. We have reduced SNAP payment error from 8.9 percent in 2000 to 3.8 percent in 2001, avoiding more than $3.6 billion in improper payments alone--for 2011. In trafficking, the illegal sale of SNAP benefits has dropped from 4 to 1 percent over the last 15 years. Preventing the misuse of about $2 billion in 2012 alone. At the same time we are pursuing new policies to combat misuse of benefits and penalize violators more strongly. We are focused on reducing errors in the school meals program, without compromising access for low-income families or increasing burdens for the school. Our State partners have greatly expanded direct certification, preventing errors and reducing paperwork for schools and for families. And we are aggressively implementing new integrity tools, clarifying requirements and helping schools who are in trouble correct problems. We have reduced improper certification in WIC to about 3 percent and sustained the low rate of improper vendor charges at about 1 percent, but we must remain vigilant. We recently took decisive action to investigate and deal with vendor management problems in a few States. FNS programs also address problems of poor diet, which often coexist with food insecurity. Today, more than one-third of adults and 17 percent of children are obese. We are implementing the Healthy, Hunger-Free Kids Act, including updating our school meal standards, which are tied to Federal funding, increased Federal funding. We are implementing--implementation can be challenging and we have provided flexibility in key areas to help schools be successful. Other reforms are underway, including proposed standards for other school foods. We continue to listen and provide assistance and support. Almost all Americans need help to improve their diet. The Center for Nutrition Policy and Promotion motivates Americans to eat better and be more physically active through their dietary guidelines, MyPlate and SuperTracker. FNS aligns its programs with the Center's guidance and education efforts. In sum, FNS programs will fill our Nation's commitment to nutrition for millions of American low-income children and families every day. To achieve this, we use every tool to manage effectively, efficiently and with great integrity. I would be happy to answer any questions that you may have. [The information follows:] [GRAPHIC] [TIFF OMITTED] 82566A.042 [GRAPHIC] [TIFF OMITTED] 82566A.043 [GRAPHIC] [TIFF OMITTED] 82566A.044 [GRAPHIC] [TIFF OMITTED] 82566A.045 [GRAPHIC] [TIFF OMITTED] 82566A.046 [GRAPHIC] [TIFF OMITTED] 82566A.047 [GRAPHIC] [TIFF OMITTED] 82566A.048 [GRAPHIC] [TIFF OMITTED] 82566A.049 [GRAPHIC] [TIFF OMITTED] 82566A.050 BROAD-BASED CATEGORICAL ELIGIBILITY Mr. Aderholt. Thank you, Ms. Rowe. I think it is important--by the way, let me say, we will go by the 5-minute rule, so we will each have a round with 5 minutes so we will proceed under normal proceedings. I think it is important that Congress protects the integrity of the nutrition program so that they can serve those who need assistance. I think everyone on this dais would agree with that. But also I think participants need to meet the eligibility requirements established by law. I think a lot of Americans are very concerned right now about the exploding participation and cost of the SNAP program over the past 4 years. In fiscal year 2008, as I alluded to earlier, there was an average of 28.2 million participants compared to the average of 46.6 million participants in fiscal year 2012. Of course, the economy has certainly been a factor in the increase, and we cannot deny that other policies have contributed to that growth. There are 43 States that have implemented a policy called a broad-based categorical eligibility or automatic eligibility for SNAP. Under this policy, most households are automatically eligible for SNAP primarily because they qualify for a noncash benefit from the Temporary Assistance for Needy Families program. It also means households may not be meeting the assets or gross income limits eligible by the SNAP law. Can you describe the type of noncash benefits that these households are receiving in order to become automatically eligible for SNAP? Ms. Rowe. Well, broad-based categorical eligibility, as you know, is an optional policy that allows States to align their income and asset limits with other means-tested programs. That would be TANF, general assistance, Social Security Income. It is available--or SSI, I should say. It is available in 43 States. It is a program simplification. It makes it easier for States to manage their eligibility process. The contribution to people who have come in through the broad-based categorical eligibility is about 2.3 percent, and we see this as a--and that is less than 1 percent of the benefits. So we see the continued flexibility that this program, that this option, provides the States is the reason that they are very interested in continuing it. Mr. Aderholt. What about the aspect of the households receiving the informational brochures on marriage counseling courses or having access to an 800 number hotline for pregnancy prevention, that aspect of it? Ms. Rowe. Well, when I was State administrator of these programs, that was something that you provided to people as part of the education and information, but they still had to meet all of the eligibility requirements to participate in the program. Mr. Aderholt. So if a taxpayer or--I am sorry, if an individual received an informational brochure or was given access to a hotline number, that would in no way--their eligibility would come into play there, is that what you are saying? Ms. Rowe. Yes, sir. They would still have to go through all of the eligibility requirements for the State. Mr. Aderholt. Well, under this policy, it is my understanding that there is no limit to the amount of assets a household can have to be eligible for SNAP. How many States have no asset limit? Ms. Rowe. I am not quite sure. Yeah, we can provide that information to you, sir. [The information follows:] Broad-Based Categorical Eligibility Thirty-six (36) States have no limit on assets for households that receive or are eligible to receive a non-cash Temporary Assistance for Needy Families (TANF) or State maintenance of effort (MOE) funded benefit. These households are categorically eligible for SNAP under a State option referred to as broad-based categorical eligibility (BBCE). In total, 43 States have adopted BBCE policies. Mr. Aderholt. All right. Would you say that there is a substantial number of States that would fall in that category? Ms. Rowe. Yes. Mr. Aderholt. More than half of the States maybe? Ms. Rowe. Very well. Mr. Aderholt. Do you think Congress should change the laws or reduce USDA, change the regulations to ensure fairness across the States on the issues of assets and gross income limits? Ms. Rowe. Well, I think we certainly would look forward to working with Congress and identifying ways in which we could ensure that there was consistency across all the States. Mr. Aderholt. And I assume you would agree that also if someone certainly their assets accumulated quite a bit of gross income, then they would not qualify, correct? Ms. Rowe. That very well could be, yes. Mr. Aderholt. I think my time is up. Mr. Farr. ASSET LIMITATIONS Mr. Farr. Thank you, Mr. Chairman. Let me just follow up on that, on asset limits, you are talking about all the assets, if you own a car. Ms. Rowe. Yes. Mr. Farr. The value of that car? Ms. Rowe. Yes. Mr. Farr. What has that got to do with hungry kids? Ms. Rowe. Well, it is an asset limit that gets factored into your eligibility requirement. So these are all issues that I certainly think we can discuss as we try and look at ways in which to have consistency across all of the States with regard to assets. Mr. Farr. Well, one of my criticisms of this program in visiting a lot of schools and coming back from a background of being a Peace Corps volunteer and dealing with a culture of poverty, is you are dealing with parties that aren't like people sitting in this room. They are not college graduates. Many of them are not high school grads. Many of them can't even read and write. And the old program had a form that you had to fill out to prove that you were poor, listing all your assets. You didn't even know what the word ``asset'' meant, much less being able to fill out these forms, which the people said here are kids in our school that are so poor that their parents cannot fill out the forms, and therefore, we cannot make them eligible. That form was larger than the tax form. It was ridiculous. NUTRITION EDUCATION So this idea of grandfathering in children because their parents have qualified for social benefits that are eligible in those States, it seems to be a wise thing. If we are going to go back and try to knock them off the rolls because of some new asset requirement, I think that is missing the purpose. The purpose here is to reduce hunger and improve diet. And part of the thing of improving diets is education; education is so important. We are being educated in the wrong way in this country. We are being educated to eat all the fast foods, and look at what problems Bloomberg had just trying to limit the size of drinks in New York. There is a war against nutritional education. And we have got to fight that war, and we are not fighting it well. We cut 28 percent of the education programs, $109 million in the fiscal year 2013 budget going back to fiscal year 2012 levels. Mr. Chairman, I am a little concerned if we are going to try to go back and make it harder for kids to qualify. I think what we need to do is start making the diets that we tell--the education--and you know what Colorado did, is that they waived the payment requirement for those kids that could afford it, just saying, look, if you are in school you ought to all get-- and a lot of nutrition counselors tell me that, in the program, you have kids from wealthy families who have dysfunctional parents; they don't get up and give their kids a breakfast in the morning. They just send them to school, and they are hungry. And they would never qualify because their parents have too much of an income to get access to these food programs, unless they have--carrying money or are getting qualified. And I think that if we are really going to try to grow healthy kids in this country and give people in poverty access to food, it is not a problem, I think, too many people are asking for food stamps. My God, we have been in a recession; there are so many people out of work. Even people in the military, even with the good payments and benefits you have in the military, there were still families of such size that their parents had to go down and ask for food stamps in order to make ends meet. So I am interested in making sure that there is not this big rip off of fraud in the providers, but I don't think we ought to do it at the expense of kids in need of food. And there is a little bit of time left. What I would like to know is, since we cut back on the education, how are we going to--the basic assumption of the American health care act is that we can grow healthier people in America, by changing, and this is a cultural pattern. I grew up without any fast food; the first McDonald's came to my district in 1962. I had graduated from college, had never seen fast food, never heard of it. So our lifestyle growing up was sort of fresh, living in a place where you could get access to stuff. We were just beginning to get into fresh frozen; everything was--remember, World War II, everything was still in cans. It seems to me, with the fast food industry, we have been able to give the wrong message, getting a lot of the wrong foods. That is why school districts are rebelling and taking soda pops out of schools and things like that. What are we doing in the national level to enforce a good healthy lifestyle in school? It is not just the school lunch program, but all of the other programs, the snack programs and things like that. Ms. Rowe. Well, clearly, we have undertaken a major public information, public awareness campaign, not only associated with our schools programs but through CNPP and the work that they are doing for the dietary guidelines and SuperTracker and MyPlate, the work that is going on with the First Lady and Let's Move, and the activities that are going on in the schools, the Healthy, Hunger-Free Kids Act--I mean, the Healthy U.S. School Challenge, where we have worked very hard with over 3,000 schools and families, associated with schools to provide information. Nutrition education is a high priority. If we are going to change people's behavior, not only do we need to educate them, but we need to give them access. And that is the other part of the equation, we work very closely with the other parts of USDA to look at farmers' markets, to look at programs that will increase access. That is why I am so very interested in programs like the Corner Store Program that is in Philadelphia. Philadelphia is starting to see some changes because of some mix of strategies that they are using, but access, once you educate folks, make sure they have access and then the resources to be able to purchase the food is also very important. Mr. Farr. Thank you. Mr. Aderholt. Mr. Valadao. WIC FOOD PACKAGE Mr. Valadao. Thank you. I am sorry, I don't fully understand the reasoning behind the WIC program using an outdated set of dietary guidelines, the 2005 dietary guidelines, for example. For the basis of this recommendation to exclude fresh white potatoes from the WIC program while this allows every other fresh vegetable and fruit in its produce aisle, it seems to me that the USDA would want to use the latest available science, which is the 2010 dietary guideline, as the foundation for the operation of the WIC program. So, at this point, I would appreciate you explaining this. I have another question before, while fresh white potatoes cannot be purchased with WIC benefits at a grocery store or supermarkets, those same potatoes can be purchased with those same benefits at a farmers' market, what is the nutritional science behind this? Ms. Rowe. Well, first of all, the WIC food package, it was the result of the work of the Institute of Medicine. And we took the results of the Institute of Medicine recommendations and looked at them, published them, had feedback on them. One of the things that the research demonstrated was that the most widely consumed vegetable, in this case starchy vegetable, was white potatoes. What was not consumed for pregnant women and young children was access to fruits, vegetables, whole grains. So that became the focus of our food package, because we knew that the access to white potatoes or other starchy vegetables, individuals would be able to purchase on their own. But the package is to look at the health needs of the individual, of things that they may not have normally purchased and made a part of their diet, to get them into their diet so it becomes a part of their behavior, so while they are pregnant and in the early stages of breastfeeding and the growth of the child we are able to have healthy options. Mr. Valadao. So why the difference between the farmers' market and the grocery store? Ms. Rowe. The grocery stores are--the farmers' market is a voucher, cash-value voucher, an individual can use that cash- value voucher to purchase any products that they want available at the farmers' markets. Mr. Valadao. All right, thank you. Mr. Aderholt. Ms. Pingree. Ms. Pingree. Thank you, Mr. Chair. Thank you very much for your testimony here today and to the conversation my colleagues have had previously. I appreciate the mention of the white potato coming from Maine. We have weighed in on the potato controversy several times. And so, you know, we have an interest in the availability and access to potatoes. WIC CASH VALUE VOUCHER I want to follow up a little bit on some more technical things about farmers' markets and some of the other things you are dealing with. I am really happy to see the recent update in the WIC package includes access to fresh fruits and vegetables. I know it increases the amount available for children and adults. And the way I understand it, under current WIC rules, State agencies are able to make the determination about farmers' markets, whether they are permitted to accept the fresh fruit and vegetable coupons. It seems like a win-win: It is good for our farmers, and it is, obviously, good for the nutrition of our children and families. And it is just doing everything we think should be happening with the growth of farmers' markets and more interest in local food. I guess one of the things I don't understand is why don't the WIC rules treat this more uniformly? Why don't they require every State to allow WIC to be accepted at farmers' markets? Is this an issue that FNS can deal with? Does it have to be addressed in statute? Can you make what I think is a very commonsense change on your own? Can you talk a little bit about that? Ms. Rowe. Well, I mean, clearly we want to see the use of our cash-value vouchers as widely as possible because that is the purpose of getting additional healthy foods available to individuals. It is a State option currently. We have worked with States and encouraged them to have as broad a definition for use of those cash-value vouchers as possible. It is something that I would be happy to have further conversations to determine whether we should have more of a uniformity mandate. Coming as a former State commissioner, I like to be encouraged to do things and to become aware of the most important thing to do and why it is important to do something than to have it mandated to me all the time, but it certainly would be something that we could have a conversation about. Ms. Pingree. So just clarify for me, and I would be happy to have a further conversation. And I understand that people like to be encouraged, not required, but we require a lot of things. Ms. Rowe. True. Ms. Pingree. In the food programs, and many of them that people push back on, and some of them are hard to administrate. Is this a statute change, or is this something that you can change? Ms. Rowe. I believe that it would be something that would require--and I---- Ms. Pingree. You can get back to me. Ms. Rowe. Okay. It is a regulation so it is something that we could---- Ms. Pingree. I would be interested in talking to you about that further. I think it has a lot of positive benefit. It also allows people to buy more potatoes. WIC ELECTRONIC BENEFIT TRANSFER By law, WIC is required to transition to EBT by 2020. However, no funds were provided for WIC EBT transition in 2012, and as a result of the current CR, there are no funds for 2013. Can you update us a little bit about the current status of the WIC EBT implementation? Ms. Rowe. Well, we have currently about 10 States that are fully implementing WIC EBT. We have a number of States with the funding that we have who are in the developmental stage of implementing or designing a WIC EBT technology for their program. There are a number of other States that are in some planning stages. We have been encouraging States to talk to other State agencies within their geography, who are looking at changes in technology to determine whether there is some way to leverage what already is in place to allow for a use of WIC EBT, but until we have additional funding, we can't take it further than where we are right now. Ms. Pingree. So it is going to stay stalled until we move beyond the CR? Ms. Rowe. Leverage funding in States where States are starting to look at software development and replacing legacy systems and where the health departments are looking at changes, if we can incorporate WIC EBT into those conversations that would be possible. FARM TO SCHOOL PROGRAM Ms. Pingree. I am going to run out of time in a minute, but just quickly I am very interested in the Farm-to-School program, and I had a chance to meet with the Farm-to-School director, and I am really impressed with the vision and the direction that is going. Do these programs have the resources that they need to continue to expand technical assistance to schools? Again, I think they are a great win for our schools. Every school I have seen participating has been enthusiastic with their stories about how much more kids want to eat, how much they like learning where their food comes from. It is obviously good for the farmers in our communities. I think it is good for communities overall. And the families who hear about the food that kids eat at school, and then they come home and say hey, can we go to the farmers' market and try buying that or can I get it in the grocery store. So I think it's a great pathway to healthy nutrition and good for farmers. I am curious about the resources and what assistance you are able to provide. Ms. Rowe. Well, first of all, let me thank you for the work that you were doing in Maine in bringing together participants in the farmers' market. That has been very--I mean the Farm-to- School program; that has been very, very important. I think we have current funding. We anticipate funding in our fiscal year 2013 budget that will allow us to continue. I am right now confident that with the vision that we have, that we can generate more participation in the Farm-to-School program. Ms. Pingree. Thanks. Thank you Mr. Chair. Mr. Aderholt. Mr. Nunnelee. SNAP BUDGET Mr. Nunnelee. Thank you, Mr. Chairman. Thank you, Administrator Rowe, for being here with us. Food stamps are growing at a rate we can't sustain. We were spending $18 billion a year in 2001. We are spending $80 billion today and rising. Now I understand we have gone through a recession, and we have had families on tough times, but now, even while unemployment is going down, our spending on food stamps is continuing to go up. While the percentage of people living in poverty are going down, what we are spending on food stamps is going up. As a member of the Appropriations Committee, I am telling you we can't continue to spend this kind of money, we can't continue to grow this. So I need recommendations. What can we do to save money and not spend as much money on food stamps? Ms. Rowe. Well, Congressman, first of all, I mean you did acknowledge that growth in the food stamp program has to do with where our economy is today, but as we are seeing the job market improve, there is a lag time between seeing the impact of that improvement on the SNAP program. However, I was encouraged today in reading a couple of articles that we are seeing decreases in places like Arizona and parts of Florida, where there is starting to be a decrease in participation. Having jobs, helping people who are in the program who are working who still don't have sufficient resources and meet our Federal guidelines, having them have jobs that will then provide a living wage for their families so they don't have to participate in the program is the way, the only way that I see that we can continue to decrease the rolls. Mr. Nunnelee. So you are telling me, short of seeing the economy improve, there is nothing we can do administratively to change it? Ms. Rowe. Well, there are things that we are doing administratively, looking at certainly fraud and any trafficking activities to make sure that we are spending the dollars that are in the program appropriately and efficiently, but the real answer is to have a more robust economy so that people can have sufficient resources to put food on the table. BROAD-BASED CATEGORICAL ELIGIBILITY Mr. Nunnelee. Let's talk about categorical eligibility. Now, your testimony before the chairman's question, 2.3 percent of the people that are qualified for food stamps come in under categorical eligibility. Can you give me a dollar amount for the number of people--what are we spending for people who would otherwise not be eligible for food stamps that come in under categorical eligibility? Ms. Rowe. I will need to get back to you on the exact dollar amount, but it is about 1 percent of the benefit. [The information follows:] Broad-Based Categorical Eligibility In 2011, less than 5 percent of SNAP participants lived in households that exceeded the SNAP Federal gross income limit. These households received about 3 percent of SNAP benefits, an indication that these households receive fewer benefits. The Government Accountability Office (GAO) found in a 2012 audit that participating households that were eligible only through broad-based categorical eligibility were more likely to have: children, earned income, higher shelter expenses, and higher dependent care costs. In order to receive benefits, all SNAP households must still have income low enough to received benefits and meet all other SNAP eligibility criteria. Mr. Nunnelee. One percent of $80 billion are people that otherwise wouldn't qualify but come in through the door of categorical eligibility? Ms. Rowe. Well, they--yes, they would--they come in through that vehicle if they come into the program, yes. Mr. Nunnelee. My question math says---- Ms. Rowe. But they meet all of the other requirements to be in the program, let me be clear about that. Mr. Nunnelee. And so in response to the chairman's question about States with no asset test, this would allow someone who wins the lottery, for instance, to continue to get food stamps by coming in the door through categorical eligibility with no asset test? Ms. Rowe. States have the ability to design their policies to prevent individuals who would win a lottery. For example, Michigan has done that, so that they have a limit that they have established for an individual in terms of assets. So States do have some flexibility to look at their policies. Mr. Nunnelee. But still we say there is nothing we can do administratively to change the program to help us save money. Ms. Rowe. As I have said, Congressman, the way that I see this program saving money or reducing its expenditures is having a more robust economy. Mr. Nunnelee. Thank you, Mr. Chair. Mr. Aderholt. Mr. Fortenberry. Mr. Fortenberry. Thank you, Mr. Chairman. Ms. Rowe, good morning. Ms. Rowe. Good morning. Mr. Fortenberry. You have one of the most powerful jobs in the United States Government. Did you know that? Ms. Rowe. I love my job, I know that. Mr. Fortenberry. I don't think many people would acknowledge or recognize that, but the amount of budgeting that goes through your auspices is enormous. SNAP FRAUD AND TRAFFICKING Just a couple of questions for you. I would like to have a deeper understanding as to how fraud actually still happens in the SNAP program. Now, to your credit, there has been a very aggressive and successful reduction in the amount of fraud, which has saved us billions of dollars. But explain for those of us who don't have criminal minds how this actually can occur and then what steps are now underway to tackle it. Ms. Rowe. Well---- Mr. Fortenberry. One of the major ways, as I understand it, is complicity with the retailer. Ms. Rowe. Right. And that is trafficking, and it is the area where we concentrate a great deal of our resources, both in terms of the technology that we have in place, where we are constantly reviewing the sales that go on in real time in stores, we are able to identify anomalies when we see anomalies in the purchases in a particular day. Mr. Fortenberry. So the retailer would be complicit with the individual? Ms. Rowe. Right. Mr. Fortenberry. Saying you take this amount, and I will give you cash back. Ms. Rowe. And I will give you cash, 10 cents on the dollar, 50 cents on the dollar, those kinds of things. When that happens, when we identify that and we disqualify a retailer, do an investigation, disqualify a retailer, we send that information to the State so that the State can then look at the client, because it takes two to participate in a trafficking event. So the States can then take action with respect to the clients. We have bad actors. Some of the things that we are looking at, for example, is we have 236,000 retailers in the program. They set, by law, the retailer definition of who can participate. We have some concerns about that, because we are able to identify those stores in those places where it is more likely to have trafficking, and if we had some greater, higher level, a definition with higher standards, then we would be able to take some of those stores out, and we would see less trafficking. Mr. Fortenberry. How do we get that done? Ms. Rowe. It has to be done by Congress. Mr. Fortenberry. I would appreciate your recommendations on that, because I think that is important, an ability to prosecute more quickly and ban a person, and that ban follows them around, because apparently these things open up, particularly maybe smaller retailers open up on the fly, as I understand it. Ms. Rowe. Well, what happens quite often is the retailer will attempt; we find them; we will disqualify them; they will attempt to sell it to someone else that they know. We have changed our policies and become more aggressive in that area so that once a new retailer is coming in from a disqualified store, we actually do more collateral checks to make sure that there isn't still going to be some arm's length relationship. We catch as many as we can, and those that we still have a belief but can't catch, we refer to OIG so they can do the investigations. Mr. Fortenberry. Would you give me those recommendations? Ms. Rowe. I certainly will. Mr. Fortenberry. That would be helpful. [The information follows:] SNAP Fraud and Trafficking Last year's House Committee Farm Bill action included several provisions that we believe would have improved the quality of stores that could be authorized to participate in SNAP and, at the same time, limit those types of retailers that are more likely to act fraudulently. These provisions included limiting stores that have significant sales of liquor, cigarettes/tobacco products, or hot foods. As the Farm Bill and these related provisions were not enacted, we would look forward to again working with the Committee on options for enhancing the type of retailers that participate in SNAP to improve integrity in the program. SNAP RETAILER ELIGIBILITY This also brings up the next point, we have vastly expanded the number of retailers, just based on anecdotal evidence, I see people hanging signs out front of certain kinds of shops that would previously not have been EBT eligible. Is that in conflict with food and nutrition goals? We have two sets of standards here in which we are trying to achieve that are seemingly that are in tension: One is to bring people who are in vulnerable circumstances the right amount of caloric intake but also move us toward a system where we are actually promoting healthier foods. But then we are setting up the ability to buy foods that are not consistent with that nutrition goal. Ms. Rowe. We are constrained by the definition that is in the law, and we are concerned about it. I mean, I--we talk about, this is one area that we discuss a lot. We have had some relief in the farm bill discussions that were going on, so when we get a farm bill it is my hope that---- Mr. Fortenberry. I just came off the Ag Committee by the way, so all of this is fresh, and I know it is a tension, but if have you recommendations in that regard that would be appropriate for this committee as well, that would be helpful because this is a problem. I mean, we have got broad health care goals. We know that health care is inextricably tied to the type of food you intake, and we have set ourselves up for conflicting situations, I think, in terms of not incentivizing the right types of nutrition on one side of the aisle, and on the other side of the USDA corridor, we are trying to achieve that goal. So---- Ms. Rowe. We would be happy to give you some recommendations. [The information follows:] SNAP Retailer Eligibility Last year's House Committee Farm Bill action included several provisions that we believe would have improved the quality of stores that could be authorized to participate in SNAP and, at the same time, limit those types of retailers that are more likely to act fraudulently. These provisions included limiting stores that have significant sales of liquor, cigarettes/tobacco products, and prepared foods. The current statutory requirements for stores to be authorized to accept SNAP benefits are minimal and may allow stores that have low food stock, few healthy choices, and a higher risk of trafficking. As the Farm Bill and these related provisions were not enacted, we would look forward to working with the Committee on these and other standards that would promote healthy eating. Mr. Fortenberry. Okay. Mr. Chairman, do I still have time for a couple more questions? Mr. Aderholt. On our next round. Mr. Rooney. Mr. Rooney. Thank you, Mr. Chairman, and I apologize for walking in late. SCHOOL MEAL NUTRITION STANDARDS I will switch gears a little bit if I could here because the district that I represent in South Central Florida has about as many oranges and cows as they do people, so I do need to ask some questions specifically with regard to school lunch and our programs there. We have a lot of family farms, as I mentioned, and a lot of kids who grow up helping out on these farms. And when updating the lunch and breakfast program standards, it seems like you kind of took a one-size-fits-all approach. I am concerned that some of the guidelines you are promoting overlook the importance of protein as part of a balanced diet. Could you please elaborate on how the USDA came to the decision of putting maximum requirements on meat for the school lunch and breakfast programs? Specifically, who at the USDA was involved? Did you work with any other agencies? Ms. Rowe. Well, first of all, the recommendations, the initial recommendations were a result of the work that we did with the Institute of Medicine. They did a study for us, gave us a series of recommendations. Those recommendations ended up into our policy recommendations, which we then sought public input. We had an extensive number of public comments. We reviewed each one of those comments and made a determination of which calorie limits we would leave in the program and why those calorie limits were important. We had a lot of support for limits on certain calories in the school meal program and we made a determination. Now we also determined, after the final rules were implemented and schools were trying to implement this program, that there needed to be some flexibilities. And so we went back and looked at our policy and allowed for some flexibility both in this school year and in the next school year, and we will be looking to determine whether it should be some permanent flexibility that would allow schools to increase the use of grains and meats within their school lunch programs and within the menu. Mr. Rooney. Was it based on calories almost exclusively? I mean, after the study and the comment period, was the decision just based on caloric intake, or were things like proteins and grains considered? Ms. Rowe. Yes, it was to create a balanced meal for a child at lunch. For many children, this is the only balanced meal that they get. And so we were trying to create a balanced meal that would be available for all children, and then, where needed, allow for some flexibility for different school districts to design their meal pattern so that it met their needs. Mr. Rooney. If I could just ask one more part to this, many of my constituents support the 1-year elimination of the maximum requirement for meat. Are there any plans to make that elimination permanent after the year is done? And if not, do you plan to ensure these kids are getting enough protein? If you consider what foods have the highest amount of proteins, my constituents will tell you that they won't touch tofu nor would our school children, and the allergies to dairy, nuts, seafood and eggs seem to be increasingly common, so what is left, and I would say that is beef. I am just wondering what your next steps will be. Ms. Rowe. Our next step is that we currently have extended the flexibility for this school year and next school year, and we are looking at the options for moving forward. We are also looking, and I should have mentioned this earlier when I talked about IOM, is dietary guidelines for Americans was part of our consideration as we looked at what the school meal patterns recommendations would be. Mr. Rooney. Thank you, I appreciate you being flexible as we move forward. Thank you, I yield back. Mr. Aderholt. Ms. DeLauro. Ms. DeLauro. Thank you very much, Mr. Chairman. I want to welcome our witness this morning and say, thank you, to you very, very much. It is a pleasure to see you back here today. I always have to say thank you for the great work that you did in Connecticut. We were really sorry to lose you but glad you are sitting here today. And I also want to say that the great work you are doing with food safety through the Produce Safety University is really first rate. Thank you. I understand that there was a comment before I came in about how we might be able to reduce SNAP, usage of SNAP, food stamps program. If we grow our economy and we put people to work, we will reduce the need for food stamps in the United States. SEQUESTRATION IMPACT ON WIC My first question relates to a topic we heard about extensively yesterday, and that is sequestration. Can you detail for us the impact of sequestration on the programs that you are responsible for, specifically the WIC program? I am concerned about the long-term implications of sequestration and the Budget Control Act on WIC, because my understanding of sequestration 600,000 to 750,000 eligible women, infants and kids will not receive the good nutrition that they need between now and October 1st. Given the spending caps in the BCA, there will be tremendous pressure to reduce all discretionary spending, including WIC, in 2014 and in future years. What would be the consequences if we break our longstanding commitment to serving all eligible women, infants and kids who apply for WIC? Ms. Rowe. Congresswoman, if we just apply the way the sequestration was constructed, if we just apply the 5 percent to that account, it is about 600,000 individuals--women, infants and children that would be affected. However, we have been working continuously in this program to look at ways to contain costs. We are identifying and working with States now to determine the best way to mitigate the impact and try and understand what the exact impact will be on each State. We are looking at moneys that haven't been expended just yet, so whether some of those dollars can be reallocated. So we are working very aggressively with our States to determine what the final impact will be, and clearly, with the discussions that are going on at the budget level, we hope those, too, will help mitigate. But if nothing happens, if everything remains and we can't find additional funding, we can't find any way to mitigate the impact, the 5 percent in that account would be 600,000 women, infants and children. Ms. DeLauro. And that is between now and October 1st. Ms. Rowe. October 1st. Ms. DeLauro. In terms of the 600,000 and let's say your attempts to use other areas, other resources, what you can cobble together, are there people who are going to be jettisoned, are there women infants and children who will be jettisoned from that program, given the 600,000 number, which is a substantial number of people? Ms. Rowe. Well, again, given the critical nature of this program and what it provides to pregnant moms and to infants and to children, and its longstanding bipartisan support in the Congress, we believe that if working together with our State partners and with the Congress, that we can find ways to mitigate this impact. It is our, you know, fervent desire to ensure that we do not have to see a single wait list develop, which would end up with perhaps probably those women who are postpartum participating on wait lists, those kinds of things. But right now, we are doing everything we can to mitigate the impact. Ms. DeLauro. I appreciate that. And I also think it might be important, Mr. Chairman, for the members of the committee to know that within WIC, when we would begin to restrict funds, they have a listing of who goes first, and it really is pretty incredible. This is a priority list, the WIC priority list. If we don't have the funding, pregnant women, breast-feeding women and infants determined to be at nutritional risk is a first priority; infants up to 6 months of age whose mothers participated in WIC could have--in any case, they have got a list of what the priorities are, the flip side of who will be able to continue that service are the people who will not be, and it is not like you are sent out a notification 30 days in advance for a furlough. These folks will come one day, and they are not going to be able to participate in the program because if you are postpartum and you are not breastfeeding, you are going off the list. And that word gets around, people will not come. This will be a major, major setback, to women, infants and children and their health. And this has been a program that has had extreme bipartisan support. And I thank you for what you are trying to do to mitigate against the loss. BROAD-BASED CATEGORICAL ELIGIBILITY Mr. Aderholt. Thank you. Let me--I want to return back to what we were talking about earlier about the noncash benefits of the broad-based categorical eligibility. And I had mentioned to you earlier about the example about the households receiving the informational brochures on marriage counseling courses or having access to an 800 number hotline for pregnancy prevention. It is my understanding and I want to get it clarified because of some--I may not have asked the question exactly right, but what my question is if, in some States, if an individual qualifies for a TANF program, then do they--and such as receiving these informational brochures on marriage counseling courses or the 800 hotline, are they automatically eligible for the SNAP program? Ms. Rowe. They can apply for the SNAP program, but they are not automatically eligible for the SNAP program. Mr. Aderholt. There was a letter that was sent out by USDA to all the original administrators that--in one portion of the letter, it says, from this time forward, we will use the term broad-based categorical eligibility to refer to the policy that makes most, if not all, households categorically eligible for SNAP because they receive a noncash TANF-funded benefit or service, such as an informational pamphlet or 800 number. Ms. Rowe. Yes. I mean, I know the letter went out, but an individual still has to meet the eligibility requirements--the benefit requirements, I am sorry, the benefit requirements to participate in the program. You may get the brochure; you still have to sit down with an eligible worker, and there still has to be a determination that you meet the benefit requirements before you can participate in the program. Mr. Aderholt. Okay, so you are saying, just receiving those things in the mail it does not automatically qualify you to---- Ms. Rowe. No. SNAP OIG AUDITS Mr. Aderholt [continuing]. Get in the program. Okay, all right. In September, an OIG report reviewed SNAP fraud and found that in one State almost 7,000 households were participating in SNAP who had assets exceeding the limits set by law. Another State found that more than 61,000 households with income exceeding the limits set by law. What my question would be and what I think has concerned a lot of people is with that out there and if that is--if these numbers are wrong, please, let me know, but what our concern is, is hurting the integrity of the program when you have these kind of numbers of households that are exceeding the income limit. Ms. Rowe. Well, Congressman, what I would be happy to do is to take that information and do some additional checking on it. I mean, 99 percent of the individuals who participate in the program are eligible to participate. So I am not sure where those numbers, you know, how those numbers were derived by those States, but would be more than happy to take a look at it. Mr. Aderholt. If you could check into that. Ms. Rowe. I will. [The information follows:] Broad-Based Categorical Eligibility This data is drawn from the OIG Audit, ``Analysis of FNS' Supplemental Nutrition Assistance Program (SNAP) Fraud Prevention and Detection Efforts--27002-0011-13.'' In the report, under a paragraph titled, ``Income limitations exceeded in SNAP,'' it states that in one State, ``we found 6,970 households that exceeded the asset limit of the SNAP program.'' These households were determined to be eligible under broad-based categorical eligibility (BBCE). As the report acknowledges, this is ``not a program violation or a case of questionable payments.'' SNAP rules provide State agencies with a number of policy options that provide States with the flexibility to tailor SNAP to meet the needs of the low-income population in their States. BBCE is one of these allowable policy options. BBCE allows States to align SNAP income and asset limits with those of a Temporary Assistance for Needy Families (TANF) program. Under BBCE, a household may be considered categorically eligible for SNAP because they qualify for a non-cash TANF or State maintenance of effort (MOE) funded benefit. The Gross Income Limit of the TANF/MOE varies by State but is no greater than 200 percent of the Federal Poverty Guidelines (FPG). Therefore, to say that these households exceeded income limitations is incorrect. In order to receive SNAP benefits, households must still have income low enough to receive benefits and meet all other SNAP eligibility criteria. OIG identified no improvements needed and provided no findings or recommendations regarding these 6,970 households. Mr. Aderholt. I think everybody at this dais realizes the importance of this program for the people who need it. I think it is what the American public and what so many individuals in Congress and what we hear back from our constituents is the frustration of the program for those who do not need the program and who would not qualify. And like I said, it hurts the integrity of the program because we want to see the people who need the help receive it. And for those people, it is a great program, and it can serve a real purpose. But to have the fraud and the abuse, it really hurts the integrity of the program, and it hurts the integrity of the work that you are doing. That is why I think we really need to look at this. We often hear that part of the reason for allowing households to qualify for one low-income program is to qualify for SNAP program is to reduce the burden on the case workers. Now, again, we can dispute whether that is the case or not, but if there was--say there is such a policy does--is administrative costs saved in that in any way? Ms. Rowe. No, I mean, once again, having worked in Connecticut as a commissioner and the District of Columbia as commissioner, administering these programs, you don't have a savings as a result--you have a savings is when you streamline the process for individuals that come in. It gets to the Congressman's comment with regard to the application process and how--what information you actually need to make a determination based on the law, what information is nice to have. We need the information that is needed to make a determination against the rules set by the legislation. The other is creating options for people to do online. Even if you apply online, there is still a review that is undertaken by a case worker. Even though technology has predictive intelligence and you should be able to do these things automatically and make a determination, the worker still needs to be involved. So our administrative costs, our administrative costs reductions, States are trying to grapple with reduced budgets, has more to do with how we streamline the process than anything else that we are trying to achieve. Mr. Aderholt. All right my time is up. Mr. Bishop. Mr. Bishop. Thank you very much. WIC IN GEORGIA Ms. Rowe, it is a pleasure to see you and have you back before the subcommittee again. I would like to spend a little time on a situation we are having down in Georgia, which I believe you are familiar with, with respect to the WIC program. Can you give us an update on the status of the Food and Nutrition Service moratorium on the Georgia WIC program? I understand that your agency has only recently received the State's response to the original communication where the State was informed of your intent to place a moratorium on the WIC program and the particular approval of any new vendors statewide. Do you have any idea when you will be able to have a resolution to this matter so we can sort of move forward? Ms. Rowe. Well, as you know, Congressman, we have made some great progress with the leadership in the State, with the agencies, et cetera. We have asked for some specific documentation to help us with the remaining issues and findings that we have outstanding. Actually, as of March 15th, the absence of having that information in, then we will issue a letter of moratorium for adding new stores into the program until such time as we have the resolution and know the vendor management in the State is being handled in an efficient manner. And we certainly will keep you abreast of the next steps that we are going to engage in. Mr. Bishop. I am very, very frustrated with what has become really a major challenge within our State. There is no question that Georgia has for some time faced some challenges in administering the WIC program. But the real victims are really not the bureaucrats at the State and Federal level, who are bickering and bickering back and forth over the compliance with regulation, whether it was filed correctly or not; the real victims are really our constituents, who, throughout the State, will be negatively impacted by this impasse. You may or may not know that Bell Foods acquired 15 major grocery stores in Georgia, and having received some bad advice from the previous State administration, WIC officials, during the certification process, they are now barred from accepting WIC vouchers because they accepted them when they took over the new stores before it was finally approved. Unfortunately, because of these larger issues with the moratorium, I have a lot of constituents who now don't have access to grocery stores that accept WIC. So it is a real problem, and it is frustrating because the people who need the programs are the ones that are suffering while the bureaucrats bicker. Ms. Rowe. Well, we have been working very aggressively, and we, too, are concerned about access, and we want to make sure that all of our participants have access to the food products they need. I am not familiar with the Bell Foods, but I will take a look at that. We have, all the way up to our under secretary, have been engaged in looking at this issue in general. But I can assure you, Congressman, that we will do everything we can if we need to put in place a moratorium to have that moratorium lifted as quickly as possible. We have had to do this in other States and it gets people's attention, and we are able to resolve the issues much more quickly, but we will do everything we can so that people are not adversely impacted. [The information follows:] Georgia WIC Program Belle Foods acquired 15 stores in Georgia, most operating as Piggly Wiggly stores, in July 2012. All 15 of the newly-acquired stores applied to become WIC vendors, as required, but prior to authorization by the Georgia WIC State Agency, these stores accepted $300,000 in WIC food instruments, thus violating WIC Program regulations. Georgia WIC requires vendor applicants who accept food instruments prior to authorization to wait 1 year before seeking WIC authorization again. The 1-year period can be waived if the store is needed for participant access. One store (Piggly Wiggly #745 in Gordon, Georgia) received a waiver and was authorized because there was no other authorized WIC vendor within a 10 mile radius, per Georgia WIC's approved participant access policy. The authorization became effective on January 3, 2013. A moratorium stops a WIC State Agency from approving any additional vendors for WIC; vendors that have already been authorized can continue to accept WIC. Under the FNS moratorium that was made effective on March 18, 2013, Georgia WIC cannot authorize any new vendors. FNS has met with Georgia WIC leadership and has accepted corrective action plans (CAPs) for 19 of the 20 findings from the Management Evaluation. To date, only three of the CAPs have been closed. The moratorium will remain in effect until additional corrective action plans that address the findings from the Management Evaluation are completed. The 1-year waiting period for the remaining 14 Belle Food stores expires in July 2013, at which time they can seek WIC authorization. However, if the moratorium is still in effect, Georgia WIC cannot authorize any stores, Belle Foods or otherwise, other than those needed for participant access. Mr. Bishop. As I understand it the current administration has just recently taken over, and they inherited this problem from the previous administration, and they are working aggressively to try to correct it, but in the mean time, you know, it is the recipients who are suffering. Ms. Rowe. And we are providing technical assistance, and we will, if necessary, provide even more technical assistance because we just--you have heard our conversation; this is a critical program, and we don't want to see recipients not have access to the benefits that they can receive from it, so we will do everything we can to ensure that Georgia's residents are not adversely affected. Mr. Bishop. Thank you very kindly. I appreciate that. I yield back. Mr. Aderholt. Mr. Fortenberry. SNAP PARTICIPATION Mr. Fortenberry. Ms. Rowe, can you tell me the average amount of time a person spends receiving SNAP benefits? Ms. Rowe. You know, the average amount of time that--it is about 10 months that individuals come in and then are able to have sufficient income through job promotions or changes in their circumstances and are able to meet their basic needs. Mr. Fortenberry. Is there a group of persons who are generally on the program for longer term because of certain incapacities, and so what percent of those SNAP recipient population does that represent versus this other group of persons, who, because of job circumstances or some temporary vulnerability become, eligible but then move off? You understand the intent of the question? I am trying to get a broader understanding of the nature of the need, because it goes to the heart of what we have been discussing earlier. If we would see economic improvement, certainly there would be a correlation to dropping off of SNAP benefits as well as the time spent on the SNAP benefits, but there is probably a population with a significant vulnerability that remains stable versus a population that we could correlate to the potential of the declining use of the program if economic circumstances were different. Ms. Rowe. I can get you the exact number, but there is a population of individuals who remain on the program for about 7 years, those individuals are folks with chronic needs. One of the things that needs to happen for many of these individuals is, are there other services in programs outside of SNAP that they need to benefit from? So it may be individuals with major mental illness problems, major drug, substance abuse problems, major disabilities. They may be chronically homeless individuals. So there are a variety of circumstances in terms of chronic needs that these individuals have. So the exact number--the average length of time that they remain is about 7 years, but the exact percentage of that, I will get back to you on. [The information follows:] [GRAPHIC] [TIFF OMITTED] 82566A.051 Mr. Fortenberry. That would be helpful to know, whether it is 20 percent of the program or 5 percent, I would assume it is not the majority of the program. Ms. Rowe. No, no. SNAP STUDENT ELIGIBILITY Mr. Fortenberry. Explain to me the eligibility of students for SNAP benefits. Ms. Rowe. Currently, and I am going to need some help on this one, I believe, because we have gone backwards and forth, students have to be categorically eligible to participate in the program, and they have to be working. So there are some-- they can be categorically eligible, and they have to be working, which is the way the program was, and I will admit before members of this committee, I was a student and found myself in a situation where I needed to participate in the SNAP program. I was in the SNAP program for about 4 months until I graduated. I had some working income, but it was not sufficient as a pregnant mom and with a family to be able to put food on the table. But as you can see, I benefited from the program, because that is why it was there, and now I am sitting before you today. There are many individuals like myself, who were students who have participated in the program, used it for what it was designed for, who were married, had children and needed that help for that short period of time. And so, as we have worked on this, because of my own circumstances and experiences and understanding, I want to make sure that students who need the program in order to sustain themselves and their families can avail themselves. [The information follows:] SNAP Student Eligibility Section 6(e) of the Food and Nutrition Act provides that no individual who is a member of a household otherwise eligible to participate in SNAP shall be eligible to participate if that individual is enrolled at least half-time in an institution of education, unless the individual is:Under 18 or is age 50 or older; Not mentally or physically fit; Assigned to or placed in a college through: a program under the Workforce Investment Act, a program under Section 236 of the Trade Act of 1974, part of an employment and training program under the SNAP act, or part of an employment and training program operated by a State or local government; Working at least 20 hours a week or participating in a State or Federally financed work study program; A parent responsible for the care of a dependent household member under the age of 6; A parent responsible for the care of a dependent household member over the age of 5 but under age 12 and does not have adequate child care to enable them to attend school and work a minimum of 20 hours; Receiving public assistance benefits under title IV- A of the Social Security Act; or is Enrolled as a result of participation in the work incentive program under title IV of the Social Security Act; or is A single parent enrolled full-time in college and responsible for the care of a dependent household member under the age of 12. If a student enrolled at least half-time does not meet one of the above requirements, he or she is not eligible for SNAP benefits. Mr. Fortenberry. I understand what you are saying, student is not some sort of a static, easy-to-define concept. You don't want to be in a situation where you have someone in an undergrad college who has received scholarships and may not have an income level and is at a substantial university taking out students loans, who is using money in the program for their own needs, because again, that takes away money and undermines, as the chairman rightly points out, the integrity of the program and takes away the funds that we do have for persons who are in significantly vulnerable circumstances. Ms. Rowe. Students are generally not eligible, but--unless they meet certain conditions. Mr. Fortenberry. Okay. SNAP ASSET LIMITATIONS Let's go back to this question of asset test, because there is no cost share by States except in the administration of the program, you think that is a lack of incentive for States to actually ensure that people who don't have--who have significant assets but maybe a lower level of income aren't eligible for the program. I mean, if someone has a million dollars of assets and they are eligible for SNAP benefits, again to the question of the integrity of the program and really our priorities, again, we want to ensure that this is readily available for persons who are either incapacitated by something temporary or maybe chronic, as you suggested, it helps get them through. Ms. Rowe. Well, one of the things that assets, allowing some level of assets is that it does promote savings and for those who have little or no income. Mr. Fortenberry. I understand, again not a static concept. Ms. Rowe. Yes. Mr. Fortenberry. It would be interesting to know if you have the statistic, have you done any studies on this? What are the assets of person who are receiving this? And are there some outliers, where you are getting people with very high levels of assets but would be peculiarly qualified based upon the way in which we have written the standards. Ms. Rowe. We haven't done any studies, but if you would like for us to take a look at that question---- Mr. Fortenberry. Do you think it is a wise idea, Mr. Chairman? Mr. Aderholt. We will be happy to try to entertain. We will work with the staff and see if something can be done. Mr. Fortenberry. Because, again, please understand, I think the chairman very well said it; it goes to the heart of the integrity of the program and what its core mission should be. And of course, we are all dealing with constraints, and we want this targeted to persons really in need. So just because we haven't defined something precisely enough and allowed for people who, when considering the totality of their circumstances, probably shouldn't be in it, actually impedes our ability to deliver it to the right people so---- Ms. Rowe. You are absolutely right. And as I said, we would be happy to take a look at this. SCHOOL MEAL STANDARDS IMPLEMENTATION Mr. Fortenberry. One more question, going to Mr. Rooney's comment, we had to do some aggressive amount of research on this problem of mothers writing to me, kids writing to me, school persons--persons involved with school lunch programs saying, the kids are hungry, you have to do something about this. Now I come from Nebraska; we tend to eat a lot, particularly beef. And we had a lot of difficulty a few months ago unpacking exactly what the problem is. Now could you go back and re-explain where we are in terms of the new guidelines, the attempts that you are making currently to implement flexibility? I would like a broader understanding of that so we can write back to people with some good information directly from the top. Ms. Rowe. Well, first of all, let me say that a lot of those calls, letters, which I received as well---- Mr. Fortenberry. Should I just send you mine? Ms. Rowe. I have my own set. The initial implementation of the program, and I was on the road all the time, just trying to understand what was going on. And there were a number of issues that we were beginning to identify. One, for school districts, just the complexity of how to plan the meal, how to ensure that they were providing sufficient options for students, that some schools did not have an option versus serve process in their school. We have encouraged schools to do that and have provided a lot of technical assistance as we found issues. One of the things that I should mention is that we did make the flexibility in meats and grains and the calories. The difference in the meals that students have now in terms of calories, not much different than the calories that they had before the implementation of this program. What is different is the mix of what is on the tray. So students may see less of one product--of one food that they really like and a lot of another, and that has resulted in---- Mr. Fortenberry. You don't want to see a young person going to a vending machine an hour later. I mean, again, it conflicts with our earlier nutrition goals. Thank you. Mr. Aderholt. Mr. Farr, I think we may have skipped over you in that last round, so we will give you a little bit of extra time on this. Go ahead. NUTRITION PROGRAM ACCESS Mr. Farr. Thank you, Mr. Chairman. I think this discussion is really important because you don't want to have rip offs when you have essentially what we call help programs. I hope that the committee would really focus on what we are talking about, particularly with school lunch programs and school snack programs. I have spent a lot of time studying education in California and visit a school a week. One of the things I try to do is also go through the lunch rooms. What I have learned from the food service providers is that essentially the most regulated part of the entire school day is the feeding program, far more regulated than the classroom. And we have made it so regulated, and that is one of the problems. The reason people didn't get access is because it is difficult--we have made it difficult to prove that you are poor. Some don't even know how to answer these questions. I will bring in the long form of the SNAP program. I think you probably have a lower error rate under the EBT program than you do under the old coupon rate. So going to technology is one way, and the savings are much greater. I think, when you look at health programs, we ought not to have means tests so strict that we fail to carry out the intent. The program is here to get food to people who need it, not deny them necessarily because their parents have two or three cars. In my district, I have poor people living in real estate that is literally worth a million dollars; their annual income is $12,000. So what do you tell them in a means test? You have to sell your house; you are an elderly person, you know, people are going after them to get reverse mortgages and those things. There are other programs out there. But you know, we don't means test the kid when he wakes up in the morning and gets on the school bus and say, well, your parents are too wealthy, they could drive you to school. We don't means test the kid when he goes into the library and say, your parents can afford enough to buy you a book. Yet we means test it when they go into the lunch program. And the bureaucracy of that means test is part of the big cost to the program. And that is why some States have just said, look, we will make up the difference, Colorado has done this. I don't know if other States have done it. We are going to pick up every kid. And I think if we are going--this is where the school providers, because you have free and reduced meals and then the other kids have to pay. And they tell me, look, these kids parents can afford to pay, but they are not feeding the kids, and they are hungry. I say, what do you do? They say, we just take the money out of our pockets and give it to them. And you should see the bureaucracy of monitors. They have to monitor every single child; does this one qualify or not? And then they have to monitor which foods that child picked up; were they the right foods on the tray, for each child? It is a huge thing. And I am trying to get bar coded, bar code the kid, bar code the lunch and let it all be done by computers, it would save us billions of dollars. So, in our desire to try to cut the costs, let's go to the administrative side of it, rather than knock the kids out from the feeding side. HEALTHY, HUNGER-FREE KIDS ACT OF 2010 IMPLEMENTATION Let me ask this one question, I understand that under the new meal pattern that we have to develop and schools have been implementing, you have a section 209 of the Healthy Hunger-Free Kids Act of 2010 requires that local education agencies report information about school nutrition environment. Under this provision, the Secretary is required to provide guidelines to help these local agencies know how to properly provide information for nutritional quality of school program meals. I understand you intend to publish the proposed rule this summer to implement section 209. What can you tell me about how you are proceeding and what kinds of items that might be required? And let me just throw all of this into one big question. Given that you now have the authority to set the nutrition standards for competitive foods, not just reimbursable meals, is it reasonable to expect section 209 standards will also apply to competitive foods. And lastly, private vendors have been required to get FNS approval before being able to offer systems to schools getting certified for menu compliance required to get the additional-- in order to get the additional 6 cents provided by the HHFKA. The FNS has also required vendors to have nutritional analysis tools certified before they can be offered. Since you have already established these requirements, do you anticipate requiring a similar certification process for any system used in schools to rate the nutritional quality of food items in meals sold to schools? And would you expect these systems to be compliant with recommendations made by the Institute of Medicine report on nutrition and rating systems, including the IOM's primary recommendation that such systems provide a nonproprietary transparent translation of nutritional information into the health meeting? I can give you this all in writing if you want. Ms. Rowe. Well, let me just say that we probably need to have a conversation with you and sit down with you and your staff on several of the points that you made in your question, but there are a couple of things. One, we are moving forward with the regulations. We expect to have them out this summer. One of the--we are in the process of meeting with stakeholders, talking to them and getting their input into what they think is important that we include in the regulations, and after we have gone through that process, we will then move to publish those regulations. With regard to various systems, I would like to just better understand for myself the questions that you are asking and how we can be responsive to it. ADMINISTRATIVE COSTS The one thing I should mention that I should have before is direct certification; about 86 percent of the children who were participating in the program are participating as a result of direct certification. That is a significant increase. We will continue, because that takes down a lot of that administrative paperwork and misunderstanding the parents may have about filling out the form or the form being in the backpack, and they never see it. So we are certainly working with direct certification to expand that in schools to reduce the administrative burden. And only about 8 percent of the cost of running this program goes into the administrative side. The rest is into the food side. Mr. Farr. But you have two administrative sides; you have the Federal administrative side, and then you have the State administrative side, and then the local administrative side, does that 8 percent include all of those levels of administration? Ms. Rowe. It is coming from the Federal administration. Mr. Farr. Just the Federal side. So there are still a lot of costs, particularly in the compliance because that has really got to be done at the local level. Ms. Rowe. And we provide the oversight to that compliance that goes on at the local level. So the administrative side and I think we can certainly again sit down and talk to you about the State level, and the Federal level, and the local level, school district level and breakdown how the administrative costs, what administrative costs go toward the operation of the program. But as I said, when we get to direct--as we expand direct certification the aspect of the application and information being--education and information being shared with parents will be significantly reduced. Mr. Farr. I will end with this, I want to say Mr. Chairman, I think that the Secretary of Agriculture, Secretary Vilsack, has done more to cut administrative costs within his agency than any other Secretary and done the things that we and all of us across political boundaries would agree needed to be done. Nobody likes waste and duplication and unnecessary spending. I think he has done an incredible job. At the same time, I am furious that the White House sends the President over here but won't send the budget over here. We need to have a budget. That is what we are working off. That is our base document. We are going to be making decisions this year in Congress appropriating funds for next fiscal year without ever having seen the President's budget. And that never in history has this happened. So you can tell the Secretary that I am pleased with his work but disappointed in his lack of ability to send Mr. Concannon and the other Secretary, and you are doing a wonderful job. Ms. Rowe. Thank you, sir. Mr. Aderholt. Ms. Pingree. Ms. Pingree. Thank you, Mr. Chair. I have a whole host of questions, if I don't get to all of them today, I know you and I will find another time to talk about some of the interests I have in my own district about DOD fresh and geographic preference, which I would love to talk to you some more about. SNAP NUTRITION EDUCATION As you know, the State of Maine chose a new vendor to administer our SNAP education program. And my understanding is there has been some difficulties in the transition, and I am just hopeful that FNS will make a concerted effort to work directly with the State of Maine and the new vendor at UNE to ensure that Maine continues to have a strong and very impactful SNAP education program. It is such a good idea, and I think it is helpful to the families who are receiving SNAP benefit to have that nutrition education. So I would appreciate at some point to get an update from you about that. And just make sure this transition works well. SNAP RECOVERY ACT BENEFITS You know, we have so much focus here on the growth of the program, the challenges that people are experiencing right now in just balancing the budget, working families who just don't have enough money to put food on the table. I not only hear so much about the need for SNAP benefits, but our food pantries are emptying out every week because people aren't finding their SNAP benefits sufficient. And it is hard to feed a family. As all of us know, it is a limited amount of money, and virtually everybody who tries the challenge of feeding yourself for $1.30 per meal per day or feeding your children and family for that, it is a stretch. And I think I can confidently say most of us in Congress spend more money on ourselves every day to eat or feed our families. It is my understanding that, in November, for a whole variety of budgeting reasons, including how we funded the Healthy, Hunger-Free Kids Act, there is going to be a $25 reduction per month for families in their SNAP benefits, unless we find funding somewhere else. So I know we are talking about the growth of the program and what people see as excesses or people who are getting it who shouldn't. I am actually worried about those families who are going to see the $25 cut in November, unless we find that funding. I hear from people all the time. We have had issues around how LIHEAP funding has decreased some of the funding we have in our home State. And people often think, okay, $25, no big deal, but I get a lot of calls when people with children can't just make it stretch; that is a lot of money when it is $1.30 per meal, per person, per day. So can you talk a little bit about what you think the impact of that is going to be and your concerns around it, if you have any? Ms. Rowe. Yes, I do have concerns. Clearly, that is a result of the ARRA increase that families have been able to enjoy. I think the impact is going to be that more people are going to be food insecure. We know from some program pilot projects, programs that we have initiated, that increased availability of resources decreases food insecurity, and we can show a direct link. The Economic Research Service has looked at that same issue and that same question. People who are not going to receive this benefit are going to find themselves--we are going to find more people who are going to be food insecure. Ms. Pingree. Well, I just want to have that out there because I think we spend a lot of time worrying about the growth of the program and are really forgetting that people are about to see a cut, and that, in this economy, could be a real challenge. DOD FRESH Since I have a little more time, let me just make sure I put this out on the table, about DOD Fresh. I think you know that, in the last several years, there has been growing criticism about delivery of DOD Fresh. There have been stories about rotten, unusable produce arriving at schools because supply chains are so long from farm to table. You may not get a chance to answer all of this, but I would like to hear more about whether you think or there is continuing belief that DOD is the best way to administer the school nutrition program? Are there efforts for FNS to work more collaboratively with DOD to ensure the program is carried out with the goals of FNS to deliver fresh healthy foods? And I am also very interested and have had some experience in my own district around this geographic preference issue. It seems to me that there is still confusion about it, I hope you can provide me with some clarity. I would like to think and I would like you to clarify that, is the intent to have geography or the ability to provide food locally more important than the cost? Is that the intent? And could it be clarified if cost is the most important factor, where does the geographic preference fall? I am interested on the side, of course, of schools getting healthy food, but also from farmers, who need to be able to plan, but I think they encounter a lot of road blocks and some confusion. I am out of time, but it is an issue I am deeply concerned about and I hope you can talk about it more. Ms. Rowe. Well, clearly, we are promoting aggressively local sourcing. We are encouraging schools as they work with farmers to work locally, so that we can increase local produce coming into the schools. We are working with DOD. We have made it clear to them that their customer is getting some feedback from our customers that there are some challenges in their product, and so we are going to be sitting down with them. We have had some previous conversations. We will have follow-up conversation with them. We are also--you know, schools have the ability to use some of their cash to purchase locally, and that is where we are encouraging them to do local sourcing. We will soon be providing, for the produce that will be going into schools for the USDA foods, we will soon be providing origin of source so that schools will know where the food is coming from that they are purchasing as they look down the list. We will be reaching out more to local farmers and local geographic areas to get them into the program. I have learned a lot more about farming since I have been engaged in this area, and I know it is very difficult for farmers to be able to plan and understand what they are going to need to plant and when it is going to be harvested and how much they are going to need. So we are working very closely with school districts so that they can understand that this planning has to go on. And we need to have some guarantees for farmers, so they understand what their yield will bring to them in terms of new revenue. So we would be happy to have some more conversation with you on it, but it is one that I have become very much aware of and have been very much an advocate in working with our schools and working with our farmers and understanding how to work with the schools, which is the other side of the equation. Ms. Pingree. Great, I am happy to hear that. And I will be glad to talk to you further. Thank you. Mr. Aderholt. Mr. Nunnelee. Mr. Nunnelee. Thank you, Mr. Chairman. SNAP PARTICIPATION Ms. Rowe, I understand while I was gone, there was some discussion about the length of time that people are on food stamps. And I will tell you, last year, I asked Secretary Concannon that question, and his response was that roughly half the people that are on food stamps are on 7 years or longer. And it is not fair to ask him or ask you to respond to a question like that off the top of your head, so I am just asking for the record. Can you submit some type of aging information? Let's get a snapshot, whether it is the close of the calendar year or the close of the fiscal year that shows how long how many people are on food stamps. If you could do that, that would be helpful. Ms. Rowe. I would be happy to do that, sir. [The information follows:] [GRAPHIC] [TIFF OMITTED] 82566A.052 SNAP TRAFFICKING Mr. Nunnelee. Thank you. Now I do still stand in amazement that your response was there is virtually nothing we can do to improve the rising costs other than improve the economy. So I have just got to ask you a couple of questions in that area. When I go to the grocery store and I use my debit card, they seem to go through elaborate hoops and hurdles to make sure that I am the owner of that debit card. Is there nothing we can do to make sure that when somebody uses an EBT card, that it is the one who has been issued that card that is using it and not somebody else? Ms. Rowe. Well, when the card is issued, there are a number of people in the household who may be approved to use that card when they go shopping. There is a PIN, and that is the unique identifier that someone has to enter into the system, just as you or I enter our PIN number so that we know that Audrey Rowe is the person that is making this purchase. Mr. Nunnelee. I will make me be the bad guy, not Ms. Rowe. But there is nothing in the system that prohibits me as an EBT recipient from getting cash from somebody and allowing them to go use my EBT card if I give them that PIN? Ms. Rowe. Well, that is trafficking. And that is when you set yourself up for disqualification from the program, both the trafficker, the person that is making the purchase and yourself; that is a different situation, but if you are, which a majority of our people are, honestly giving your card to your daughter, son, representative, payee give them your PIN, they go in. But yes, if someone does that, that is trafficking. Mr. Nunnelee. How do we uncover that trafficking? Ms. Rowe. Usually, in a number of ways. We are able to look at the vendor transactions, usually trafficking when someone goes in, there are some anomalies in the kinds of purchases that that card has made previously and what they are purchasing now. When we see those anomalies, we take some immediate action. We may actually go and do an undercover. We may do a variety of things to try and identify, is this store or is this person--is this store allowing those transactions to take place because they are colluding with the individual, or if this is an individual who has passed their card on? And we catch those all the time. We aggressively go after them. We turn them over to OIG. We will prosecute someone. I mean, we make it real clear that, within the program, that kind of activity is illegal, and you will be prosecuted. Mr. Nunnelee. And I have got in front of me applications from my home State. The thing that jumps out at me, we have gone to great lengths as a Congress to make sure that if a person takes out a loan or a credit card application, that there are certain disclaimers that are in very large print and in much more bold font than the rest of the application. And I don't expect you to be familiar with those type of regulations, but it jumps out at me that the application for food stamps in my home State, there is the disclaimer that says, ``if you commit fraud, you are personally responsible,'' but it is blended in with all the other font. The thing that does jump out says, ``you can get benefits within 7 days.'' That is in big bold font. Can we not require large font on the applications concerning fraud, concerning trafficking, as you described, so that we can make it much more plain to individuals applying, that if you commit fraud, you will be personally liable for this? Ms. Rowe. Well I can say, yes, we can look into and determine whether we can do that. For someone who is applying as a retailer, there is big font on there, that if we determine that you are trafficking, you can be prosecuted or immediately disqualified. That is part of our new very aggressive program to address trafficking and fraud in the program. So, yes, we can look into that and suggest to States that they make some change with regard to the font that they have on their program for trafficking, for illegal use as well. [The information follows:] SNAP State Applications Each State Agency develops its own SNAP application. Under SNAP regulations, States must include prominent and boldface lettering that explains: That the applicant may be subject to criminal prosecution for knowingly providing incorrect information; and The civil and criminal provisions and penalties for violations of the Food and Nutrition Act, which includes those provisions against fraud and trafficking. As States have implemented online applications, FNS has built these requirements into guidance and checklists for conducting State reviews. Mississippi has not developed an online application to date. We will work with the State to ensure all requirements are met. Mr. Nunnelee. For individuals. Ms. Rowe. For individuals as well, yes. Mr. Nunnelee. Thank you, Mr. Chairman. Mr. Aderholt. Mr. Bishop. SEQUESTRATION IMPACT Mr. Bishop. Thank you very much. I kind of want to turn my attention now to veterans, hunger and sequestration. I have been very encouraged to find out that the Food and Nutrition Service has worked very hard to make sure that veterans and their families are informed about potential benefits, particularly since less than 1 percent of all of the nutrition benefits go to veterans. For example, FNS has developed a Web site, which can help veterans navigate the network of services, including SNAP, food stamps, collaborated with the Veterans Affairs Readjustment Counseling Service to distribute a brochure, which I think you prepared, entitled, ``How to Get Food Help.'' And you have done that in 300 adjustment centers and 70 mobile veteran centers around the country. And you are working with the Department of Veterans Affairs to cross promote benefits and resources to disabled veterans and their families and to identify new areas of collaboration. And I congratulate you and thank you very much for that. Can you tell us, though, what, if any, impact sequestration and the other proposed reductions in the food nutrition programs will have on these initiatives aimed at veterans? Ms. Rowe. Well, I don't believe that--as I think about, I am thinking about how the work that we do with veterans is our staff going in and training individuals who are working with vets who are reentering back into their homes. We have been in this process with regard to our staffing. We will not be furloughing any of our staff as of right now. So I anticipate that those kinds of requests to continue to work with veterans and veteran agencies we will be able to continue. Mr. Bishop. So you don't anticipate a staff shortage to make that collaboration more difficult? Ms. Rowe. Well, sir, we have, starting in 2011, we started experiencing reduction in our budget. Our current staff level is at the 2003 staff level. One of the reasons we have taken so much action and focused aggressively in reengineering our processes is so that we can reallocate staff to target into working in areas that we have targeted as high priority. So, in that sense, no, I do not see any change in the work that we are doing with veterans today. Mr. Bishop. And the utilization of your IT upgrades, that will facilitate some of the things that will allow you to do more with less? Ms. Rowe. Yes, absolutely. We have upgraded our IT systems. We have been reengineering our contracting systems. We have reduced our footprint around the country. We have many more workers who are engaged in telework, appropriately stationed. We have done a number of things within the agency to allow us to work within the availability of resources that we have. PROGRAM OUTREACH Mr. Bishop. Okay. According to a recent Gallup poll, more than one in six Americans said that, in 2012, there have been times over the last year they didn't have enough money to buy food that they and their families needed. We also know that the rate at which SNAP eligible people are enrolled and receiving benefits vary substantially by State and locality. For example, less than 75 percent of people in Georgia who are eligible to participate in SNAP actually receive benefits. How many States have SNAP outreach plans, and what is FNS doing with respect to helping States optimize their participation of SNAP programs? And the same thing goes for the school lunch program, where, according to reports, less than half of the poor children that are eligible for breakfast are not participating in a program? And of course, the only ones who arrive who get breakfast are those who come early, and the others--many don't want to own up to the fact that they are poor and they need it. What strategies do you have in place to increase the number of eligible children and to increase the outreach? Ms. Rowe. Well, again, clearly, with regard to our overall outreach that we are engaged in, all States are required to have a State plan for outreach, which regional offices review very carefully. We look for a number of things to ensure that they are properly targeted to populations of people who are not participating in the program but who would be eligible. We work with our schools, some of the outreach that we encourage our schools to do is through PTAs and other forums that exist in the school environment, that information is made available to the breakfast programs. We work with schools through the State agencies, and States have primary responsibility, but to the extent we know of best practices that are working in another State, we share that. We use our Web site to convey a great deal of information that would be technical support to States. So we aggressively look at ways to educate individuals about the program and the eligibility requirements. Mr. Bishop. So you encourage the States and the local school districts and the localities to visit your Web site and--so that is stressed. Ms. Rowe. Absolutely. Mr. Bishop. Before the electronic age, they would have to depend on the State to transmit that information, but now they can get it directly from your Web site. Ms. Rowe. They can go to our Web site. There is something called the Food Service Management Institute, located in Oxford, Mississippi, which does a great job at training, information. That is directly available to the food service staff and the food service directors in the States, but we do look carefully because of the feedback that we have gotten that everyone is not necessarily--the kind of communication that that we would like to see, it is not necessarily taking place. So we zero in to make sure that nonprofit organizations, organizations that are what I consider to be the boots on the ground, organizations that really touch people who need these programs are given the information that they need. [The information follows:] Nutrition Assistance Outreach In FY 2012, FNS approved 42 State outreach plans. Mr. Bishop. Thank you. Mr. Yoder [presiding]. Ms. Rowe, I am Congressman Yoder from Kansas. I am taking the seat of Chairman Aderholt. He had to step out for a minute. Welcome to the committee. WIC INCOME ELIGIBILITY I had a few questions for you. I wanted to particularly ask you about the GAO report from February 2013, entitled ``WIC Program Improved Oversight of Income Eligibility Determination Needed.'' Are you familiar with this report? Ms. Rowe. Yes. Mr. Yoder. I noted just some conclusions of the report and wanted to get some information and feedback from you. In particular, the report questions integrity of the WIC program and identifies potential improvements in program administration to strengthen the WIC program for the future. Among its key findings, the GAO concluded that FNS has not monitored States' compliance with Federal regulations on income eligibility determinations, that FNS allows too much discretion to the States and local WIC agencies, and that adjunctive eligibility is no longer in line with WIC program goals, stating that many States have increased their eligibility thresholds beyond the 185 percent poverty level. And as a result, more than half of all U.S. infants are now enrolled in the WIC program. Have you responded to this report yet, and how do you respond to the assertions made? Ms. Rowe. Yes, we have responded to the report. With regard to the income eligibility, we have income guidelines, which have been in existence for some time; we have updated them with policy guidance over the years. What we will be doing this April is issuing new updated eligibility income guidelines for all States to follow. Then we will be going out to make sure that States are trained and understand what is expected of them with regard to these new guidelines. I have asked staff to do management evaluations of all of our State agencies to ensure that they are adhering to the guidelines that we not only have for income, but any of the other management guidelines that we have issued that States are adhering. So we will start that management evaluation next month, and we will run those until we have looked at every single State. WIC ADJUNCTIVE ELIGIBILITY With regard to adjunctive eligibility, which is what you were referring to, I do, you know, I think the big--the program itself is well targeted to those who are most vulnerable; 76 percent of the participants in the WIC program are eligible. However, Federal law allows those individuals who are eligible to participate in SNAP, Medicaid and TANF to be deemed eligible adjunctively to participate in the WIC program. It, again, is a small percentage; it is about 2.9 percent of our participants who exceed the 185 percent of poverty level. We continually monitor that data, but that is, of course, a State option, and it is Federal law. Mr. Yoder. Do we know how many children that affects? Ms. Rowe. I can get you that information. I don't have it. [The information follows:] Nationwide, WIC certification errors were approximately 3 percent in 2009. FNS regularly provides technical assistance to WIC State agencies regarding income eligibility determinations, which are a part of the certification process. The guidance we plan to issue will ensure consistent use and application of income determination policy across State agencies. The Child Nutrition Act confers adjunctive (or automatic) income eligibility for WIC for categorically eligible persons participating in the following programs: Supplemental Nutrition Assistance Program (SNAP), Medicaid or Temporary Assistance for Needy Families (TANF). In addition, if you are a member of a family that includes a pregnant woman or infant who participates in Medicaid, any categorically eligible family member is adjunctively income eligible for WIC. In some States, individuals with incomes higher than those established for WIC participation (185 percent of the federal poverty level) are eligible for Medicaid. Therefore, by law, such individuals are eligible for WIC and State agencies cannot deny benefits based on their income level. Our guidance to States will be consistent with the law. We do not have data on how many participants, including how many children, would be affected if adjunctive eligibility was not in place. Mr. Yoder. Certainly, not having a uniform system when we are dealing with the thresholds and income levels and certainly those things affect families in one State differently than other family; that is obviously a concern you addressed as well. Do you know if you move to retraining and refocusing our State folks to ensure they are following the rules and the thresholds, et cetera, in a consistent way, how many children that would take off the rolls? Ms. Rowe. Well, let me just say the rules or the training that we would provide would be targeted to ensuring that all of those who are on the rolls are eligible to be on the rolls. I cannot tell you how many will be affected until we go through the entire process, but the intent would be to ensure that anyone who is participating in the program either participates as a result of adjunctive eligibility or through the regular application. Mr. Yoder. And what we don't know is how many people qualify who don't qualify under one of those two measures are receiving benefits who don't qualify under adjunctive or income eligibility? Ms. Rowe. Under adjunctive or--it is about--I think the number is about 3 percent. Mr. Yoder. That don't qualify under one of those two criteria but are still receiving benefits. Ms. Rowe. Correct. Mr. Yoder. So they may be taken off the system them. Ms. Rowe. They may be impacted. Mr. Yoder. Follow the GAO report. Okay. And do we know how many children that is? SCHOOL NUTRITION FLEXIBILITY Mr. Yoder. And I just wanted to echo some of the comments of my colleagues that have been made earlier regarding the nutrition programs. Many of our local schools are obviously having challenges with this uniform system. And do we have opportunities to create flexibility in what we could look at that would help schools tailor the needs towards local communities? Ms. Rowe. We created some flexibility. We continue to listen and are willing to create flexibility, where appropriate, so that we can make it easy for the schools to do what we want--what we all want to see happen, and that is a healthy environment for our children. We will evaluate, and we want to get through the first year. We are going to evaluate the impact. We are going to look at what worked, what didn't work, what changes we may need to consider for future years. And so nothing is static, as far as I am concerned. We all have--it is a dynamic process, but the bottom line of what we are trying to achieve is ensuring that our children have access to healthy food from the time they enter the school day until the time they leave. Mr. Yoder. Thank you, Ms. Rowe. Ms. DeLauro. IMPROPER PAYMENTS Ms. DeLauro. Thank you very much, Mr. Chairman. There has been a lot of talk about SNAP and waste, fraud and abuse, and error. I think it is interesting to note for the record that the SNAP error rate is about 3 percent. I wish we could go to a variety of other Federal programs and look at their error rates. Case in point, and I want to ask the chairman to see if this is a committee that can look into the issue of--before I say that, let me just say this, we have in other farm programs with direct payments, we continue to send direct payments to people who are dead and who have been dead for several years. We ought to try to take a look at that in terms of what the loss is in that area as well, in terms of waste. But I want to specifically mention the Crop Insurance Program. I will just try to do this very, very quickly. I don't know how much is known about the Crop Insurance Program. I support it. I wish it applied to my part of the country in the way that it does in other parts of the country. However, Federal Government picks up 60 percent of the cost of the premiums in the Crop Insurance Program; that does not even include administrative costs. Secondly, there are 26 beneficiaries, 26, who receive at least $1 million in a premium subsidy. There is no income threshold. There is no asset test. There is nothing that says you will get your million dollars, and you know what? We can't find out who they are. We can't find out who the 26 are, because we are forbidden by statute; transparency is forbidden. So I want to ask this committee to let us look into the Crop Insurance Program. Let us take a look at the waste in that program that is there and figure out how the Federal Government can save money, in addition to the direct payments that we are paying to dead people in this Nation. SNAP RECOVERY ACT BENEFITS With that, Ms. Rowe, let me move and ask you, I want to follow up on something my colleague, Ms. Pingree, was mentioning. A cut in benefits this fall when ARRA ends, the average household, and SNAP receives $281 million in SNAP benefits, $413 a month for a household with kids. Eighty percent of SNAP benefits are used in the first half of the month, and yet starting in November, every SNAP recipient will lose about $25 a month in food assistance for a family of four. I share your concern and my colleague's concern about the impact of that reduction. SNAP PARTICIPANT CHARACTERISTICS Can you, Ms. Rowe, discuss the make up of the SNAP case load? It is my understanding that 55 percent of the case load lives below half the Federal poverty line, not in the case of the folks who are getting at least a million dollars in the premium subsidy--I suspect they are eating well, probably more than three meals a day. Folks below half the Federal poverty line, that is below $9,500 per year for a family of three, and that more than 90 percent of SNAP recipients live below 100 percent of the Federal poverty line. Can you discuss how SNAP has been effective at targeting resources to the poorest Americans? Ms. Rowe. Well, let me talk about the characteristics of the participants. Nearly 75 percent of individuals on the SNAP program are under the age of 18, or 60 or older, or disabled, so it is children, seniors or disabled. If you look at the data between SNAP households that had, in 1991, 41 percent of all SNAP households received cash welfare and only 20 percent had earnings; if you look at 2011, 8 percent of the households received cash only, and 31 percent have earnings. And so even though people are working, they are still needing to participate in this program. In 2011, 43 percent of recipients had a gross income at or below 50 percent of the poverty line, and so that would be, for a family of three, $763 would have been the gross income that was available. For participants, in terms of diversity, 35 percent are White, 23 percent are African American, 15 percent are Hispanic, 3 percent Asian, 4 percent Native Americans. And the balance, we do no have that data because they did not report, but for those who reported, that is the data that we have available. Ms. DeLauro. I want to thank you for that, and I also just want to say to you, I would ask you to explain it, my time is going to run out, but the system that USDA uses to make sure that only people who are truly eligible receive the assistance from this program, I think it is really incredible what has been done, and that has an error rate at 3 percent. I defy you--and I come from a State that is defense dependent, so I do make a case here, but I will tell you, let's take a look at what 99 percent of the defense contractors are getting and let's take a look at the waste, fraud and abuse that exists there, before we begin to talk about people who live well below the poverty line. And these days, in my district, Connecticut, richest State in the Union statistically, one in seven, one in seven don't know where their next meal is coming from, and it is not food insecurity. They are going to bed hungry. And that is kids going to bed hungry in this Nation. And it is not something that we can afford, and if we do create jobs, if we do grow the economy, we can allow for them to move forward. Thank you for the great work that you do. Ms. Rowe. Thank you. Mr. Yoder. Thank you, Ms. DeLauro. Any other questions? That concludes our hearing. Thank you so much. Ms. Rowe. Thank you, sir. 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U.S. DEPARTMENT OF AGRICULTURE WITNESSES PHYLLIS K. FONG, INSPECTOR GENERAL KAREN L. ELLIS, ASSISTANT INSPECTOR GENERAL FOR INVESTIGATIONS GIL H. HARDEN, ASSISTANT INSPECTOR GENERAL FOR AUDIT Introduction of Witnesses Mr. Aderholt. The subcommittee will come to order. We have before us today USDA Inspector General Phyllis Fong, and Assistant Inspector General for Investigations Karen Ellis, and the Assistant Inspector General for Audit Gil Harden. We welcome all of you to the Subcommittee, and thank you for being here this morning. This Subcommittee has always appreciated the work of the Office of the Inspector General. Ms. Fong, thank you and your staff for the work to combat fraud, waste, and abuse within the USDA's programs. We are especially interested in your work on the Supplemental Nutrition Assistance Program, known as SNAP, and also the department's longstanding challenges with security over its information technology infrastructure and processes. So we look forward to your testimony here this morning. Before you begin, I would like to ask the Subcommittee ranking member, the distinguished gentleman from California, Mr. Farr, if he has any opening comments. Mr. Farr. Well, thank you very much, Mr. Chairman. And it is always one of our annual meetings that I look forward to. Unfortunately, we are not addressing you with any budget. We have got to make--with these hearings, we have got to make budgetary decisions based on zip. And it is very difficult to do that. So, as I told the last panel, I wish that the White House would send the budget up here rather than the President up here, because appropriators need a budget to work with. But hopefully, we will do the right thing, and we look forward to your testimony. I have a couple questions I would like to ask on specifics, and we will get to that at the Q and A period. Thank you very much. Mr. Aderholt. Thank you, Mr. Farr. Subcommittee members, we will proceed with the usual of the hearing under the 5-minute rule. We may have several rounds. It is my understanding we will be having votes within the next probably 20 minutes, and we will be called away. What we will do is, when the votes are called, we will take a recess. And then we will return, reconvene after the vote, and continue with the questions from the members. But I think, Inspector General, we will be able to get your testimony in this morning. And so you go ahead and start with your remarks. And your written testimony will be included for the record. So I would recognize you now for your oral statement, and then, as we proceed with time, before the votes, with questions; if not, when we return. Thank you. Opening Statement Ms. Fong. Okay. Good morning, Mr. Chairman, Ranking Member Farr, and members of the Subcommittee. We thank you for the opportunity to come today and testify about the OIG's oversight work at USDA. We certainly appreciate this Subcommittee's longstanding support for our office and your interest in our work. And as always, we welcome the chance to address your interests and concerns. As you know, our mission at the IG's office is to help USDA deliver its programs effectively and with integrity. We do this by providing independent, professional audit and investigative services, and by keeping you and the Secretary informed of our findings. As you know, our audits can result in recommendations to improve program operations, while our investigations can lead to criminal sanctions, disqualification from USDA programs, and disciplinary actions. We do not have programmatic or operating authority, as you know. Instead, it is the responsibility of USDA agencies themselves to take appropriate corrective actions. As we plan our work, we look at four key areas within the department's portfolio as a framework for prioritizing how we do our efforts. Our first area of focus is to support the department in ensuring the wholesomeness of the U.S. food supply. In this area, we recently reported on APHIS's smuggling interdiction activities and FSIS testing for E. coli in beef trim, as well as FSIS meat inspection activities. As summarized in my full statement, our findings led to several significant recommendations. Currently, we have in process work on E. coli testing in boxed beef products, as well as FSIS inspection procedures at swine slaughterhouses. Our second area of focus is to help USDA safeguard and effectively deliver its benefit programs. Mr. Chairman, you mentioned the SNAP program. That is certainly the biggest program within the USDA portfolio, and as such, we have devoted a significant portion of our investigative and audit resources to this program. Last year, we reported over $57 million in results and 342 convictions from our investigative activities. We have also issued a group of audits addressing eligibility and fraud detection in the SNAP program. We have issued audits on soil rental rates in the Conservation Reserve Program, and we have looked at the crop insurance program from the perspective of new producers and organic programs. We have significant work ongoing right now vis-a-vis vendor management in the WIC program, as well as RD's business and industry guaranteed loan program. Our third area of focus deals with assisting the department in improving its own management systems. Again, Mr. Chairman, you mentioned the department's IT security challenges. We have certainly spent quite a bit of time on those issues, as well as the department's financial statements and its efforts to reduce improper payments. All of those audits are statutorily required, and we are in process again this year looking at all of those areas. We have also focused on the grant management process within the department. Specifically, we issued a report on OAO's grants management activities. And we have ongoing work to assess FAS' trade strategies, as well as the settlement claim process for the so-called Pigford litigation. Finally, in the area of helping USDA improve its stewardship of natural resources, we issued a number of audits regarding NRCS' efforts in the area of oversight and compliance activities, floodplain easements, and migratory bird habitats. That was all within the last year. We have ongoing audits on the EQIP program and the rehabilitation of flood control dams. As you know, we are also working to finish our remaining oversight concerning USDA's $28 billion in Recovery Act funds. And we view these audits and investigations as very significant, because even though they apply to the money that was provided under the Recovery Act, the recommendations that we make will go to how the programs function moving forward with their regular appropriations. And so we believe that our recommendations for action can have a lasting impact on the management of those programs. We issued recently an audit of RD's Business Enterprise Grant Program, as well as loss claims in the Single Family Housing Program. And I think you all are very much aware of those audits. Significant work that we have ongoing involves reviews of the broadband initiative program and Forest Service grant making activities. In conclusion, Mr. Chairman, I want to thank you again and just point out that we within the IG's office are very cognizant of the need to improve our own activities. We have been engaged in streamlining our activities. And we appreciate the support that you have given us over the years. Thank you. [The information follows:] [GRAPHIC] [TIFF OMITTED] 82566A.187 [GRAPHIC] [TIFF OMITTED] 82566A.188 [GRAPHIC] [TIFF OMITTED] 82566A.189 [GRAPHIC] [TIFF OMITTED] 82566A.190 [GRAPHIC] [TIFF OMITTED] 82566A.191 [GRAPHIC] [TIFF OMITTED] 82566A.192 [GRAPHIC] [TIFF OMITTED] 82566A.193 [GRAPHIC] [TIFF OMITTED] 82566A.194 [GRAPHIC] [TIFF OMITTED] 82566A.195 [GRAPHIC] [TIFF OMITTED] 82566A.196 [GRAPHIC] [TIFF OMITTED] 82566A.197 DEPARTMENTAL CHALLENGES Mr. Aderholt. Thank you for your testimony and for giving us an overview of what you are doing there in your department. And as I mentioned in my opening statement, we will probably have votes here shortly, but we will go ahead and proceed with the questioning aspect of the hearing. And I will begin this morning, and then we will go as far as we can before the votes are called. Your office is uniquely situated within USDA and has a view of the greatest challenges and the ways in which it performs very well. What would you say that right now is USDA's biggest challenges that you see from your standpoint? Ms. Fong. Well, that is a very good question to ask. I think what we are seeing overall department-wide is that, as with every other Federal department, the challenge for the department is to continue to deliver its mission and its programs in an era of constrained resources where the demand for programs is increasing. And as the department moves to deliver its programs, it faces challenges in providing an adequate level of oversight. And I know that we have discussed this among our team. Frequently, managers view their priority as delivering the program. Because they have perhaps a limited amount of resources available, the oversight and effectiveness of that delivery may not be their top priority. And so we see that it is important to increase the emphasis on the need for really delivering the program as efficiently as possible in accordance with rules and regulations, bringing integrity to the program. And that is where we believe that our value lies. Mr. Aderholt. What would be the top three recommendations that you would make to USDA? Or I say top three, or as many as you---- Ms. Fong. Well, okay. We have made a lot of recommendations over the years. I think increased emphasis needs to be placed on improper payments, eliminating and reducing improper payments across the board. The department has engaged in these activities. We need to continue to work in FNS. The school lunch program and school breakfast programs deserve some focus. The SNAP program improper payment rate has been reported to be decreasing, which is terrific. But increased focus can be placed on identifying the level of fraud on the part of both retailers and recipients. And I think we have made recommendations to the SNAP program management, to really focus on those issues. Obviously, if the department can reduce its rate of improper payments, more money will be available to provide to eligible recipients. And so I think that is a goal that all of us share. Mr. Aderholt. Which programs or processes within USDA do you see as doing a good job and being a leader? Ms. Fong. Well, I want to start by saying that I see an increased emphasis from the Secretary on down through the management ranks in terms of emphasizing the need to play by the rules. And so whenever we issue an audit report or an investigation report and we point out areas where changes need to be made, we do see a commitment on the part of program management to make those changes. I think, you know, one good example is in the SNAP arena. We have been working very closely with the FNS officials because we all share the goal of eliminating or reducing trafficking and fraud. And we believe that we have a very good working relationship with that agency. Now, much more needs to be done, of course, but they are open to our recommendations. Mr. Aderholt. Okay. Since the vote is coming, let me go ahead and recognize Mr. Farr. And why don't we do for 5 minutes? And then we will recess for a vote, and then we will come back. Mr. Farr. Thank you, Mr. Chairman. It seems that some of the questions rise on whether the extent of what you have to do, you have enough budget to do it in these investigations. And the second thing I just wondered is how do you respond to an agency when you make recommendations and yet they don't have any money in their budget to fill them out? I always found when I was in local government, we had grand jury reports criticizing agencies of local government. And it was easy to criticize, but to fix it was always a monetary issue. And maybe it would be really--I mean, this is probably a bigger discussion for your IG association is to figure out how do we use those recommendations also to build into our appropriation process so that, indeed, if these are things that need to be cleared up, cleaned up, and they don't have enough resources to do it, some of that judgment of whether there is enough money to do it. Can they do it within internal--or could you just make them, and then the heads of the departments have to make sure that they are doing something about it, right? I mean, there is really no enforcement tool other than the transparency of your report. Do you understand the question? Ms. Fong. I do. Mr. Farr. And also let me just--part of that, too, would be that I think that the issue on food stamps--not food stamps, I mean school lunch, when I got into the details on it, it was probably one of the most regulated programs we could ever do in giving out benefits to people. More regulated than anything else. And we are talking about kids in a setting like a school cafeteria. And yet proving that every kid who received a meal every day was poor enough to receive it and that what was on their plate met all the incredible, it is a huge bureaucracy. And it just seems to me that some of these rules we make probably are dumb rules, that the amount error is so de minimis. Yes, again, there are some violations of law because we made the law so tight. Do you ever get into recommending that there is--that Congress ought to be cleaning up, revising some of their standards to make them more practical? PROGRAM RECOMMENDATIONS Ms. Fong. Well, let me offer a few comments on your questions. And I appreciate your message here. Let me just talk generally about how we go about making our recommendations and how we view that process. As you know, when we go in and look at a program, we spend a lot of time talking with the program officials to get their viewpoints as to how it is operating, what they believe to be their challenges, where they believe they have obtained some successes. And we try to document all of that in our reports. And as we go through the process of formulating recommendations for the program officials, we are very cognizant of the fact that many times they are operating without additional resources. We know that this is a difficult time for all agency managers. And so we view the recommendation process in many ways as a dialogue, where we try to come up with suggestions that we believe could work. We are very open when they come back and say, you know, that is really not going to fix the problem, or that is going to create other problems, or we have resource issues here. And if you are asking us do that, it is just not going to work with our current level of staff or the expertise that we have. We do not want to be in a position where we are making recommendations that really are not practical, that an agency manager will say, I can't agree with this. Because that doesn't help anybody. We are really here to help the agency move forward. And so that is the philosophy with which we approach these recommendations. I think if we look at our statistics on recommendations, most of the time we have reached agreement with the agency managers. By the time we issue our audit reports, they will say, yes, we agree with the approach you are recommending, and we will commit to take action on that. And that, to me, is an indicator that it is a practical recommendation. Mr. Farr. How about feedback to Congress that we have enacted some laws that are not practical? Ms. Fong. I am going to defer to my colleague here. Mr. Harden. We don't have as many of those type of recommendations. But if we are working on something and see that the legislation is not working, we will make recommendations to the agency for them to bring that forward as part of their legislative process, or as I understand the process to work, for the Secretary to bring that forward. Because our recommendations go to the agency. And it is what they are able to get on the plate for a legislative change. Mr. Farr. I am excited to hear that. I don't think I have ever seen it since I have been in Congress. I wish we had ability to have reviews, revisions of the law, essentially is what you need, is to look at law that has been enacted over many, many years ago, and it is now not practical to try to carry out to that detail, and that there is better ways of doing it so that we can get back. But I am glad there is a system there that allows for that feedback. My time is up. Mr. Aderholt. What I would like to do at this point, we will go recess for the vote and then come back, and we will start back with Mr. Rooney. You will be the first one up when we come back from the vote. So if you will bear with us, we will go cast our votes, and we will resume here very shortly. Thank you. [Recess.] Mr. Aderholt. Okay. The subcommittee will resume. And at this point, we will recognize Mr. Rooney for any questions that he may have. Mr. Rooney. Thank you, Mr. Chairman. FSA OFFICE CLOSURES Thank you, Ms. Fong, for your testimony and for answering our questions. My district is in South Central Florida. It is what is sort of locally called Florida's heartland. If you look at Lake Okeechobee and go north almost to Mickey Mouse, everything in between not on the water is my district, and it is oranges, grapefruit, sugar, and beef cattle and dairy. And one of the things that I have heard about most often from my ranchers, farmers and growers over the last couple of years, one of the biggest issues for them, has been the closures and consolidations of the Farm Service Agency offices. I don't really have a question with that, but there seems to be a lot of strife and possible management issues. I have just heard a lot of negative things with regard to FSA closures. Those offices are supposed to help these people navigate USDA rules and regulations; everything that your office would support them in trying to do the right thing with--and to be able to operate their property. So, I would ask you to look into that. I don't know what is going on, but it literally is the biggest issue that I hear about on a continual basis. [The information follows:] Because we have not performed work related to the recent office closures by FSA, we asked FSA to provide us with summary information related to office closures in Florida's 16th District. According to the Farm Service Agency (FSA), one FSA office in Florida's 16th District was closed and its operations were consolidated into an adjacent county office as part of the agency's 2012 office consolidation plan. This office was located in Highlands County, Florida, and was closed because it had zero full-time permanent employees. In addition to the criteria provided by Congress in the 2008 Farm Bill directing FSA to first close offices that are located within 20 miles of another office and having two or fewer employees, FSA notified Congress that it was going to recommend for closure all of its county offices that had zero full-time permanent employees regardless of their proximity to another FSA office. In total, 31 offices were identified as having zero full-time permanent staff and were outside the 20 mile radius of another FSA office. Of those, 28 were identified for closure and 3 were maintained in order to continue part-time service delivery to limited resource and socially disadvantaged farmers. According to FSA, some producers and community members in Highlands County expressed their desire to retain the Highlands County FSA office. These viewpoints were conveyed at the public meeting held in that county and through written public comment. While FSA considered and reviewed this feedback prior to the finalization of the consolidation, Highlands County was still found to meet the criteria of having zero full-time permanent employees. FSA producers were provided the option of receiving service from a different FSA location than the one proposed by the State FSA for their convenience. They will continue to have the opportunity to vote for representation on the local FSA committee that oversees the office serving them. WETLAND RESERVE PROGRAM Now, specifically, I wrote a letter to Secretary Vilsack on March 27th of last year commending the Wetland Reserve Program, which greatly helps Florida's ranchers and growers. The letter recommends and I obviously hope that it continues, because it allows them to bridge the gap in tough times, to be able to use the money that they get for the easement, also to be able to store water north of the lake, not going to go into the whole Everglades restoration, but you understand it, and so we think it is a win-win, and obviously, we hope that that continues. But, my question to you is, in 2008, you audited the Agency's WRP, the Wetland Reserve Program, and you found numerous cases of financial mismanagement. In fact, your audit found a number of cases where mismanaged easements had destroyed the restoration process all together. This was very disturbing to me because the farmers and ranchers rely on this to supplement their land use, and if there are problems with regard to what the easements are supposed to be for, which is water storage and the ability to help the environment, and audits show mismanagement of those easements, it kind of appears that the farmers are behind the eight ball, so to speak, in what they are trying to do. Do you believe that the mismanagement of funds has diverted resources from individuals who need it the most, and will you continue to monitor the NRSC's management of these conservation programs? Ms. Fong. Let me make a few comments, and then I am going to defer to Mr. Harden for more specifics. We, clearly, and I appreciate your question, are very aware of the conservation programs and how NRCS is managing them, and as you point out, we have issued a number of audits over the last number of years on different aspects of the conservation programs, and we continue to watch these programs because we think that there are many actions that the agency can take to improve the management. With respect to the specific audit, Gil, I don't know if you know whether the actions have all been implemented yet? Mr. Harden. I know we would have reached agreement on all of the recommendations, and that particular one, I would have to go back and check on it, the implementation of them, but given the age, I would assume that they are moving on those. But more recently, I mean, we are finding similar type problems in other conservation programs, so yes, as Ms. Fong says, NRCS and their management of their easement programs and the different conservation programs is definitely something that we are looking at on a routine basis in trying to work with them to strengthen their oversight and control of those programs and how they implement them. Mr. Rooney. Well, I would appreciate if you have any further information, if you can let our office know. There is a perception out there that farmers are out to injure the environment, and this program demonstrates that we want to be good partners with those that are trying to do the right thing, and so the sooner that we can figure out how to rectify this mismanagement, I think, the better for everybody. Mr. Harden. I guess one thing I will add to what I was saying before. A lot of our recent work has not shown farmers to be doing incorrect things. It has been more on the agency's side in terms of how they are implementing their programs. Mr. Rooney. I understand that. I don't want the whole thing to blow up just because, you know, the government is having problems, but anyway, thank you very much. Mr. Chairman, I yield back. Ms. Fong. We will be happy to provide that information for the record. [The information follows:] OIG audit report 10099-0004-SF, Natural Resources Conservation Service (NRCS) Wetlands Reserve Program (WRP) Wetlands Restoration and Compliance, was issued August 2008. In reviewing payments for wetland restoration, we found that NRCS was obligating expired funds. We determined that NRCS incurred obligations for new easements and restoration work because NRCS had assumed that 1996 Farm Bill funds-like 1990 Farm Bill funds-were no-year funds and were available for obligation in subsequent fiscal years. However, this changed with the 1996 Farm Bill, which restricted the period of availability for WRP funds to FYs 1996 to 2002. Upon the advice of the Office of the General Counsel, NRCS found available unobligated WRP funds and adjusted its accounts, avoiding the necessity of reporting an Anti-Deficiency Act (ADA) violation to Congress and the President. Concerning the monitoring of restored WRP easements, we saw opportunities for improvement. We recommended that NRCS develop a monitoring system to prioritize the easements and optimize monitoring resources by implementing, for example, a risk-based system. In the management decision process, OIG and NRCS agreed that NRCS would create and implement a risk-based monitoring system for WRP easements. NRCS agreed to create the Agency Conservation Easement Management Plan which was designed to outline actions to prioritize site visits of potential violations. Additionally, NRCS agreed to utilize high- resolution aerial photography and trained remote sensing specialists to complement on-site monitoring activities of all WRP easements annually. On March 4, 2009, NRCS and USDA's Office of the Chief Financial Officer, agreed that NRCS had achieved final action and closed the recommendation. http:// www.usda.gov/oig/webdocs/10099-4-SF.pdf Mr. Aderholt. Thank you very much. Mr. Bishop. Mr. Bishop. Thank you very much. OFFICE OF ADVOCACY AND OUTREACH And welcome, Ms. Fong and your associates. Let me just explore the audit of the 2501 Program. Just a couple of weeks ago, you completed and released an audit of the Office of Advocacy and Outreach, and of course, OAO is an office within the department management of USDA and was established by the Farm Bill of 2008 to assist farmers and ranchers who have moderate size operations, have recently begun operations or classified as socially disadvantaged. And it is designed to help them gain access to USDA programs. And of course, the Office of Advocates and Outreach uses outreach and assistance for Socially Disadvantaged Farmers and Ranchers Program to gain and improve that access. And of course, as a very strong supporter of the 2501 program, I want you to know that I welcome all of the internal efforts aimed at improving the administration and effectiveness of that grant assistance program My question is, your audit cited a number of missteps in administering the program on the part of some of the OAO employees as well as a general lack of management controls of the grant-making process. Assuming that your recommendations are put in place and carried out fully, and I noticed that they accepted all of your recommendations, are you confident, moving forward, that the program will be managed in a proper manner? Ms. Fong. Well, let me make a few comments and then I will turn to Mr. Harden. I appreciate your question Mr. Bishop. I do have some follow ups on that, too Ms. Fong. We did start that audit because, as you point out, the whole purpose of our audit was to help the department deliver that program as effectively as possible, and you know, we are very happy to say that the department took our recommendations and implemented them immediately, even as we were doing our audit work, to ensure that the final recipients of that program were properly looked at in terms of eligibility and the funds. My understanding is that for that program, I am not sure that there is money moving forward. I think 2013 is the last-- 2012 is the last year with funds, and so it is still being implemented. So, I think, you know, for future years, if Congress appropriates additional money, then there would be a future for that program, but right now, we are not aware that it is going to move forward. I also should note that---- Mr. Bishop. And the Senate---- Ms. Fong. Go ahead. Mr. Bishop. In the Senate farm bill draft, I think they did include it, but they also added some additional groups, an additional group in particular, veterans, for that program, which would again stretch the eligibility, to some extent, but it is my anticipation that it will continue if we get a farm bill. I am sorry. Go ahead if you want to continue. Ms. Fong. And to address one of your other questions. We are very encouraged by the fact that the department did take our recommendations and put into place a good grant-making process once we had our audit work presented to them. Mr. Bishop. How will sequestration impact the program for the remaining life of it, as well as, are there any additional administrative costs that were associated with carrying out the recommendations that you made? Mr. Harden. I don't know the specific administrative costs associated--I don't know of specific administrative costs for carrying out the recommendations. It is like you mentioned, if it is reauthorized with the Farm Bill, we think it will be a stronger program going forward. FOOD AND NUTRITION SERVICE Mr. Bishop. Okay. Let me go to SNAP right quick. I think you are pretty familiar, Ms. Fong, with some of the challenges that we are facing in the State of Georgia with our WIC program, and it is clear that FNS was fully aware for a number of years that the State of Georgia didn't have the resources or the expertise to appropriately manage and operate the WIC program. In fact, you issued a report in 2006 which said as much. But from a national perspective, it seems like the Food and Nutrition Service should have some way to red flag State SNAP and WIC programs which are facing administrative and management issues. Do you think that there are adequate management flags or safeguards in place at FSN which would assist in identifying issues before they become major problems, particularly at the regional level? Ms. Fong. I think that the WIC program does present a number of administrative challenges for the Department. That has been pointed out through work that we have done, as well as work that GAO has done. And as the WIC program starts moving toward an electronic delivery system, we anticipate that they will face similar challenges to what they had with the movement of the SNAP program when it went to the EBT delivery program. You know, on the fraud side, we are seeing some significant fraud schemes where people seek to take advantage of the program improperly. On the management side, there are some issues with respect to vendors and whether those vendors are being properly overseen. We do have some audit work planned. Mr. Harden. And another way to approach your question. I do believe that FNS has the right type of oversight or control structure. It is a matter of how well they implement that. In talking, because I can't specifically talk about the WIC program right now, but similarly, in the school lunch program and work that we recently completed, we found that they had a management evaluation process in place. They just were not following it at either the Federal level or the State or local level, so we would have to watch and see how they use that process, which would be able to flag States that have problems. Mr. Bishop. Do you have adequate technical assistance training or other target assistance to make sure that the States can rectify any issues or problems that come forward? Are there any specific training programs, technical assistance opportunities that the department has for the States to eliminate or to ameliorate or to reduce those kinds of problems? Mr. Harden. I am generally aware that they have those for all those types of programs. I am generally aware that they have those types of programs for--those types of training in all of their programs. Specifically, I know we looked a little bit at what they have set up for the school lunch program as far as recent work we did, so some of it is available to them. Mr. Bishop. Yeah. We heard from the school lunch program and some of the provisions that are being implemented there to help local lunchroom folks through the Web site and other electronic means, but I was wondering if the same thing was available for WIC and for SNAP. Ms. Fong. We can certainly reach out to the program officials and provide that information for the record. [The information follows:] Yes. We discussed this issue with Food and Nutrition Service (FNS) officials who provided the following information. WIC. FNS has an automated WIC management evaluation tool as discussed under training programs above. SNAP. FNS continues to provide technical assistance to enhance the effectiveness of State integrity oversight through electronic means and automation. For example, FNS provided States with a tool to automate the monitoring of social media websites so that when an individual attempts to buy or sell SNAP benefits online, a State fraud investigator is notified via email and can evaluate the situation for potential investigation. In addition, FNS is conducting a data mining project to devise guidelines and technical assistance for States to better detect recipient fraud consistently, as well as to audit the integrity of data systems in order to establish standards for data management and input controls. Our audit work has identified several electronic tools used by FNS to identify and reduce problems. The primary tools are: The Anti-Fraud Locator Using Electronic Benefits Transfer Retailer Transactions (ALERT), maintained by FNS, analyzes patterns in States' EBT transaction data to identify suspicious patterns most commonly associated with SNAP retailer fraudulent behavior such as benefit trafficking. The Watch List compiles retailer data that meet predefined parameters (generally, retailers with the highest ALERT scores) into a single list. Investigators use the Watch List to identify stores for investigation. The Store Tracking and Redemptions System (STARS) helps FNS manage data on participating retailers. It contains information about the retailers and identifies their investigative history. Mr. Aderholt. All right. Mr. Fortenberry. Mr. Fortenberry. Thank you, Mr. Chairman. STATE DETECTION OF FRAUD Ms. Fong, nice to see you again. Thank you for coming today. As you recall, several years ago, I had been the Subcommittee chairman on department oversight and operations on the Agriculture Committee, and we had a very forthright hearing in which we discussed the delays in your audits as well as the problems of a lack of enforcement mechanisms that the State could engage--States could engage with in order to detect fraud. Since then, I have noticed that you stated in direct response to that hearing that you have expanded your audit scope and you have made specific recommendations in this regards to potentially help stop fraud by stating what tools are available that should be more aggressively used as well as identifying which tools are not available and how the department should move forward in that regard. I think it would be helpful to everybody if you explain what your recommendations are. You said the department has accepted those recommendations, and what do you envision as the timeline on the implementation of the recommendations? Ms. Fong. Well, thank you, Congressman, and I appreciate your interest in these issues. You know, based on your interest and your encouragement, we were able to complete a group of audits on the SNAP fraud issues that you mentioned, and we issued the 10 State audits as well as a roll-up report late last year, basically finding that FNS needed to do a little more work in order to nail down the level of fraud in the program, both on the part of retailers as well as on the part of beneficiaries. And what we pointed out was that currently, there is no good methodology for calculating the percentage of fraud at either of those levels in the program. Our audits also pointed out that numbers of beneficiaries were possibly ineligible for benefits because the States were not doing the kinds of data matching activities that they should have been doing. We found that in a number of States, there were people who were receiving benefits from more than one State. They had bad Social Security numbers, and they were receiving benefits that way, and so we pointed out to FNS that there were things that FNS could do to fix this problem. Now, I believe that FNS has agreed to all of our recommendations. In terms of the timeframes, I don't know specifically what--we would have to provide that for the record, I think, on the timeframes Mr. Harden. Overall--I want to get back to the specific timeframes, but overall they were reasonable or else we wouldn't be at agreement on the recommendations. Mr. Fortenberry. Do you have an estimate of how much that could potentially save the system? Now, again, all of this is said in the spirit of ensuring the integrity of the program because this is an important program for many Americans who are vulnerable and particularly those who need temporary transitional types of assistance as well as those who have longer-term needs. When we have a system that is not ensuring that those who need the help are getting it in a timely fashion, we are potentially wasting it; we are undermining our own mission here. So you have a very important mission, and I, again, I appreciate your aggressive response to the earlier hearing where it was a forthright conversation about some of the gaps that we have here. Do you have an estimate of what that could potentially save if implemented? Mr. Harden. What we identified in the 10 States that we looked at, we identified about 13.9 million average recipients who were possibly ineligible, and that equated to about $3.7 million a month. Now, because of differing circumstances, it is not exactly right to extrapolate that over a period of time, but that is what it was. Mr. Fortenberry. That is extrapolated nationwide or is that a subsample? Mr. Harden. That is just for those 10 States that we sampled. Mr. Fortenberry. So extrapolating that nationwide, roughly you are looking at maybe close to half a billion dollars? It is simple math. Mr. Harden. It is simple math. If you are going to apply it that way, you could, but that is not something we can extrapolate. Mr. Fortenberry. Well, one of the difficulties here is again, because of the great expansion of the program, particularly in our difficult economic times and those finding themselves in need of this type of assistance, the numbers have grown so substantially, so even when there is a small amount of fraud, the numbers are actually very large. So, if you could find out what the timeline is for implementation and then the specifics as to which States perhaps are leading in their efforts to implement these recommendations along with FNS guidance, that would be helpful, and perhaps which States are lagging. Thank you, Mr. Chairman. Ms. Fong. Be happy to look into that. [The information follows:] [GRAPHIC] [TIFF OMITTED] 82566A.198 [GRAPHIC] [TIFF OMITTED] 82566A.199 [GRAPHIC] [TIFF OMITTED] 82566A.200 Mr. Aderholt. Ms. DeLauro. FOOD SAFETY Ms. DeLauro. Thank you, Mr. Chairman. And I want to just say welcome, and it is always wonderful to have you here before the Subcommittee, Ms. Fong. I want to thank you for your testimony. You mentioned several food safety issues, which I would just like to follow up on. First, I wonder if you can provide us with an update of your November 30th, 2012, report on oversight of shell egg inspections. In the report you found that USDA did not have a unified approach to ensure the safety of shell eggs either internal within the department or external in coordination with the FDA. Has FSIS provided you with the information that you requested regarding recommendations? There are the recommendations 1, 2, 3, 9, and 10, and they essentially develop a plan coordinating--coordination of USDA, FDA related to shell eggs; develop and plan to share information within USDA and FDA on shell eggs; develop and implement a data collection plan re-sanitation at egg processing facilities; develop and implement a science-based policy for shell egg storage temperature; and develop implementation enforcing policy for violations that are a risk to consumers. If you have that information, I don't know if you have that information. If you do not, I would love to have the information for the record. Mr. Harden. We can definitely provide it for the record, but just for your information, either late last week or early this week, we reached management decision on all of those recommendations that were outstanding, so there is agreement on them moving forward and how they are going to move forward and it does address the points that we made in our recommendations, but we can get the specifics on that for you. Ms. DeLauro. Terrific. Appreciate that. [The information follows:] Our audit on USDA Controls Over Shell Egg Inspections (50601-0001-23) was issued November 30, 2012. We recommended that the Food Safety and Inspection Service (FSIS) coordinate with the Food and Drug Administration (FDA) to implement a seamless farm-to-table approach to shell egg safety, and ensure that crucial information related to shell egg safety is collected and shared between USDA agencies and with FDA. We also recommended that FSIS implement a scientific policy on shell egg refrigeration, and that AMS take the necessary steps to prevent the USDA grademark from being placed on shell eggs that are potentially contaminated with Salmonella. AMS and FSIS agreed with our findings and we have reached management decision of all of the report's recommendations. USDA has taken action to implement 4 of the 10 recommendations (recommendations 4, 5, 6, and 8). According to OCFO's records as of April 2, 2013, AMS has one recommendation (recommendation 7) that needs to be implemented. Five recommendations made to FSIS (recommendations 1, 2, 3, 9, and 10) also remain unimplemented. And in an April 2012 report, you identified multiple shortcomings related to the inspection of meat and poultry processing facilities. Your note that you were unable to determine the efficiency of the FSIS staffing level because of inadequate data was of particular concern to me. I wonder if you could talk a bit more about your findings and any action taken by FSIS since, specifically related to the first and third recommendations. Now that the U.S. is relying more on PHIS, P-H-I-S, when do you expect to conduct a followup to the audit? Mr. Harden. Well, they did respond favorably to our recommendations in terms of thinking of putting in mitigating factors for if inspectors are not able to get do their processing plants when they are assigned, so, you know, we had a very good response on that. And I would say that we would probably follow up on that after a period of time and give them a chance to implement it. But with regard, just for informational purposes, in regard to the public health information system, we currently have work ongoing because, in response to a number of reports we have issued in the last several years, FSIS' response was always, we will take care of that when we implement the public health information system, we will make sure that is included, and so we are following up on several of those recommendations right now. Ms. DeLauro. Question is I know they have agreed but they are actually working at doing this? Okay. If there is any update on that, I would be happy to know that. RISK MANAGEMENT AGENCY And then, Ms. Fong, I was interested in your work related to the risk management agency and crop insurance. I know the statistics were somewhat breathtaking: 154 of the 176 new policies you sampled, a staggering about 87-and-a-half percent were sold to ineligible producers, yet the taxpayers footed a reinsurance bill for companies as if all 176 policyholders were eligible. Between this report and the GAO report on data mining, it is clear that RMA needs to evaluate its data collection analysis. Can you tell us more about your findings or related to RMA's database and the use of data validation to ensure accuracy in this program? Mr. Harden. In response to that question. Part of the answer goes back to things that the IG mentioned in the opening statement in response to some of the major challenges at the department. With the new producer program, we found that the AIPs were not carrying out their role in the---- Ms. DeLauro. The AIP---- Mr. Harden. The Approved Insurance Providers, the private sector providers that are supposed to be doing checks, and they were relying on information from RMA in a way that they should not have been relying on it. Ms. DeLauro. Was the information not accurate from RMA or was it--why wouldn't they---- Mr. Harden. They were trying to use an audit check that RMA kept in its system as a check for eligibility when that is not what it was designed to do. Ms. DeLauro. Okay. Mr. Harden. They were just not carrying out the responsibility that they were supposed to. In addition to that, RMA was not doing enough oversight of the insurance providers to make sure they were doing what they needed to be doing. Ms. DeLauro. Okay. But let me ask you this. Was RMA dealing with, in terms of this program, looking at eligibility and their mechanism for determining eligibility as well as the insurance companies not doing what they are doing, do we have a problem both within the agency and with the insurance companies in terms of accuracy of data and how are we going to address it? Well, my time is out, so---- Mr. Aderholt. Mr. Nunnelee. Mr. Nunnelee. Thank you, Mr. Chairman. IMPROPER PAYMENTS As I understand it, the Office of the Inspector General is charged with the responsibility of reviewing the agency under the Improper Payments Elimination Recovery Act. And in that process, you identified some high-risk programs, so maybe to start with, so that we will be on the same page, how do you identify a high-risk program? What is that? Mr. Harden. Actually, we do not identify the high-risk programs. The agency, the department and its agencies have to apply criteria coming out of OMB as to what would be decided is a high-risk program, and then we look to see how they carry out the responsibilities with regard to that. Mr. Nunnelee. All right. So how do they identify a high- risk program? Ms. Fong. Well, OMB issues guidance to all Federal agencies that says if you have got a certain level of improper payments totalling a certain dollar amount that kicks you into the high- risk category. So each agency has to go through its programs, identify which ones have that level of improper payments in that dollar range and identify it. And what happens then is that once they are designated as a high-risk program, then they have--the agency has certain obligations to identify how they are going to address the problem, mitigation that they can do to bring the improper payment rate down. And our role, as the IG's office, is to go in every year and to audit what the agency is doing in terms of whether there are actions to lower the improper payment rates, are they successful, are the rates coming down, are they identifying the right things? Mr. Nunnelee. Okay. Ms. Fong. So that is the overall scheme. Mr. Nunnelee. So what has been your experience in recent years with this agency? Have they identified the right areas; are they addressing them; and are the rates coming down? Mr. Harden. I will start by saying they are making progress. Last year our fiscal year 2011 report noted that they weren't meeting four of the seven requirements, and this year's report, which we issued on time last week when it was required, they are not meeting three of the seven requirements. Last year, when we went in, because of the problems, because it was new, the Department did not have all the processes and controls set up to know that it could collect the information to really monitor it. They are making progress on that so we didn't make additional recommendations this year to them, but what we did find was the sub-agencies that have the high-risk programs did not have all the controls in place to get their information to the Department, so we made specific recommendations to them. They have not responded to those recommendations yet just because they didn't have time to in us issuing the report by the mandated time, but I do expect to hear from them. So they are making progress to get it done. Because the Department has not made the progress it needs to or is not compliant for 2 years, two consecutive years, they have to talk to OMB about what they are going to do now to rectify the problem. Our recommendation to the department this year was to have that conversation, document that conversation so we can see what was done as we look at it next year. Mr. Nunnelee. All right. So these sub-agencies you have identified that aren't headed in the right direction, which sub-agencies are those? Mr. Harden. The six agencies that are involved are FNS, and those are big programs like SNAP and school lunch and the Child and Adult Care Program. You have got CCC and some of the farm payments, Forest Service, Natural Resource Conservation Service, the Risk Management Agency is one, and rural development is the last. Mr. Nunnelee. All right. Is that in any particular order? Did you go from best to worst or---- Mr. Harden. No, I wouldn't say that I put them in any particular order. I was just working from my notes. Mr. Nunnelee. All right. And of these agencies, the six that you identified, how would you compare your report this year to last year? Are there new problems that have come in, or are they still failing to address the same old problems? Mr. Harden. Well, the three areas that they were noncompliant in this year are three of the areas they were not compliant last year, so there is consistency in terms of--but we did know that the improper payment rate overall went down, so they are making progress, but you know, it is just a big problem to address. Mr. Nunnelee. All right. Thank you, Mr. Chairman. IMPLEMENTATION OF OIG RECOMMENDATIONS Mr. Aderholt. In the semi-annual report to Congress for April to September 2012, you note that for this period, OIG issued 176 program improvement recommendations and that USDA's managers agreed to implement 174 of them. When an agency implements a program improvement, it reports the action to the USDA's chief financial officer. OIG does not oversee the implementation of the recommendation. My question would be, is this the most effective way to ensure the agencies adopt an OIG recommendation? Ms. Fong. Well, it is the process that is envisioned through the Inspector General Act, which created our offices, and sets forth the roles of the various parties within an agency. Basically, it requires us to report, to work with agencies to reach decision on recommendations, and then it requires the Secretary to report on actions taken to implement, and so that is the overall structure. Now, within that structure, once we reach agreement with the agency as to what it is going to do, we don't just walk away from it. We do keep an eye on what the agencies are doing as they implement their recommendations, and frequently, as we develop our audit plans every year, we are watching to see whether it is time to go back in to look at a program again to see if the implementation has been working or if actually it occurred or if there are still issues that need to be addressed. And so we view our oversight and relationship with the agency as sort of a continuous ongoing relationship. Mr. Aderholt. And so speak again about the follow up on the reports to an agency and how that works again, the follow up? Ms. Fong. Well---- Mr. Aderholt. And how often that occurs. Ms. Fong. When we issue a report, we are engaged very deeply in discussions as to whether or not the agency is going to agree with our recommendations, and so that is one level of discussion that occurs in great depth through our audit process. Once we reach an agreement, then the agency has to report to the CFO's office its progress on implementing its actions, and there is a mechanism there under the Inspector General Act that says that if the agency does not implement its corrective action within a certain period of time, I think it is 6 months, a year, then the Secretary has to report that, as do we, that these actions have not yet been implemented. So we have ongoing dialogue with the CFO's office as well as with the agencies to keep track of the progress of those actions. Mr. Harden. And one other granular part of that. As they are implementing a recommended action, we provide the agency and OCFO with a document that says, okay, to reach that final action, to know that it has been adequately resolved, we expect the agency to do A, B, C, and provide this information to OCFO. If OCFO gets that information and it doesn't look like it matches, they send something to us saying, `hey, is this doing what you intended for it to do or not?', so they don't accept final action on an audit recommendation that they shouldn't. And so that is another way that we are part of that process. And depending on the sensitivity of the recommendations and the programs involved, we will kind of gauge our planning process as to when we will go back in. Some we may have to go back in sooner because of the sensitivity; some we may, due to other priorities, may need to pick up later. Mr. Aderholt. Have you ever encountered a case where an agency didn't do what it said it was going to do or made a change that didn't meet the intent of the recommendation? Mr. Harden. I would have to go back and find a specific example, but yes, when we go in and do follow up, we do sometimes find it didn't quite fix the problem, and so we--and we may have an additional recommendation to make at that point in time or we--it is rare, but you can reopen a recommendation and say, you didn't finish it, so you got to go back and fix it the way we originally talked about. Mr. Aderholt. How can we find out whether an OIG recommendation and then a related management decision has been implemented? Mr. Harden. I would say you would need to work with the CFO's office. I mean, they keep that data, and we could definitely work with you in getting it, but they maintain the data as to the documentation that it was done, and we go to them as we start audit work to make sure, you know, if we are following up on a recommendation, that they did what they said they were going to do. We would first go to OCFO and say, okay, what did they provide you? We can see documents match. Now let's go in the field and see if they actually did it. Did the retraining of people, did the instruction that was given, was it clear, and did people follow it the way that it was intended to be followed? Ms. Fong. You can also contact our office, have your staff reach out to us, and we would be very happy to brief on what we know about the status of any audit recommendation. Mr. Aderholt. Mr. Farr. Mr. Farr. Thank you, Mr. Chairman. HORSE SLAUGHTER There has been a big controversy in this country about horse slaughter. We banned it, and now the Congress has lifted that restriction on the ban, and I understand that USDA is thinking about licensing a company in New Mexico. You have investigated the USDA's Food Safety Inspection Service, and in your 2010 audit of the National Residue Program, you pointed out that the Food Safety Inspection Service should at least annually assess the risk of drug residues by canvassing drug industry experts and private practitioners about the veterinary drugs that could end up in the food supply and also that the FSIS should subject every shipment of livestock coming from unknown producers to additional residue testing. What is interesting about horses is that they are not raised for commercial meat purposes. They come from all kinds of backgrounds, you know, racehorses, show horses, pet horses, the list goes on and on, you can imagine, so that there is really no known process of what each one of those handlers has done in using drugs with them. And so, because they aren't raised for food, every shipment of horses will come from unknown producers and will have been exposed to a huge variety of unknown drugs. It seems like the Food Safety Inspection Service is posed to disregard your advice of 2 years ago by resuming horse slaughter without giving sufficient consideration to food safety. Are you prepared to investigate whether the food safety inspection service has the appropriate systems and protocols in place to ensure the safety of horse meat? Ms. Fong. We are aware that this is a very sensitive issue, and that the agency is engaged in making decisions as to how it is going to go about implementing its program, if it does. I am not aware that they have yet approved any process. Mr. Farr. They have not approved, but they are considering it. I think an application has been filed, at least that is what I have heard Ms. Fong. And I agree that that is my understanding as well. We, as you pointed out, we did issue a very significant audit on residues in meat last year, and I believe we reached management decision with FSIS on that. We would be very happy to go back to FSIS and just reiterate the findings that we had in that audit just to make sure that they are fully aware and cognizant of those findings. Mr. Farr. I think the Committee would appreciate it generally. I mean, the other side of it is we have just seen that they were going to cut back meat inspectors. They were going to rift them, and you know, the Senate bill we just voted on the floor restores that, but in their testimony here, they are faced with sequestration. And it seems a moment when food safety and particularly with drugs in animals is at an all-time concern, that this is the last place that we ought to be--as pointed out, these are first responders, and first responders shouldn't be cut back to responding to concerns. Why don't I yield to you. Ms. DeLauro. I would just add the one thing that we know, what just happened in Britain and finding out all over the world that horse meat is being used in products in which it is not supposed to be used, and that has been happening. So I think we opened a door here that really would put our food safety in that--it would put it at risk. Mr. Farr. I mean, obviously, if the department doesn't have the funds, then they ought not to be giving the permit to start this new enterprise that has got all kinds of risks and high controversy. Ms. Fong. Well, I didn't know if that was a question. I understand your concern. We will certainly engage in dialogue with FSIS on our residue audit, just to make sure that that is at the forefront of their minds. Mr. Farr. Can you report back to this Committee on what your judgment is, whether they are equipped to handle it? Ms. Fong. We will be happy to gather our thoughts on that and provide something for the record. Mr. Farr. Appreciate that. Thank you. [The information follows:] To date, FSIS' inspection program for horse slaughter is not in place, and they have not approved any facility for horse slaughter. From FSIS' appropriations hearing testimony (before this Subcommittee) on March 13, 2013, OIG learned that FSIS is working within the National Residue Program framework to develop its horse slaughter inspection program. As FSIS' horse slaughter inspection program is in early development, we do not anticipate performing a review at this time. However, we may consider a review of such processes at a later date. Mr. Aderholt. Mr. Fortenberry. USDA IMPLEMENTATION OF OIG RECOMMENDATIONS Mr. Fortenberry. I would like to follow up a little bit more on how the culture and interaction between your agency and the department is structured, and then go into the specifics of how the CFO, the chief financial officer, contains or controls the data as to how well implementations are going or being implemented and what type of timelines, and your comment, where you said, well, contact the CFO's office. I heard you adjust that slightly to say, we are also available to do that. I think it is important to recognize that we depend upon you to bring us the results of your audits and in a timely fashion, that are substantive and clear. So if the CFO has information that perhaps is not transparent to us, us going to the CFO, I would think, would be a circuitous route to try to get to the heart of the matter, which you are charged with. So, in that regard, it is my understanding that they keep basically some type of scorecard as to how well these recommendations have been implemented. Could you report that to us as a part of your general findings? Ms. Fong. We would be happy to do that. [The information follows:] [GRAPHIC] [TIFF OMITTED] 82566A.201 [GRAPHIC] [TIFF OMITTED] 82566A.202 Mr. Fortenberry. I think that might be an improvement, and it would get us out of this entanglement as to the centralized authority in this regard to find out how well program missions and clarifications of implementation are actually being followed in a timely manner. So, again, we are looking--sometimes some of this can turn into gotcha, a gotcha type of hearing, and that is not the intent here. The intent here is to again ensure the integrity of the missions of the programs, and our substantive way of doing that is through you being the basic watchdog. Do you have sufficient autonomy and independence from the agencies in which you are charged to audit to effectively carry that out? Again, I am unpacking a little bit from the nuance of what you said regarding the CFO's office to ensure that you answer my question, yes, absolutely. Ms. Fong. Yes, absolutely. Mr. Fortenberry. All right. Thank you, Mr. Chairman. Mr. Aderholt. Mr. Bishop. Mr. Bishop. Thank you very much, Mr. Chairman. EMPLOYEE BUYOUTS AND EARLY RETIREMENTS Ms. Fong, in your testimony, you indicated that your office is offering voluntary early retirement authority and voluntary separation incentive pay payment to 39 employees. I noticed, however, that last year, you testified that during the first quarter of fiscal year 2012, your office had approved voluntary buyouts and early retirement for 21 employees and that you were implementing plans to approve similar measures, including offering 30 additional employees buyouts and early retirements by the end of December of last year. What is the status of those buyouts and those retirements that you spoke of last year, and does the 39 employee figure include or exclude any of those employees that you spoke of last year? And can you give us an indication of who those folks are in terms of positions and grades and years of experience? And given the apparent institutionalization of our continuing resolution process here in Congress and the added burden of sequestration, have your staff reductions had any impact on the ability of your office to complete the audits and the investigations with which OIG is tasked? And have you experienced a brain drain with all of your staff departures? Ms. Fong. Okay. Let me go ahead, and I appreciate your question. We should definitely clarify what we did in terms of buyouts for our staff. Bottom line is that in fiscal year 2012, last fiscal year, we offered three buyout opportunities because looking forward to 2013, we saw that we would need to bring our staff down, the numbers of our staff down, so we offered three buyout opportunities. Mr. Bishop. Was that because you didn't have enough work for them to do? Ms. Fong. I wish I could say that. And basically, 39 employees, during those three buyouts, a total of 39 employees left our rolls. That includes the 21 that we testified about last year, plus an additional 18. I will note as a matter of interest, we offered three buyouts. In the third offering, no one accepted a buyout, and so we concluded that we had pretty much offered a buyout to anybody who was interested in doing that. So, coming forward into fiscal year 2013, the staff who we lost through buyouts ranged from extremely senior auditors and investigators and managers at career levels, who had 30 years of experience, all through our ranks, all the way down through our ranks. Most of the people that we lost were in our audit and investigative offices. Needless to say, because we are a staff-intensive organization, we depend on human resources to carry out our mission, and so this year, we are operating at a much lower staffing level. The impact of sequestration for us is that we have had to reduce travel funds. Every time we have a request for an audit or an investigation or an allegation of wrongdoing, we have to assess where that falls in our priorities and whether it will require us to spend money that we may not have. So that is the impact of sequestration on our operations. Mr. Bishop. Do you have a brain drain such that it will limit your capacity to carry out the responsibilities with which you have been tasked by this Congress? Ms. Fong. Well, because we have lost so many experienced people, and under the rules of the buyouts, we are not allowed to fill those vacancies, generally speaking. Once you lose a very experienced person, you can't really replace that. That being said, we have a very dedicated workforce of people around the country. And we are committed to doing the very best that we can, given our resources. Mr. Bishop. Okay. So I take that as a maybe? Ms. Fong. It is a practical reality I think. Mr. Bishop. Thank you. Mr. Aderholt. Ms. DeLauro. Ms. DeLauro. Thank you, Mr. Chairman. ELIGIBILITY IN RMA I want to follow up on where we left off in the last round. But let me make this point, as I understand it. OIG found that nearly two-tenths of 1 percent of SNAP participants in New York were potentially ineligible for the program, compared to the 87.5 percent of new policies that OIG found were sold to ineligible producers. Clearly, it would seem to me that we have work to do to ensure a proper--appropriate oversight by RMA of insurers, which was my last point at the last round. So that where are we with regard to RMA? And whatever database, if they are using the wrong database to make some conclusions, do they have a database that deals with eligibility criteria, et cetera? Are they following that protocol? Or do they not have one at all and they make a determination by some other alchemy? And then where is the safeguard on the insurance side of this? And where are you making your recommendations to deal with this kind of 87.5 percent that are going to ineligible producers? Mr. Harden. In terms of the database, as I understand it, I may have to correct this if I get it wrong, but approved insurance providers, the private sector folks are the ones that are making the eligibility determinations for particular farmers or policies. That is overseen by RMA, similar--to make an analogy, it is like FNS overseeing a State operation for SNAP or school lunch. Where we have seen problems is at the AIP level, the insured provider level, that they are not doing an adequate job, and where we find significant, you know, problems, eligibility, as you are pointing out here, policies that shouldn't have been paid, we are making recommendations to RMA to go back and---- RMA OVERSIGHT Ms. DeLauro. What should RMA be doing? Mr. Harden. They should be providing better oversight of the providers. Ms. DeLauro. Okay. So they need to provide better oversight of providers. Do you have a dollar amount attached to, you know, what it cost us in terms of not having a better oversight mechanism? Do they have a mechanism now or are they just, as I said, are they not dealing with it? Is it not tight enough? What exists? Because you have a very stringent requirement on the SNAP program, which has over the years been put into place, so you are looking at an error record underpayment, overpayment of about 3.8 percent. And we go through this all the time. But what I want to find out is what is the similar process that we deal with, with RMA and with insurance companies to make sure that we don't get an 87.5 percent rate of ineligible producers getting an advantage? Ms. Fong. You make some very good points. Ms. DeLauro. And is there a dollar amount attached to any of this? And if you don't have that, I really want to know what we are doing here in terms of dollars as well. Ms. Fong. We can certainly provide information for the record---- Ms. DeLauro. Please. Ms. Fong [continuing]. On RMA's improper payment rate, which is an issue we are working with very intensely, as well as a number of audits we have done in the last few years that pinpoint dollar recoveries. [The information follows:] In USDA's FY 2012 Agency Financial Report, RMA reported that Federal Crop Insurance Corporation improper payments were approximately $173 million, a 4.08 percent error rate. We have not audited this improper payment error rate; therefore, we cannot attest to the validity or accuracy of the rate. In 2009, OIG issued an audit report on RMA Compliance Activities (05601- 0011-At) that determined that RMA's sampling methodology to estimate improper payments was statistically inadequate because RMA evaluators excluded certain payments, such as premium subsidies and denied claims. OIG's recommendation to include all payment types in its sampling methodology has not been resolved; therefore, OIG believes RMA's reported estimated improper payment rate of 4.08 percent may have been understated. Ms. DeLauro. Tell me how often has RMA been audited to see about these efforts? Ms. Fong. We have done a number of audits of RMA in the last 3 or 4 years. I am thinking of the citrus work that we did. Ms. DeLauro. But the last 3 or 4 years. So the last 3 or 4 years. Ms. Fong. And we have a long history of audit work in RMA. And we have a very significant audit that made significant findings about RMA's oversight of the insurance industry, saying that they really need to do a better job. We can provide you with a number of dollar results on that. Ms. DeLauro. Sure. [The information follows:] [GRAPHIC] [TIFF OMITTED] 82566A.203 [GRAPHIC] [TIFF OMITTED] 82566A.204 Ms. Fong. And as you may know, there have been some very significant investigations and fraud in the crop insurance program. Most recently, the tobacco industry in North Carolina. Ms. DeLauro. Right. Ms. Fong. Multimillion dollars where the producers and the insurance agents both defrauded the government, many, many convictions and sentences, which highlights the need for oversight, I think. Ms. DeLauro. With my time just about up, I would appreciate that information and the recommendations and the structures that are in place that really address this issue and what needs to be done to tighten them up. Thank you. Thank you, Mr. Chairman. [The information follows:] RMA has three major divisions--Product Management, Insurance Services, and Risk Compliance. Insurance Services is responsible for program delivery, and local program administration and support. Product Management is responsible for overseeing product development. Risk Compliance monitors compliance with program provisions by both producers and the approved insurance providers (AIPs) that sell and service policies. Risk Compliance looks to its National Program Operations Reviews (NPOR) as its primary tool for monitoring and oversight of the AIPs. An NPOR is a review conducted approximately once every 3 years by a designated Lead Regional Compliance Office, along with other assigned regional compliance offices, of selected operations of an AIP, to determine their compliance with laws, regulations, the Standard Reinsurance Agreement, and/or associated Appendices, and/or approved FCIC policies and procedures. Risk Compliance, Strategic Data Acquisition and Analysis (SDAA) uses data mining as a tool for monitoring and oversight of AIPs and indemnity payments. Through data mining, Risk Compliance identifies policyholders for possible onsite spot check inspections, which are conducted by Farm Service Agency field personnel. Risk Compliance, through its field compliance offices, initially follows up on referrals that may involve potentially fraudulent payments; Risk Compliance also works closely with (and refers to) OIG's Office of Investigations on any referrals or other incidents involving potential fraudulent payments. Under the Standard Reinsurance Agreement between RMA and the AIPs, and AIPs are required to conduct a number of quality control reviews involving their agents, policies, and indemnity claims, and forward the results of their quality control reviews to Risk Compliance. Risk Compliance monitors and collects the results of these quality control reviews conducted by the AIPs. Risk Compliance also requires the AIPs to notify RMA upon receiving notice of a potential claim on an eligible crop insurance contract where the production loss of indemnity is likely to exceed $500,000, or such other amount determined by RMA. RMA may elect to participate in the loss determinations and review the actions of the AIP taken in the settlement of the claim before agreement is reached with the producer and before the AIP makes payment. These are called Large Claims Reviews. Conversely, RMA may elect to decline participation or review of the claim. Mr. Aderholt. With our time concluding at almost the noon hour, I am going to go ahead and recognize Mr. Farr. I think he has got a couple more questions. APHIS OVERSIGHT OF INVASIVE PESTS Mr. Farr. I just have one more question, Mr. Chairman, and I appreciate it. And it is this oversight issue. We have spent hundreds of millions of dollars trying to detect and eradicate invasive pests. In the area in California that I represent, probably California as a State probably has more issues than anyone because of the amount of travel in and out, the amount of transshipment of goods, everything. It is really a problem. Because when we do have an invasive pest, it can wipe out the wine industry or multibillion dollar industries, any of the 400 industries that we have in agriculture, especially crops and so on. And I know every year, we appropriate millions of dollars each year to the Animal and Plant Health Inspection Services, APHIS, to trace and eradicate these pests once they are in the country. The Department of Homeland Security has personnel from the Ag Department now moved over to DHS who are responsible for protection of the ports of entry. And huge sums have also been allocated from the Commodity Credit Corporation to fight invasive pests. So I was really disturbed to learn that in a report last August, you found that from fiscal year 2008 to 2011 there was virtually no management accountability in the smuggling, interdiction, and trade compliance unit of APHIS. That group has the front line responsibility at APHIS for closing the pathways by which pests get into this country. As a result, there was an extremely low success rate in finding these pests and tracing how they got here in the first place. To paraphrase your testimony, 90 percent of the surveys that APHIS undertook did not result in a seizure or trace back of a prohibited product, and APHIS did not take action to stop further shipments on 96 percent of the surveys that did result in seizure and trace back. I mean, these figures are shocking. And, you know, I can understand that APHIS has taken your recommendations to heart. But how does the management of a program get so bad in the first place that it takes your shop to uncover it? What is going on in there? And when they take your recommendations, do they fix it for good, or is it you are going to come back and discover stuff that they ought to be doing under their watch, under their responsibility to detect the gaps and the lack of strong, effective management? Mr. Harden. When we brought this to their attention during the field work, they immediately started taking action. But oversimplifying the cause of what they told us as why this got to the state it was, was the managers higher up trusted their people to do the right thing. Now, this is a very sensitive matter, and it is something that we will follow up on. But they took very seriously what we brought to them. Mr. Farr. The question is why did those managers let it get that bad? You as an outsider, this is not your expertise, this is what they are hired to do. Mr. Harden. I don't know that I can answer why they let it get that bad, because when we asked them, why is this going on, the answer we basically got was, well, we trusted them to do the right thing. That is not a good answer, but that is the answer that we were able to get. Mr. Farr. Are they still around? Mr. Harden. Yes, but one of the deputy administrators, as I understand it, that was new to this program area in terms of the management of that area. Mr. Farr. So does your recommendations, I mean, sometimes it seems it is just such gross mismanagement that people ought to be held accountable for it. Mr. Harden. I understand that. And if it were at that level, then there would be that recommendation, or if we felt there was something---- Mr. Farr. You can make those recommendations? Mr. Harden. If we feel like there is something criminal, we would refer it to investigations. If we found like---- Mr. Farr. Criminal is pretty secure--I mean, pretty difficult to prove in these things. It is just malfeasance and lack of professional oversight, things like that. But does your report bring that to the attention? Mr. Harden. We can when we feel it is appropriate to bring that type of recommendation forward, yes. Mr. Farr. Did you feel so in this situation? Mr. Harden. That wasn't part of our recommendations because of how they were reacting to it. It was different players. So, I mean, it is hard to--to generalize, it is hard to take somebody out if they are very new to the game, and they are looking at you and saying, I am going to try and fix this. Mr. Farr. Yeah, but 96 percent of their surveys where they found problems they did not take any action on. Well, I hope we can plug that hole, Mr. Chairman, with your help. Thank you for your testimony. Thank you for being here today. Mr. Aderholt. Thank you, Mr. Farr. And certainly, we will be glad to follow up on that to see what the Subcommittee can do. Thank you, Ms. Fong for being here. Ms. Ellis, Mr. Harden, thank you for joining us here today for the testimony. And we look forward to working with you. We do have some questions for the record that I know that I have that we will submit for the record, and other members may do as well. So, again, we thank you, and the Subcommittee is adjourned. 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V.................................................... 1 Ellis, K. L...................................................... 267 Fong, P. K....................................................... 267 Hagen, Elisabeth................................................. 1 Harden, G. H..................................................... 267 Rowe, Audrey..................................................... 83