[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
RESULTS OF THE DEPARTMENT OF AGRICULTURE'S FISCAL YEAR 1999 FINANCIAL
STATEMENTS AUDIT
=======================================================================
HEARING
before the
SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
INFORMATION, AND TECHNOLOGY
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
__________
MARCH 21, 2000
__________
Serial No. 106-166
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpo.gov/congress/house
http://www.house.gov/reform
__________
U.S. GOVERNMENT PRINTING OFFICE
67-250 WASHINGTON : 2000
______
COMMITTEE ON GOVERNMENT REFORM
DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut ROBERT E. WISE, Jr., West Virginia
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
STEPHEN HORN, California PAUL E. KANJORSKI, Pennsylvania
JOHN L. MICA, Florida PATSY T. MINK, Hawaii
THOMAS M. DAVIS, Virginia CAROLYN B. MALONEY, New York
DAVID M. McINTOSH, Indiana ELEANOR HOLMES NORTON, Washington,
MARK E. SOUDER, Indiana DC
JOE SCARBOROUGH, Florida CHAKA FATTAH, Pennsylvania
STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland
MARSHALL ``MARK'' SANFORD, South DENNIS J. KUCINICH, Ohio
Carolina ROD R. BLAGOJEVICH, Illinois
BOB BARR, Georgia DANNY K. DAVIS, Illinois
DAN MILLER, Florida JOHN F. TIERNEY, Massachusetts
ASA HUTCHINSON, Arkansas JIM TURNER, Texas
LEE TERRY, Nebraska THOMAS H. ALLEN, Maine
JUDY BIGGERT, Illinois HAROLD E. FORD, Jr., Tennessee
GREG WALDEN, Oregon JANICE D. SCHAKOWSKY, Illinois
DOUG OSE, California ------
PAUL RYAN, Wisconsin BERNARD SANDERS, Vermont
HELEN CHENOWETH-HAGE, Idaho (Independent)
DAVID VITTER, Louisiana
Kevin Binger, Staff Director
Daniel R. Moll, Deputy Staff Director
David A. Kass, Deputy Counsel and Parliamentarian
Lisa Smith Arafune, Chief Clerk
Phil Schiliro, Minority Staff Director
------
Subcommittee on Government Management, Information, and Technology
STEPHEN HORN, California, Chairman
JUDY BIGGERT, Illinois JIM TURNER, Texas
THOMAS M. DAVIS, Virginia PAUL E. KANJORSKI, Pennsylvania
GREG WALDEN, Oregon MAJOR R. OWENS, New York
DOUG OSE, California PATSY T. MINK, Hawaii
PAUL RYAN, Wisconsin CAROLYN B. MALONEY, New York
Ex Officio
DAN BURTON, Indiana HENRY A. WAXMAN, California
J. Russell George, Staff Director and Chief Counsel
Bonnie Heald, Director of Communications/Professional Staff Member
Bryan Sisk, Clerk
Trey Henderson, Minority Counsel
C O N T E N T S
----------
Page
Hearing held on March 21, 2000................................... 1
Statement of:
Viadero, Roger, Inspector General, Department of Agriculture,
accompanied by Robert W. Young, Deputy Assistant Inspector
General for Audit; Linda Calbom, Director, Resources,
Community, and Economic Development, Accounting and
Financial Management Issues, Accounting and Information
Management Division, U.S. General Accounting Office,
accompanied by McCoy Williams, Assistant Director; Sally
Thompson, Chief Financial Officer, Department of
Agriculture, accompanied by Keith Kelly, Administrator,
Farm Service Agency; James Newby, Senior Policy Advisor for
Rural Development, Department of Agriculture; and Vincette
Goerl, Deputy Chief for Finance, U.S. Forest Service....... 4
Letters, statements, et cetera, submitted for the record by:
Calbom, Linda, Director, Resources, Community, and Economic
Development, Accounting and Financial Management Issues,
Accounting and Information Management Division, U.S.
General Accounting Office, prepared statement of........... 23
Goerl, Vincette Deputy Chief for Finance, U.S. Forest
Service, information concerning depreciation rates......... 70
Horn, Hon. Stephen, a Representative in Congress from the
State of California, prepared statement of................. 3
Thompson, Sally, Chief Financial Officer, Department of
Agriculture, prepared statement of......................... 45
Viadero, Roger, Inspector General, Department of Agriculture,
prepared statement of...................................... 7
RESULTS OF THE DEPARTMENT OF AGRICULTURE'S FISCAL YEAR 1999 FINANCIAL
STATEMENTS AUDIT
----------
TUESDAY, MARCH 21, 2000
House of Representatives,
Subcommittee on Government Management, Information,
and Technology,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 2 p.m., in
room 2154, Rayburn House Office Building, Hon. Stephen Horn
(chairman of the subcommittee) presiding.
Present: Representatives Horn, Walden, and Owens.
Staff present: Russell George, staff director; Louise
DiBenedetto, GAO detailee; Bryan Sisk, clerk; Bonnie Heald,
director of communications; Jean Gosa, minority staff
assistant; and Trey Henderson, minority counsel.
Mr. Horn. The subcommittee on Government Management,
Information, and Technology will come to order. This hearing is
the third in a series of hearings to examine the results of the
financial audits of selected Federal agencies. We began this
series in February and have examined financial audits of the
Internal Revenue Service and the Health Care Financing
Administration.
Today we will focus on the Department of Agriculture, one
of the oldest and ablest Departments in the Federal Government.
President Abraham Lincoln established this agency in 1862
calling it the People's Department. As the Nation's economy
expanded beyond agriculture, the Department's scope of
responsibilities also broadened. From the farm supports and
soil conservation programs of the 1930's and the food
supplement and inspection programs of the 1960's, the
Department is now responsible for administering $118 billion in
assets and $122 billion in direct loans and outstanding loan
guarantees.
Despite this vast financial responsibility, the Inspector
General has been unable to verify the reliability of the
Department's financial statements for the last 6 years. The
Departments's underlying financial information is simply not
reliable.
For the past 3 years, this subcommittee has been grading
the financial management of the 24 largest departments and
agencies in the executive branch. Because of its long-standing
financial weaknesses, the Department of Agriculture has
consistently received an F. Now, I happen to have the highest
regard for Secretary Glickman. He was a very fine legislator.
And I am sure that, under his leadership, the necessary actions
will be taken to correct those problems.
The Inspector General and the General Accounting Office
have both reported that the Department is unable to make
reasonable cost estimates on its loans and loan guarantees. In
1990, Congress passed the Credit Reform Act precisely because
it wanted to know the cost of these programs. We are interested
today in hearing why the Department still cannot estimate these
costs, and what actions are being taken to resolve this
unacceptable situation.
[The prepared statement of Hon. Stephen Horn follows:]
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Mr. Horn. We welcome our witnesses today and look forward
to their testimony. Panel one will include the Honorable Roger
Viadero, Inspector General, Department of Agriculture, who is
accompanied by Robert W. Young, Deputy Assistant Inspector
General for audit; Linda Calbom, Director, Resources Community
and Economic Development, Accounting and Financial Management
Issues, Accounting and Information Management Division, U.S.
General Accounting Office. Now that's got to be something for
Paul Light and some of his----
Ms. Calbom. Hard to get on a business card.
Mr. Horn. And she is accompanied by McCoy Williams the
Assistant Director. Sally Thompson the Chief Financial Officer,
Department of Agriculture, is accompanied by Keith Kelly,
Administrator of the Farm Service Agency; James Newby, Senior
Policy Advisor for Rural Development, Department of
Agriculture; and Vincette Goerl, Deputy Chief for Finance, U.S.
Forest Service. So if you will--all the names that I named out
there you're sitting at the table or behind, please stand,
raise your right hand and take the oath.
[Witnesses sworn.]
Mr. Horn. The clerk will note that eight have responded to
the oath.
And the way we operate here is to go down the line of the
witness list and your full statement is automatically put in
the record. A lot of you know that. You've been here before.
But there are some newcomers. So full statement automatically
goes in the record. I don't need to make another motion and so
forth. But we would like you to summarize that statement and
not read it to us. We can read. But we would like just from
your heart what you say there. And we would appreciate it if
you could do it within 5 minutes. If you will go to 10, I won't
be pained by it; but Mr. Viadero has to leave at 3:30 as I
remember; and we want to accommodate you and get in some
questions also. So we will begin with the Inspector General.
And it's all yours.
STATEMENTS OF ROGER VIADERO, INSPECTOR GENERAL, DEPARTMENT OF
AGRICULTURE, ACCOMPANIED BY ROBERT W. YOUNG, DEPUTY ASSISTANT
INSPECTOR GENERAL FOR AUDIT; LINDA CALBOM, DIRECTOR, RESOURCES,
COMMUNITY, AND ECONOMIC DEVELOPMENT, ACCOUNTING AND FINANCIAL
MANAGEMENT ISSUES, ACCOUNTING AND INFORMATION MANAGEMENT
DIVISION, U.S. GENERAL ACCOUNTING OFFICE, ACCOMPANIED BY MCCOY
WILLIAMS, ASSISTANT DIRECTOR; SALLY THOMPSON, CHIEF FINANCIAL
OFFICER, DEPARTMENT OF AGRICULTURE, ACCOMPANIED BY KEITH KELLY,
ADMINISTRATOR, FARM SERVICE AGENCY; JAMES NEWBY, SENIOR POLICY
ADVISOR FOR RURAL DEVELOPMENT, DEPARTMENT OF AGRICULTURE; AND
VINCETTE GOERL, DEPUTY CHIEF FOR FINANCE, U.S. FOREST SERVICE
Mr. Viadero. Thank you, Mr. Chairman, and members of the
committee. I'm more than pleased to be here today to testify
about the Department of Agriculture's financial management. And
with me today, as you mentioned, Robert Young, Deputy Assistant
IG for Audit. In order to be effective, management must have
reliable financial information. For the Department to fulfill
its mission and otherwise serve the public, it must know how
much money has been received, spent, and is needed. It must
know where the assets are and where they need to be repaired or
replaced. It must know the cost of its operations to make
informed decisions and to identify where efficiencies and
economies need to be implemented.
Financial information in USDA is on whole not reliable. We
have issued disclaimers of opinion for the past 6 years. In
other words, the books and records of the Department have been
so poorly maintained that we have been unable to compile and
analyze sufficient evidence to enable us to reach an opinion.
What we are saying is that we don't know how fairly the
financial numbers of the Department such as the $118 billion in
assets are presented. More critically, this also means that the
managers of the programs and operations also don't know. And in
the absence of this essential information, their capability to
perform their jobs is significantly impaired.
I'm going to briefly discuss the primary problems
preventing USDA from getting an improved or hopefully in the
future a clean opinion on its financial statements. The
financial management systems of the Department process almost
$10 billion in collections and over $64 billion in program
costs. One of the Department's most critical systems is the
national finance--is at the National Finance Center's central
accounting system [CAS]. The problems with CAS has been well
chronicled. It is poorly documented, provides only summary and
not detailed data, and does not meet governmentwide accounting
requirements.
Only one clear course of action is apparent to enable this
Department to emerge from the murky pool of bad data, simply
jettison the system. The Department is therefore developing a
new system to replace CAS. This new system is called the
Foundation Financial Information System [FFIS]. The core of
FFIS is a commercial off-the-shelf product that is compliant
with government accounting and system requirements.
A critical decision was made, however, at the outset in
implementation of that FFIS that has stymied the implementation
and significantly driven up the cost. Specifically, the
Department in concert with the user agencies opted to retain
many of the legacy or feeder systems and interface them with
the core off-the-shelf package. Because the feeder systems are
old and poorly maintained and documented, retaining them has
had the effect of reintroducing the same old blood after a
transfusion.
Another long-standing highly complex and very material
encumbrance to the Department's efforts to secure a clean
opinion has been its implementation of the credit reform
legislation. USDA has several highly unique loan programs
subject to credit reform that total over $70 billion. The
original loan accounting systems were not equipped to provide
the extensive detail necessary to fulfill the requirements of
credit reform.
In the absence of reliable historical data, USDA agencies
have extensively used the judgment of program managers to
estimate future loan performance. No studies or analysis are on
hand to support these critical assumptions. The breadth and the
complexity of the issue is extraordinary, though the
Department, GAO, and my office are all working in tandem to
attempt to resolve it.
Another major problem confronting the Department is the
Forest Service accounting for real property. The Forest Service
has about $2.6 billion in real property assets. About 60
percent of the dollar value or about $1.5 billion is
attributable to what is referred to as ``pooled assets,''
preliminary roads. The remainder represents individual assets
such as buildings. The Forest Service is unable to support the
valuation of these pooled assets, again estimated at about $1.5
billion. A significant problem also persists in the valuation
of individual real property assets. We statistically sampled in
our audit and projected that these assets were overstated by
about $135 million and understated by about $80 million.
Now let me address what the Department needs to do to
strengthen its system and obtain an upgraded audit opinion.
First, FFIS must be fully functional, the feeder system problem
corrected, and data conversion from existing systems
successfully accomplished. These are extraordinary barriers to
overcome by the end of this fiscal year.
Second, the Department must compile and analyze supportable
credit reform data and implement workable cash-flow models. It
appears unlikely that this hurdle will be done this year.
Third, resolution of the Forest Service real property
accounting weaknesses will require considerable resources just
to compile the inventory valuation data, and the pooled asset
issue must be further studied and a viable methodology to
estimate the values of assets where supporting documentation
has not been retained and must be developed. This remains a
major impediment to an improved audit opinion.
All that having been said, in my 6 years as the Inspector
General at USDA, and after having issued six disclaimers, I
would like to say something on behalf of the current top
financial management of this Department. They have brought a
new philosophy, a level of commitment and focus to this
critical function. They are making progress. And they do
deserve a significant amount of credit for their
accomplishments. It's difficult to make improvements when you
have to do it piecemeal based upon the antiquated legacy
central accounting system. Mr. Chairman, this happily concludes
my statement, and I'll be more than happy to answer any
questions you or any of the other Members have.
Mr. Horn. Thank you very much.
[The prepared statement of Mr. Viadero follows:]
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Mr. Horn. As you know we go to the next witness, and then
we'll open it up to questions after the third principle
witness. So we have Linda Calbom, the Director of Resources,
Community, and Economic Development and in the General
Accounting Office.
Ms. Calbom. Thank you, Mr. Chairman. And thank you for
allowing us to be here today to talk about the Department of
Agriculture's financial management issues. As Mr. Viadero just
testified, USDA has been trying for a number of years to get
its financial house in order. But it continues to have serious
problems with the accountability over its $118 billion in
assets and its well over $100 billion in taxpayer funds
provided annually for its operations.
In my written statement I outlined a number of key issues
that USDA needs to address before it can get its financial
house in order. I want to just talk about three issues here
today. Mr. Viadero has touched on some of those, as have you.
First is this inability to estimate the cost of the loan
programs. The second thing is the unreconciled fund balance
with Treasury accounts. And last, I want to mention a little
bit about where Forest Service stands in its financial
management issues.
As far as the loan program goes, as you mentioned, Mr.
Chairman, the Credit Reform Act of 1990, as well as Federal
accounting standards that were effective in 1994, require
credit agencies to estimate up front what the cost of their
loan programs will be. These estimates are then used as a basis
to determine the amount of loans that will be made available to
these programs. Because these are up-front estimates and
they're very complex, you have to make projections of the cash
going out and the cash coming in over the life of the loans.
Unfortunately, USDA has not kept very good track of the
historical information needed to make these projections and
doesn't have good systems for capturing the information they do
have. The CFO established a task force in March 1999 to assist
in resolving the agency's problems in this area. However, to
date USDA has not provided the resources needed to properly
address this problem. So progress has been slow.
There are some major ramifications to this problem. USDA is
the largest direct lender in the Federal Government with over
$70 billion in outstanding loans, which is material to the U.S.
Government's consolidated financial statements. The agency's
inability to properly account for these loan program costs is
one of the key reasons GAO is unable to give an opinion on the
U.S. Government's consolidated financial statements. In
addition, because the program costs drive the amount of lending
authority provided to the agency, the lack of reliable cost
estimates means that Congress does not have valid data in
making decisions about whether to scale back or increase some
of these loan programs.
The next issue I want to cover is fund balance with
Treasury. This is a particularly critical account because
nearly all the disbursements and receipts of the agency flow
through this account. In that sense it's very similar to a
checking account. And as you know, if we can't balance our
checking account, that means that we've either made a mistake
or the bank has made a mistake or we're just not very good at
math.
USDA is currently undertaking significant efforts to
reconcile these accounts; but until they complete this process,
the agency can't be sure that all funds spent and received are
properly accounted for. And just as important, the agency needs
to establish a process so that going forward on an ongoing
basis they'll be able to keep these accounts in balance and be
able to feel comfortable that their receipts and disbursements
are being properly recorded. Until they do this, the integrity
of much of the agency's financial data is questionable; and the
agency is actually exposed to inappropriate use of these funds.
Last, I want to mention a little bit about Forest Service.
I have testified before this subcommittee before about the
serious financial management problems that plague the Forest
Service. As you know, because of the pervasive nature of these
problems, we designated Forest Service financial management as
a high-risk area back in January 1999. Forest Service has made
good progress, particularly in implementing their new
accounting system, which they did last October. And this new
system is a critical step toward cleaning up some of their
other basic accounting deficiencies.
However, the secondary systems that feed data into the main
accounting system still remain problematic. And as you know, if
you feed bad data even into a good accounting system you're
still going to get bad accounting data. So it's still a very
big problem. This is the USDA-wide problem. This is a system
Mr. Viadero was talking about, this FFIS. So this problem has
to be cleaned up before real accountability can be achieved,
not only at Forest Service but USDA-wide.
In addition, the Forest Service still doesn't seem to have
a good handle on the assets that it has out in the field. That
includes its equipment, its buildings, and its massive system
of roads. As you recall from prior testimonies, their system of
roads exceeds the number of miles in our whole national highway
system. So it's pretty massive. The accountability for these
assets is hampered by the autonomous field structure that
Forest Service maintains. This structure makes it very
difficult for headquarters to carry out the efforts needed to
address their problems accounting for property and equipment as
well as to correct just the other basic accounting
deficiencies.
Currently, consideration is being given to establishing
Chief Financial Officer positions in each of the regions and we
believe that creation of these positions with direct reporting
links to headquarters would help Forest Service make great
strides toward accountability over its field assets.
In conclusion, USDA is a large complex agency with many
difficult issues to address before it can be accountable to you
the Congress, and to taxpayers, for the money provided it to
carry out its varied missions. Many of these problems are deep
rooted and will take time to correct. They'll take significant
upper-management oversight, and substantial resources.
Therefore, continued congressional oversight such as this
hearing is really essential to ensure that USDA focuses
adequate attention on getting and keeping its
financial house in order.
Thank you, Mr. Chairman.
Mr. Horn. Thank you very much, Ms. Calbom. We'll be getting
back to a lot of your statement when we get to the question
period.
[The prepared statement of Ms. Calbom follows:]
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Mr. Horn. Sally Thompson is the Chief Financial Officer of
the Department of Agriculture. And we're delighted to have your
statement.
Ms. Thompson. Thank you. Good afternoon, Mr. Chairman, and
to you, Mr. Congressman Walden. I would like to take the next
few minutes to outline the highlights from the testimony that I
turned in to you. I would first like to say that Secretary
Glickman and Deputy Secretary Rominger put a very high priority
on the financial management in USDA, as well as the senior
management team that's here with me today representing Farm
Service Agency, Rural Development, and the Forest Service.
I have been the CFO for about 2 years and previous to that
time, we did not have a CFO except for about 18 months there.
However, and I came in as you know--the Department has been
highly decentralized over the years. And sometimes I feel that
the Federal Government is a lot like the Titanic ship in that
it wasn't built to make sharp turns. However, unlike the
Titanic, at USDA we are making significant progress, even
though we have a ways to go.
I would like to focus on the five major areas that I see as
preventing USDA from getting a clean opinion, tell you a little
bit where we've been, where we are, and where we're going.
The first is the financial statement. As I describe, it is
a picture frame of our reliability, timely and accurate
information. But probably more importantly is we need good
financial information for our program managers to be able to
make decisions. No. 1 in that area is we must resolve our
credit and debt management issues. As was mentioned here today,
we have formed an executive Department-wide team that is
dedicated to working both with GAO and the Inspector General
that have given us a lot of dedicated resources. In that time
we have a new model in rural development that does a subsidy
estimating model for rural utilities and for the Community
Advancement Program and GAO and the Inspector General have
worked through to make sure that it is compliant.
Second, as was mentioned, we must fully implement our new
financial management accounting system. I am pleased to be able
to say that right now as of last October, we had 40 percent of
the Department up, including the Forest Service; and by this
October, we will have over 80 percent of the Department up. But
as was mentioned today, that is the accounting system that is
the middle of 1970's technology feeding into all these feeder
systems that feed in our accounting system.
The Secretary recognizes this. He formed an executive team,
sent out a memo to all of the agencies saying I have asked this
executive team, chaired by the CFO, to come up with a plan to
have corporate systems in place over the next 18 to 24 months.
This would mean systems in the area of procurement, travel,
property, and also budget formulation. We are moving along very
quickly. And I am sure that we plan to have a full time
schedule, budget and plan in place by the end of April to
achieve that.
As was mentioned also, we must address the fund balance at
Treasury. This has been a high priority of ours this year. We
have dedicated over 80 staff who have been working on this
project between outside accounting firms as well as internal
staff at the cost of about $3 million. But the good news is by
March 31st our balance with Treasury will be reconciled and it
has never been reconciled before. But more importantly, there
will be a process in place that will continue to reconcile on a
monthly basis so that we will never again be in this position.
We also must strengthen the accounting for property,
plants, and equipment. And we have, as was mentioned, close to
$3 billion, a large part of that in the Forest Service. They
have done a significant amount of work in inventorying that
property and equipment and their real challenge was mentioned
today was to locate the documentation to support the cost,
which again, has never been done before.
In each of these areas we are making significant progress
but, Mr. Chairman, we have a major issue here and that major
issue is funding. Over the last few years, take rural
development for instance, their program dollars, which they
manage, have gone up over 51 percent; but their staff dollars
to manage that program have been decreased 28 percent. A big
gap. And every dollar that they spent on systems is a dollar
they have to take out of staff costs to be able to deliver
programs. The same is true in farm service agencies as well as
the risk management area.
Now, we feel that of course the spending that we have
received over the last few years from programs are very
critical to the Department's mission and to those emergency
funds to get out. But somewhere along the line we need to come
up with the right funding mix for also to be able to achieve
the systems technology that we need.
One of the things that I'm asking for is the rural
development to be able to use those liquidating balances that
were set aside with the Credit Reform Act that were there to be
able to absorb losses in the prior years. Now we are far enough
down the road to realize we do not need as much of a set aside.
If we could use those for our loan modeling, that GAO has
identified that we need, I think that we could significantly
improve our process.
Another success story that we have is in our collectible
debt. In 1999, we collected over $136 million in delinquency
debt. That is a 90 percent increase over the 1997 figure. And
considering between 1982 and 1996 we had only collected a total
of $55 million in delinquent debt, overall our debt percentage
of outstanding loans has gone in the last 3 years from 8
percent to 6 percent. Once again progress, but certainly not
there. Of the $7 billion of delinquent debt outstanding, $6
billion of this is noncollectible. It's in either foreign loans
or bankruptcy. However, of the $1.3 billion that's remaining, a
billion of that is food stamps that is delivered by the States,
which means that information is in 53 different systems that
can't talk to Treasury and they average about $88 per claim.
So Mr. Chairman, these are the major issues. We have made
progress. We are working very hard to get there. But I would be
glad to answer any questions that you have.
[The prepared statement of Ms. Thompson follows:]
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Mr. Horn. Thank you very much. We will now go to questions.
It will be 10 minutes for each Member alternating between the
majority and the minority. And I now yield for the first 10
minutes to my colleague from Oregon, a diligent member of this
committee, Mr. Greg Walden. The gentleman from Oregon; 10
minutes for questioning.
Mr. Walden. Thank you, Mr. Chairman. Ms. Thompson, I want
to go to you because the numbers you put up, please take no
disrespect in this because I think you are doing a good job in
trying to get a handle often this agency's problems. But how am
I supposed to trust the data you just gave us after listening
to the GAO and the Inspector General's testimony about the lack
of accountability and ability to audit the books of these
various agencies and, you know, $97 million in vehicles, $11
million in microscopes. How am I supposed to sit here and know
the data you just referred to is accurate and trustworthy?
Ms. Thompson. That's a very good question, Mr. Congressman.
Let's just say I'm sure that it's relative and it's in
perspective. Whether it's totally accurate, I cannot attest to
that either. I'm a CPA and was in audit for a long time, so no,
it's not auditable. But I do believe it can show you a trend.
Mr. Walden. I don't disagree with that. Again, I say I
think you've done good work in what we've heard so far.
Mr. Viadero, we first met in the AG subcommittee in March
1999 when you gave a similar overview of the Forest Service's
budget or Forest Service's accounts and all. And I remember you
said then that your opinion, this is quoting from your
testimony, ``was a disclaimer I could not do enough work to
draw a conclusion. This has become the pattern since the annual
audit of financial statements became law in 1990.'' I take it
from your testimony there hasn't been much improvement since
then in the Forest Service budget in the last year?
Mr. Viadero. Forest Service has made improvements. However,
the Forest Service gets a disclaimer of opinion, as I noted.
They had an overstatement of inventory of $135 million, an
understatement of $215 million. Now if we get the information
or we're supplied the documentation to look at these accounts,
we still may not come up with a better opinion then a
disclaimer. So I don't want to mislead anybody by saying if
they come up with additional documentation it's going to be an
improved opinion. It will be the first step to get an improved
opinion, but until we go in and look at it. We cannot determine
what the opinion will be.
Mr. Walden. And what has changed since March 1999 to well,
March 2000 to improve your ability to go in and look for that
documentation?
Mr. Viadero. Well, the overall--this is going to sound
different. The overall ability of the management concerned.
Forest Service now has a Chief Financial Officer who operates
under the umbrella of the Department's Chief Financial Officer.
Speaking from the Inspector General's point, this is the first
time we have all these people on the same sheet of music, so to
speak. The problem began before these people arrived at USDA.
Mr. Young and myself sat at the table with the Deputy Secretary
and literally beat on the table, we wanted both systems, both
the old system and the new system to run parallel for at least
one quarter or a half a year so that the testing would be
concurrent. And we were given all this rigamarole from people
that used to be there that the reports, we won't be able to
generate the same reports.
Now, as Ms. Thompson--I too am a CPA and 32 years an
investigator. I always thought debits have to equal the credits
regardless of what the reports say. The old system was very
unreliable. Yet we took the old systems, and they flipped the
switch like everything is going to work. Now, here is 32 years
of cynicism. I'm looking in the corral at what's on the ground;
I'm saying there must be a pony in here some place. It just
didn't add up right.
Now, what these two people have done is gone in and
literally reconstructed much of the old data. And that's a
hand-entry job. Forest Service also has a reimbursable with my
agency, for people that will never work, say again, never work
on the Forest Service financial statement and GAO has concurred
to this as has OMB that we have people in there working so it
doesn't hinder our independence and definitely hasn't with a
disclaimer to work with them to develop the methodology and the
ability to reconstruct much of this data.
Mr. Walden. I was especially troubled today on the $70
billion in loans that seem to be problematic. If that were a
major U.S. financial institution, would it be open tomorrow
with the books in the state that these books are in?
Ms. Thompson. We can account for, Mr. Congressman, every
payment that was made individually. Where our main weakness is
is in estimating those subsidy rates out for 20 years. That is
something you don't do in the private sector. GAO went out and
surveyed the private sector for us so we could see if there was
a loan system out there from Citibank, Chase Manhattan, one of
those, and found it just could not work in the Federal
Government.
So our real issue there is sometimes like in farm service,
they have 44 variables of estimating that subsidy. I have been
trying to get things streamlined. I think there is probably
about 6 to 10 at the most of very critical variables,
unemployment, GPA, interest rates, those kind of things to
estimate out 20 years. Because they're still estimates. But
that's where our real weakness is. We have got one of the
models up and running for rural development. We have another
one for guaranteed loans. And farm services is working. And
where our real need now is in that single family residential
loan area.
Mr. Walden. So this is not an issue that your books don't
balance on the payments in and the money out, so you can track
all those loans and know what is current and default rates and
all of that.
Ms. Thompson. Yes.
Mr. Walden. So this would pass a standard bank audit.
Ms. Thompson. I think so.
Mr. Walden. Mr. Viadero, if you were a bank auditor, would
you give them a green light to keep operating this way?
Mr. Viadero. Not at this time. Sir.
Mr. Walden. Ms. Calbom.
Ms. Calbom. As Ms. Thompson said, the issue is not so much
that they can't keep track of the loans they have per se, but
the issue is what's the cost of the loans. And in the private
sector, we have loan loss reserves where we try to estimate the
cost of the loans. We have a similar thing in the Federal
Government; but it's a bit more complex because you have to
estimate at the time you make the loan how much cash is going
to come in, how much is going to go out, and you have to make
projections of things like when is a borrower going to pay
late, when is a borrower maybe going to pay early--because that
affects the cash-flow too--when are they not going to pay at
all. It can be quite complicated.
The only good way to make those kind of projections is to
look at past borrower behavior. Unfortunately, the records have
not been maintained in such a way that they can be easily
accumulated so you have a basis to make those projections. So
that is the big problem with the loans. But it's key in the
Federal Government because the way we account for the loans and
the subsidies on the financial statements is exactly the way
they're budgeted for. So if you can't do it right for financial
statements, it definitely calls into question what's happening
on the budget side too.
Mr. Walden. Which leads to my next question, which is we
hear that you may need more money to hire more people or do
whatever you need to do. How do we know this float that's
going--there must be a float of some sort if you don't know how
much money is actually on the financial statement versus what
we're budgeting for.
Ms. Calbom. What happens is an estimate is made of what the
cost of these loans is going to be. Then later if they find out
that they what the cost is going to be, then they have to
actually go back and use permanent and indefinite authority in
order to get more money to cover these loans. So what happens
is Congress approves what they think is a certain level of
loans at a certain cost, then it ends up to be different. Then
the agency has to go back for more money. It can go the other
way too. If you were to overestimate the cost of the loans
initially, you make a certain level of loans based on that
estimate, well you're kind of leaving money on the table. You
could have been making more loans, but because you didn't have
a good handle on it, you're kind of stuck where you are.
Mr. Walden. Let me go back then, Ms. Thompson, to your
other chart there that showed program moneys versus employment.
Are we talking about the loan programs?
Ms. Thompson. Yes, we are.
Mr. Walden. If you have a permanent authority to go after
more money to pay for the cost of administering those loans,
why is there a shortfall? Unless your cost estimates are off.
Ms. Thompson. What we're showing there is the loan money
that goes directly out. And we do not have the authority to use
that money for administrative money, which would be where your
staff costs are and where your loan system development costs
are.
Mr. Walden. I'm confused then.
Ms. Calbom. That's right. The cost of the loan programs
don't include administrative costs. It includes costs of
defaults.
Mr. Walden. So like a loan loss reserve system.
Ms. Calbom. Exactly.
Mr. Walden. Not for the cost of it. Why wouldn't you budget
in the cost of each loan your estimated cost of administering
the loan as part of the whole package?
Ms. Calbom. Actually, under the law the costs of
administration are not to be included. So that's the----
Mr. Walden. So that's a separate allocation you request
then. And what's happening with your request for that
administrative, for the budget authority or appropriation of
what the administration has put forward versus what Congress?
Mr. Horn. Would you define yourself and the position you
have.
Mr. Newby. I am James Newby, Senior Policy Advisor for
Rural Development. One of the problems we have had for the
past----
Mr. Horn. Excuse me. Do you report directly to the
Secretary or who do you report to?
Mr. Newby. Directly to the Under Secretary for Rural
Development.
Mr. Walden. Could you move that mic just a little closer to
you. I have a cold and bad ear.
Mr. Newby. I have a bad voice.
Mr. Horn. We all do this time of year.
Mr. Newby. Our request for administrative expenses for the
past 5 years has been relatively constant, but on top of that--
the appropriation level has been relatively constant. In
addition we've had to absorb about $80 million for pay cost
increases because this money is not appropriated. So in
actuality there's about an $80 million shortfall.
Mr. Walden. Could you put that in perspective for me in
terms of your overall request.
Mr. Newby. Our overall request for 2001 is $581 million;
$417 million of that is just for salaries of our people, about
7,000 people. $52 million is for IT expenses, information
technology, and that is a maintenance level only. There is no
new development cost associated with that. And about $80
million for general support for travel, training, rent,
utilities.
Mr. Walden. So you have 7,000 people.
Mr. Newby. Roughly 7,000, yes.
Mr. Walden. And so we're funding 7,000 FTE. Would that be
correct?
Mr. Newby. Yes.
Mr. Walden. Those are all filled? Are those all filled
positions?
Mr. Newby. No, we have about 100 vacancies at the moment.
Mr. Walden. Is that pretty much an average to have?
Mr. Newby. Well, at the moment it's almost forced. We
imposed a hiring freeze last October basically so we could make
it through the year. In order to keep everyone on board, we
reduced general support costs by almost 22 percent.
Mr. Walden. I overshot my time, Mr. Chairman; but I'll come
back for a second round when we get there. Thank you very much.
Mr. Horn. I thank the gentleman. And I now yield 10 minutes
to the gentleman from New York, Major Owens; 10 minutes to the
gentleman from New York.
Mr. Owens. Thank you, Mr. Chairman. The problem that I
always ask about I would like to get back to it, when can we
expect results with regard to USDA corrective action plan to
overcome noncompliance with credit reform requirements that
were first discussed in this committee in 1994? Have we done
any--made any strides toward repairing, again these
deficiencies wiped out--it goes much further back than 1994. I
remember being astounded by the fact that under Ronald Reagan
they put people on these credit committees that had been given
great loans, some of them were multimillionaires and not paid
back the loans. And that whole problem has really stuck with me
for some time because I'm a veteran of administering social
programs and community action programs and programs involving
poor people. And they always ride herd on us for every dime.
And to find out that millions of dollars were not being paid by
people who sat on committees that made decisions about getting
the loans really shocked me. In that area have we had any
improvements? Let's take the Farmers Home Loan program. I think
that the name of it was changed.
Mr. Kelly. My name is Keith Kelly, Administrator of the
Farm Service Agency, which now does incorporate the Farmers
Home Administration with the ASCS. We have made progress over
time as the law was passed by Congress to sit there when these
loans were uncollateralized----
Mr. Owens. They were $14 billion when we first started
discussing this.
Mr. Kelly. That's correct. When I came here about 3 years
ago, we were still working down these millions and $500,000
loans that were never collateralized, nor were they required to
be collateralized. I think we're now about--I will use the
million-dollar category--we're somewhere in the neighborhood of
about 300 loans out there that about 75 percent of them are
going through some bankruptcy or court or litigation process.
Mr. Owens. Is the problem computers, financial system? What
was the problem? Why did that get out of hand?
Mr. Kelly. Those loans, why they got out of hand is the
question you're asking, why the loans got out of hand?
Mr. Owens. That's the question.
Mr. Kelly. By law they did not have to be collateralized.
If I borrow money, I have to put up something for collateral to
the bank. And if I don't pay my loans, they can come and
repossess my car or my house. Those loans are uncollateralized
loans. And with that--there was an emergency, they were
economic emergency loans. In that economic crisis that happened
in the mid-1980's, those loans were made available hoping they
would be paid back. Well, there was----
Mr. Owens. Hoping they would be paid back. They made money
available hoping. There were million-dollar loans made.
Mr. Kelly. Yes.
Mr. Owens. Where are we now? What's it down to now?
Mr. Kelly. In the total, I do not have that information.
Mr. Owens. The system won't tell you that?
Mr. Kelly. We have the information. I just do not have it
here at this hearing for you. I'll provide it for you.
Mr. Owens. Your system can give us that information.
Mr. Kelly. Yes, our system can give us that information.
Mr. Horn. Without objection, that answer will be put at
this point in the record.
Mr. Owens. You cite--a number of deficiencies have been
cited this morning. Can you give us some areas that there have
been some improvements in at this point?
Ms. Thompson. Mr. Congressman, one of the areas of
improvement is bringing in the new accounting system. We now
have over 40 percent of the Department up on the new accounting
system. By this October 1, we will have over 80 percent. We
will have all of our large agencies up on the new accounting
system. That is going to make a significant difference of being
able to give accurate, timely, and reliable data. We still have
a ways to go. We still have got a lot of old systems that are
feeding into that accounting system. But the Secretary is very
actively addressing that. We have an executive committee that's
being chaired by myself that includes the senior management at
USDA to put in place a plan to replace the procurement system,
the property system, the travel system, and also budgeted
formulation system as well as some human resource systems and a
new payroll system. This will allow us to have within the
next--hopefully to get to a qualified opinion by this October
and to a clean opinion by the following----
Mr. Owens. Could you just clarify for me, the chart here
implies that the number of employees should increase in
proportion to the amount of money you're loaning, and it's gone
down instead of going parallel up.
Ms. Thompson. That's exactly right. It's not just
employees, but it is also what we said we needed money for
systems. We need----
Mr. Owens. So it's not just employees. It's the cost of
systems as well as employees.
Ms. Thompson. In that bottom line. In the top line----
Mr. Owens. Fewer employees, but you might have to put more
money into your computers.
Ms. Thompson. That's right. The money for salaries and
expenses which would include systems have gone down 28 percent
and our program dollars that needed to be delivered have gone
up about 51 percent. There is that gap. This is Rural
Development. Farm Service Agency could show you the same chart
there. That's what I'm talking about is that gap, you know, not
that it should be right on top of each other; but we're
certainly needing more dollars for both salaries and systems.
Mr. Owens. Is it true that the Department of Agriculture
has--the number of employees in the Department of Agriculture
is second only to the number of employees in the Department of
Defense?
Ms. Thompson. I believe we're somewhere around the fourth
or fifth largest Federal agency.
Mr. Owens. It's not true then.
Ms. Thompson. I don't believe we're second, no. I believe
the State Department is and----
Mr. Owens. Anybody have a figure as the number of employees
you have in the Department of Agriculture?
Ms. Thompson. We have right around about 100,000. Maybe
around 92,000 93,000.
Mr. Owens. Before these systems have gone--as these systems
go into effect, does that go down proportionately? The number
of family farms versus agri-businesses need less people to
service them?
Ms. Thompson. That's absolutely true too. But I will say
since Secretary Glickman came in in 1994, I believe that we
were about 138,000 employees. And now we're down, I think,
around 92,000 93,000.
Mr. Owens. So going back to my first question, according to
the Inspector General, some of USDA's lending agencies were not
in full compliance with some of the provisions of the debt
Collection Improvement Act. Specifically, which programs were
not in compliance and what is being done to correct these
deficiencies? Does that overlap with what you said in the first
place about the Farmers Home Loan program?
Ms. Thompson. I believe that some of those are referring to
the amount of debt that's turned over to Treasury to be
collected. We have made significant improvement in the dollars
that we have turned over, and we will have an even larger
improvement this year. There were some dollars that we were
waiting to turn over because they were looking at the National
Finance Center as to whether it should have been a debt
collection center. Because Treasury needed some help in their
Birmingham area, they were able to get that up to speed. And
they just let us know in January that the National Finance
Center would not be a debt collection center. So we're in the
process of getting those loans being ready to be turned over to
Treasury for collection.
Mr. Owens. Can somebody clarify for me what the procedure
is? How long do you wrestle with the problem of repayment of
loans, and when do you turn it over to the Treasury debt
collection?
Ms. Thompson. The average is around 180 days. However, that
varies from the type of loans. We obviously don't----
Mr. Owens. Even collateralized loans that we were talking
about, they get longer time to incubate before they go to the
Treasury?
Ms. Thompson. Yeah, because those are very old loans. I am
talking about the newer loans. If they're home loans----
Mr. Owens. The older the loan is the less attention is paid
to it? Is that what you're saying?
Ms. Thompson. No, that's not true. I think what Mr. Kelly
is saying they have applied a lot of effort to collecting some
of those old loans. But when they're not collateralized and you
have no assets to go after, it takes much longer in court. If
that person has any other assets that the court can--it has to
go through the court system at that point.
Mr. Owens. Is there any regulation or rule of privacy that
prohibits you from making available to this committee the list
of the people who have had loans more than 180 days overdue?
Ms. Thompson. I don't think there is. We can get back to
with you that answer. I think it's going to vary on the type of
loan. Now----
Mr. Owens. Some loans are covered by privacy.
Ms. Thompson. Whether they're a home loan, as you know
there's much different regulations in place.
Mr. Owens. You don't keep a public record of loans that are
made?
Ms. Thompson. Oh, of course we do.
Mr. Owens. So it is a public record. The answer to my
question is that there is no reason to--there's no prohibition
on making public the information.
Ms. Thompson. That's true, but what I'm saying is it's not
all loans are delinquent in that 180 day. They may be
delinquent, but they're not collectible. If they're bankruptcy,
if they're foreign loans, if they're in the court system----
Mr. Owens. Why shouldn't we have information on those that
are not collectible?
Ms. Thompson. Oh, you can have the information.
Mr. Owens. We still want to know where they are.
Ms. Thompson. I'm not saying you can't have that.
Mr. Owens. How soon can we get that information?
Ms. Thompson. We'll certainly work on that and probably I
would think in the next 30 days.
Mr. Owens. Mr. Chairman, I ask unanimous consent that we
ask for the----
Mr. Horn. The unanimous consent order is to all of this
data we would like put in on the background of it. Well, let's
put it at a certain--the whole reason I authored the Debt
Collection Act of 1996 was because of agriculture loans that
you gave a couple of million bucks to a guy that defaulted in
northern California. He then went to live in pretty posh Santa
Barbara in California and lo and behold they gave him a loan
again. And so, yes, we would like to see who the deadbeats are
that aren't paying back their loans.
Mr. Owens. Let the record show this is a bipartisan
request.
Mr. Horn. I am for family farmers, having been one; but I
am not for defaulters. We ought to set it, Major, at some part,
you know, over a million to start with or over $500,000.
Ms. Thompson. That's what I was going to say.
Mr. Owens. I am just interested in those over a million
that is all.
Ms. Thompson. OK. That we can do.
Mr. Owens. Thank you, Mr. Chairman.
Mr. Horn. Thank you. Those are good questions. Let me just
yield--well, we'll give you 10 on your own. So go ahead.
Mr. Walden. Go ahead.
Mr. Horn. Let me ask you this, Ms. Thompson. If you put it
in a nutshell, what is it that the Department has to do besides
the people investment in capital? I'll get to that in minute.
What--how would you put it so we don't see this same material
pop up every 6th year of the 6 years? What would you do to get
the job done? I realize you aren't the CIO; you're the CFO. But
tell us what needs to be done, in a nutshell.
Ms. Thompson. OK. I may not be the CIO, but I am
responsible for financial systems. So I guess that puts--and
when you start to think about that, almost everything we do at
the Department has a financial system impact on it. And I guess
that that's what I really need to do, I need to finish getting
the accounting system up. We're working very diligently on
that. And we will have everybody up a year from this October,
but 80 percent up this October. I also need to get those feeder
systems, as we've talked about, which are all of those
auxiliary systems that feed into that accounting system that
are also built in the 1970's, get good information, you know,
get those systems up and running.
We will have gone a long ways. And that includes the loan
systems as well. Because they obviously feed in--if you think
about everything that feeds into our financial statement, those
are the systems that I need to get out of the 1970's
technology, up to date, and feeding into our accounting system
that produces our financial statements. We need to get some
training done in the Department because obviously you put new
systems in, you have got a lot of business processes that need
to be reengineered that makes the Department also more
effective and more efficient. What I am finding is so often not
only in our National Finance Center but also throughout the
Department is that we need good training and financial
management. We need some stronger staff in financial
management.
Mr. Horn. Now, is that your responsibility, or is that
personnel's responsibility, or how do you get that supervision
and training and retraining and retraining?
Ms. Thompson. It needs to come--one of the things that we
do as a CFO office is direct that. We are responsible for the
leadership of financial management in the Department. And I'm
finding that, you know, we've got all the cooperation that we
need within the Department in the agencies, but the problem is
resources. It always comes down to, do we put the staff in the
program area versus putting it in the financial management
area.
Mr. Horn. Ms. Thompson, to what extent did the Department
reprogram funds at the end of the fiscal year? How much were
reprogrammed and moved elsewhere in the Department?
Ms. Thompson. Wish I could say we had--we were able to do
that. But when I went out to find out how much unobligated
funds we had out there, we could not tell that because we
didn't have good enough systems.
Mr. Horn. So you can't go back--you kicked all of that back
to the Treasury then.
Ms. Thompson. That's right. One of the pieces of
legislation that I tried to put through last career that's
coming back again this year is to be--to allow us to use those
unobligated funds amount to about $50 million a year. And out
of a 5-year period of time that's $250 million. Now, they could
only be used if they don't score against us because obviously
if you gave us $50 million to use but took $50 million out of
our budget, we haven't gained anything. Now which means you
would have to convince the CBO not to score it.
Last year they for a while they said they would, and then
when they came right down to it, the appropriators approved a
pilot program that would have allowed us to use 1 year's funds
to see, you know, how it worked. And then CBO came back and
said they would score it. Certainly, OMB is supporting that
legislation again. We will try it. If you have any influence
with CBO that would go toward a long ways toward solving that
problem for us.
Mr. Horn. When you were asked about the number of
employees, you noted that since Mr. Glickman came, it went from
about 138,000 down to 93,000.
Ms. Thompson. Yes, sir.
Mr. Horn. So you should have gained some money by having
45,000 less employees.
Ms. Thompson. Well I think----
Mr. Horn. Do you not have your personnel records and your
financial records all tied to those salaries? That's how you
aggregate a budget.
Ms. Thompson. That's true sir. But if you look at this
chart where it shows that we have dropped 28 percent in our S
and E budget, that takes care of most of the drop in the
Department.
Mr. Horn. The corporations that did the same thing during
the recession at the beginning of this administration, they
found that they were more efficient, their systems, and they
were better off. And it just seems to me somebody has got to
make a tight judgment and somebody did over there. They can't
take credit and then damn it, because the fact is that's
exactly what they did. They had, I think, 108,000 in Internal
Revenue Service, got down to 100,000. That was the Gore
initiative.
So what happened to the money is what I'm asking and why
wasn't that put to either lower-paid people that come in.
That's usually why they do the $25,000 bit and get the higher-
paid people out to retirement, and just seems to me that that
was a pretty good chunk of money that could have brought the
people that you need to get this job done. Now, when I look
currently, there's an out-of-balance amount of $5 billion that
the Inspector General notes they can't reconcile the checking
account. Now, with some of those people, it wouldn't take
38,000 or it wouldn't take 45,000 people; it would take just a
few hundred here and a few hundred there, I think, you would
agree with proper training.
Ms. Thompson. I would agree with that, sir. I think,
though, you look at the Department of Agriculture and if you
take out the emergency funds that have been given to us over
the years, you would find that our budget is straight lined, in
fact even down a little bit. And as Mr. Newby mentioned, from
rural development we have absorbed the pay cost and the
inflation of just supplies and that sort of thing. And in Rural
Development alone that costs $80 million over the last 5 years,
as he mentioned. So a lot of the savings as you are looking at
it on the salaries that were either those dollars were cut or
they've been absorbed by inflation and pay costs.
I certainly haven't been able to find them, and I have been
digging everywhere I can look for dollars. Our systems, if you
get good systems in place, they will pay back over a 5-year
period of time. But the problem is you need an up-front
investment. One of the things I'm even looking at is the
possibility of borrowing some funds from Treasury, knowing that
I can pay that back as like a loan with the efficiencies that I
can gain by getting rid of some of those old systems and being
able to streamline the staff that would be running those
systems.
Mr. Horn. In the Debt Collection Act of 1996, we provide
that you get money back when you collect the debts. And you
might want to explore that part of the law. The whole thing was
to give an incentive to upgrade computing with both the capital
and human investment as well as the capital in hardware and
software. So I would take a look at it because you have a real
loan collection problem. There are others that have bigger
ones, but you've got one. And it's manageable.
And I think, as you say, if you can get it down to
manageable pieces here, why, it will work. But it won't work
and that's why I want to just off the top of your head from
what do we have to get to. What is priority one? What is
priority two? So forth. So can you tell me that?
Ms. Thompson. Yes, I certainly can. Priority one is the
financial systems, which include both the accounting and all of
those feeder systems. Priority two is getting the credit
reform. Again, that's another system, but it's also getting all
of the data verified and collected. A lot of that data is in
the counties out there in those files that we need that is a
priority two. Priority three is getting the property system in
place for the Forest Service, getting the inventory done and
getting the documentation needed to substantiate that.
Mr. Horn. What does that take in the Forest Service? Is it
just agreeing on what is a piece of property or what is a tree
or what is it? I mean, how are you going to deal with that?
Ms. Thompson. Sir, that has to do when I talk about
documentation is what was the cost. And probably the roads are
a classic example there. And I would like to if you--if it's
all right, I would like to have the Chief Financial Officer
from the Forest Service tell you exactly what she's doing to be
able to, for instance, inventory the roads.
Mr. Horn. This is Ms. Goerl.
Ms. Goerl. Yes. I'm Vincette Goerl, and I'm the Deputy
Chief for the Office of Finance and Chief Financial Officer;
and I report to Mike Dombeck. In our process of getting good
valuation for not only an inventory but a good valuation of the
real and personal property, one of the largest challenges that
Mr. Viadero spoke to was the value of pooled assets on the
roads. What we're talking about there is the collection of
costs associated with the building of the roadbed over time.
We're talking about a road system of nearly 400,000 miles, a
significant amount of those built over the last 50 to 60 years.
So when you go back to establish a baseline cost or
valuation of that property, finding those records would be and
are next to impossible. So what we have been working with at
the Inspector General this past year on a methodology for going
back and establishing one-time baseline cost for these pooled
prior to 1995. We have collected the cost documentation since
that time and have the costs for those road improvements.
Within the next few weeks we will have finalized all of our
discussions with both GAO and the Inspector General on how we
establish that one-time base cost; and we would apply it this
year through an acceptable methodology. Then we would have a
baseline from which to work in the future for those costs.
That's a major issue. Because that's a significant amount of
valuation of our assets.
What was also mentioned is we completed our first and most
thorough inventory of real and personal property this past
year. That was a huge undertaking when you're looking at
150,000 trails, 400,000 miles of roads, 45 thousand facilities
and such. We also implemented a new systems module in
Infrastructure, our real property system where we could collect
property information along with valuations which we had to
establish for all of that real property, to come up with the
valuation or plant, property and equipment for our financial
statement. It lacked, however, the pooled assets because we had
yet to agree on the methodology to establish values for those
assets.
Mr. Horn. So that road condition that factor tell how well
the role--that the road had survived? So it's a matter of say
maintenance and preventative maintenance.
Ms. Goerl. There's two aspects to the inventory that we
took. One was on where the roads are, how many roads are there,
how many facilities are there. And then what is the cost or
value of that property so that we can run it through a
depreciation model. The second aspect is deferred maintenance
on a survey of the condition level of that property. Those are
two different sets of issues. Our deferred maintenance for the
roads alone is around $9 billion. And having to do the work to
do the survey of all those roads accurately has taken us some
time. That does not include the rest of the maintenance on our
facilities and other things like that. It's probably closer to
$10 to $12 billion. We have to come up with separate
methodologies on each type of property and the approaches
toward completing the total survey of all of our real property.
That is also being collected in this new system.
This is a huge undertaking and we were very proud of the
effort we completed last year. This is the first time we have
ever included all that data in the system to determine its
value. We had problems with ensuring that everyone did this in
the same manner, that the documentation was there, and that the
valuations were inputted correctly. An initial audit by the
Inspector General did demonstrate there were problems. We're
working right now on going back and correcting that information
and we just initiated in the last couple of weeks this year's
full inventory again. We will be asking for that inventory to
be completed by the end of June. We are working with the
Inspector General so that we can go through a full audit year
on real and personal property.
Mr. Horn. What you say makes a lot of sense to me now. It
sounded like you're also getting management decision points
where people can decide do they need that, don't they, and this
kind of thing, what's the level of maintenance, what's our
long-term budget for preventative maintenance.
Ms. Goerl. Extremely valuable information. The fact that
this information is auditable provides much more credit with
our appropriations committees and internally in the Forest
Service as we decide which maintenance approach we will take
for both roads or other real property but also what it will
take over time dollarwise to bring the maintenance level up for
this property.
Mr. Horn. I guess I would ask you in--well, I think my time
is over. I'm going to get my other colleagues back in this. And
then I'll talk to you about measurement. Because I think that's
the key to a lot of what every agency is doing. And it's--it
shouldn't just be an accounting data obviously. Are think we
kid ourselves, we need to make sure nobody stole it. But we
also need to make management decisions. And sounds like you're
on the right track. The gentleman from Oregon, 10 minutes.
Mr. Walden. Thank you, Mr. Chairman. Let me read from again
the testimony from last March 11 by Mr. Viadero who said,
``First of all''--this is reference to the Forest Service, oh,
she left the table. Oh, don't go away.
First of all, real property, accounting for real property
is by far the most significant accountability problem the
Forest Service has. Unfortunately, though, the Forest Service
may be able to see the forest for the trees it's uncertain as
to what is in the forest, where it is or how much it is worth.
In fiscal 1997, we could not verify the 8.2 billion in real
property reported by the Forest Service because the agency had
not inventoried enough of its assets nor put a value on them.
It goes on to talk about the work that was being done. That was
last year. What is the current value of the assets of the
Forest Service?
Ms. Goerl. Well on the balance sheet it's around--I'm going
to guess here because I don't have it in front of me it's
around $3 billion with depreciation, I believe for the total
real property.
Mr. Walden. So you're taking the value of the roads and are
depreciated cost over how many years, 20, 30?
Ms. Goerl. I think what we're looking at is a 50-year
depreciation of the road pools when we get through with our
methodologies. I can't remember them all right now, I can
provide them for the record if you wish; but there are specific
depreciation schedules for each of the different types of
property that have been established. The key objective is to
have the correct valuation of the property in the beginning
before you apply the depreciation not only have a problem in
getting accurate information in the system but the accurate
costs validated and then running the depreciation schedules.
[The information referred to follows:]
[GRAPHIC] [TIFF OMITTED] T7250.047
Mr. Walden. I am very sympathetic to the challenge you
face, and I am glad these improvements are taking place.
They're obviously long overdue. I guess the question is as this
administration and through the Forest Service pushes through at
a very rapid rate the new roadless regulations for the Forest
Service which will cover 40 million acres and the chief has
made it clear he wants that done by the end of the year, what
effect will that have on the balance sheet? Has anybody ever
talked to you about what difference is that going to make if
these areas are suddenly going to be become roadless and----
Ms. Goerl. Well I think there's two different issues here.
First, I think there's what is the financial and the inventory
information that we have about our assets. The second thing is
obviously if any of that information will be used in
determining some of the policy decisions and where that feeds
into the regulatory process. Of course you want valid
information from which to make your management decisions on the
policy, but I think the two are very distinct. Obviously one
feeds management information into the other for determination
of what you will do given whatever regulation you are
considerating. Obviously we're using this type of information
from the infrastructure system to support the analysis on the
roadless initiative and others, but we're using other policy
and rearrangement information as well.
Mr. Walden. You don't have a dollar figure that's what I
was after.
Ms. Goerl. A dollar figure for the investment in the
roadless initiative?
Mr. Walden. Yeah, if those regulations are passed.
Ms. Goerl. I do not have any information. I can provide
that for the record on the impact I know we're spending about
$8 million on the analysis and the development.
Mr. Walden. $8 million.
Ms. Goerl. The estimated costs equal $8.6 million in fiscal
year 2000 an additional $1.2 million in fiscal year 2001.
Mr. Walden. OK. Let me see here. I want to go back to those
issues of the loans that the chairman and Major Owens spoke of
too. Because I understand the committee is going to get the one
over a million. I wonder if we could get just a statistical
analysis by number of loans and values in some categories below
a million so we can get a look at is a million a small segment
of those loans and really the problem is below that but we
don't want your 20-feet-high stack of information.
Ms. Thompson. Absolutely. If in the back of the financial
statements of which I'm sure that you have, they break down the
loans in quite a bit of categories. This would be on page,
starting on page 44 of the financial statement.
Mr. Walden. Oh, very good.
Ms. Thompson. It would give you the balances of direct
loans both prior to 1992 to after 1992, the default on the
guaranteed loans, again broken those down, the guaranteed loans
outstanding and then some of the subsidy information that GAO
was talking about is also there. But it gives you a gross loan
balance broken down between housing and utilities and----
Mr. Walden. But it wouldn't have it by size of loan.
Ms. Thompson. We'll work on that one, yes. We'll have to
get you that type of information. But we can do that.
Mr. Walden. OK. You've got bigger challenges I know and I
don't want to throw--if it's a big burden don't worry about it.
Ms. Thompson. Need to take a look at those.
Mr. Walden. That would be helpful. I guess back on the
Forest Service issue, while I realize it's important to figure
out these pooled assets--see you thought you could get away, no
way. The pool asset issues is of course important to the
balance sheet but I remember again Mr. Viadero your comments
about the receivables and payables last year was and quoting
again from the record in the ag committee, ``Since 1993 the
Forest Service has historically computed its account payable
balance statistically by identifying the extent of errors
likely to have occurred and projecting them over the universe
of transactions then adjusting the total.'' Has that been
fixed?
Ms. Goerl. It's definitely fixed when we moved to the new
financial system because we had subsidiary accounts receivable
and accounts payable systems which we did not have in CAS.
That, of course, went into effect October 1. But, of course the
audited financial statements are on fiscal year 1999.
Mr. Walden. This year.
Ms. Goerl. We expect that this year we will be able to take
away one of our major areas of material weakness because we're
using a certified standard general ledger in the financial
system.
Mr. Walden. So you're comfortable we don't have this
statistical projection to get to balance.
Mr. Viadero. I know I'm the IG for Agriculture. I want to
use my colleague in State Department's comments, we're
cautiously optimistic.
Mr. Walden. So are we. Oh, I have a question too back on
this issue of, you know it's a constant struggle either in the
private sector or public sector trying to figure out how many
people or how much money do you need to run a program. I guess
the question I have is do you look at private sector models in
terms of how many loans a loan officer can manage and the
volume of those loans and compare that against what is going on
with your, say, on this example the rural development program?
And if so how does the Federal Government stack up?
Ms. Thompson. We have done that, and I will let Mr. Newby
address that. I guess I would just like to say having come out
of the private sector, in fact I was a bank president at one
time, there is a big difference between the loan portfolio in
it and the Federal Government. We don't say we're the lender of
last resort anymore. We say we're the lender of opportunity. I
think that makes a big difference. But what I'm saying is not
only is the clientele a much different clientele that they're
dealing with than you do in the private sector, and certainly
Mr. Newby can describe a little bit of that for you. You know
our people need to be able to speak five languages. They're
dealing a lot with senior citizens, disabled people, low-income
people, uneducated people, the whole thing; we're dealing--but
so that makes our statistics means that it takes us longer to
manage that. And with that I'll turn it over to Mr. Newby.
Mr. Walden. Before you do that since you were a bank
president I spent 5 years on a bank board, what is the rate of
non-performing loans by percent?
Ms. Thompson. Ours is, as you know, between 6 and 7 percent
which is pretty good, you know. It depends upon--and if you're
talking about residential loans, you know you're down around 3
percent there. If you're talking about commercial loans and you
get into oil loans--I was in Denver during that period of time
where it went to 20 to 30 percent. You know, so again, that's
what I was trying to tell Congressman Owens is it's the type of
portfolio you're looking at. And then you got geographical
differences too. And when the housing market just bottom fell
out of it up here in the Northeast but in the Southwest it was
very strong. You know that sort of thing.
Mr. Walden. Good point.
Mr. Newby. We haven't collected data in the last few years
that would compare the number of loans per individual loan
officer with the private sector. I can provide that for the
record that will show you some that were 4 or 5 years ago. The
reason we haven't is that we changed about 30 percent of our
workload by centralizing all the single family housing loans.
We had a very decentralized servicing system. We centralized
all of that in St. Louis and now providing tax and escrow
services for the borrowers for the first time after 20--almost
20 years after Congress told us to. That changed about 30
percent of our workload. So we need to do a new analysis. But I
can show some data from 3 or 4 years ago.
Mr. Walden. Would that be useful to us though?
Mr. Newby. It would. The number of loans each loan officer
handles for us is significantly higher than you would find in
the private sector.
Mr. Walden. And more difficult according----
Mr. Newby. More difficult.
Ms. Thompson. Very much more difficult. If you go out to
that loan servicing center at St. Louis, we brought in a
manager from Citibank that's running it, doing an incredible
job. And all through that area you'll see charts up on, you
know, how many calls linked up through the day what the number
of minutes were, how that compares to the private sector. So
they really are running that servicing center much as would you
in a commercial market.
Mr. Walden. Very good. Thank you, Mr. Chairman.
Mr. Horn. I thank the gentleman. And I have a few questions
here before the Inspector General leaves. Let me note that he
reported 32 State agencies do not have claims systems in place
that can accurately report and collect on over-issued food
stamps. How much do you estimate was the total over-issuance of
food stamps in fiscal year 1999? Do you have those figures, Ms.
Thompson?
Ms. Thompson. I have a cumulative figure of about $1
billion. But I don't have it broken down for 1999.
Mr. Horn. 1998 was $1.3 billion.
Ms. Thompson. Yes. Right. I just got a 1998--yes that's
$1.3 billion. They will have the 1999 figure in May.
Mr. Horn. We'll leave a space in this record for that
letter.
Ms. Thompson. Mr. Chairman I'm sure you already realize and
know but maybe not everybody realizes that the States determine
the eligibility on that. They also control the collectibility
on those as well. And that's part of the problem as I mentioned
in my testimony in being able to turn that over to Treasury.
And I have had very long sessions with Treasury. Of that $1.3
billion, it's made up of a million accounts and they average
about $88. There is also some regulations on the--that you
can't go against, I believe, somebody that is currently
receiving food stamps to collect. So the States have, you know,
they may have gotten some over-funding at one time; but, you
know, they're still eligible for food stamps. The problem is
also the States can't turn that over for collection because
their systems can't talk to Treasury.
Mr. Horn. Are the States not turning it over because
Congress passed a law that it's none of our business or what?
Ms. Thompson. No.
Mr. Horn. I mean some authorization--let's face it they're
not concerned about money. They're just concerned about keeping
people happy. So I'm just wondering is that a law that we can't
collect it and the States should collect it?
Ms. Thompson. Yes. The States are--now they can turn that
money over to Treasury, but Treasury can't accept it. They
can't accept paper, and they can only accept electronic
transfer. And there's 53 different systems at a minimum out
there to be able to turn that over.
Mr. Walden. Mr. Chairman, if I might, I believe Congressman
Goodlatte is working on legislation to make for a unified
system where all the States would be able to talk to Treasury
as I recall. Doesn't he have legislation? It seems to me we had
a hearing on that in the subcommittee.
Ms. Thompson. Yes he does. You know, the States were so
involved also in Y2K as you know and becoming compliant. So
even those that had system changes on the drawing board got put
to the back.
Mr. Walden. So there may be some hope there.
Mr. Horn. Does the Inspector General have some thoughts on
this.
Mr. Viadero. Yes. First of all Mr. Chairman it's incumbent
on the States to get this money back. However the States can
send the tapes to Treasury and let Treasury do the collection
for them. So actually USDA is out of it. The States know what
they have to get the money, but nobody is really pressuring the
States to collect money. It just stays out there. As Mr. Walden
said, it's sort of a float; and it's a float of $1 billion
approximately. But the States can send the tapes back to
Treasury under the legislation, and Treasury can collect it,
not USDA.
Ms. Thompson. That's true. But the problem with Treasury is
that they can't accept those tapes because they're not
formatted in the same way that their systems can accept it. At
least that's what Treasury tells me. You know you got 53
different systems out there from 53 different States and
territories.
Mr. Viadero. I don't want to be a cynic again, Mr.
Chairman, but if the States can work with Treasury when it
comes to receiving money then certainly the States can work
with Treasury when comes to getting the money back.
Mr. Horn. In other words, you're saying it's a one way
system the way the States see it give us the money, and put it
on the stump and run.
Mr. Viadero. That's another way of putting it, yes, sir.
Ms. Thompson. Mr. Chairman, if I could, I do have somebody
here from Food and Nutrition, and they just handed me the note
that says that in fiscal year 1999 the States collected about
$213 million from recipients that had been overpaid. As an
incentive, States receive a portion of the collected claims. So
there is some incentive there. I'm not saying that the
Inspector General isn't right, that whether that incentive is
enough. I know I have talked to Roger about what hammer do we
have; and he has said, well we could stop issuing the State
food stamps. But you know that that doesn't sound very
realistic.
Mr. Viadero. What I said was hold back the administrative
costs until they get the money back. We never want to hold back
benefits from the recipient. These people need it. But the
States--if a State has a debt and we held back the
administrative cost until the States did their job I think we
would be in better shape.
Mr. Horn. Well, we found that out in Y2K. They're partners
and we're partners with them. And unless you keep on it,
everybody is going to say, hey, we can just keep that money.
Mr. Viadero. Mr. Chairman, something else, if I can, since
this is also the IT committee, or is the IT committee of
particular interest to us--and I don't want to sound like I
don't want to be left off the cry poor band wagon, but my staff
has gone down in the last 3 years, 24 percent because we're
viewed as a staff organization.
We get nothing funded. Either we get flat lined in the
House and the Senate gives us a modest increase which doesn't
cover the raise or it's vice versa. Right now I have about 72
people on average doing CFO and CIO work. And to that end, it
will take almost $1 million for us to get a computer lab to
perform IT security reviews.
GAO issued a report on the computer hacking and just by
coincidence it happened when there was an international hackers
convention going on. Timing is everything. And Ms. Thompson we
had what 12,000 hacks a second into the National Finance
Center. Now that, to me, is exceptionally disturbing. Given the
amount of dollars that go through the National Finance Center
and the other payment centers and collection centers that we
have, 12,000 hacks a second. It's phenomenal.
I have a small group of folks that sit in an unknown place,
and they do unknown work--no. What they do they're my hackers,
they try to hack into systems. And you know we've gotten
through in some of the systems, particularly some of the loan
systems we just left a message there, hey we were here.
Actually we were going to get a loan in the name of Dan
Glickman and put it in and give him a statement that his loan
has been paid. But we opted not to do that in fairness to the
Secretary. But we could use a hand on the IT side in helping us
with our committee's as far as getting a test lab through so we
can further prevent the hackers from coming in.
Mr. Horn. Now, do the CIO's have a committee on this? I
believe they do, don't they?
Mr. Viadero. There's a CIO committee, yes.
Mr. Horn. Are they talking to Inspector Generals and CFO's
also.
Mr. Viadero. Probably not.
Mr. Horn. Because the question was, we would welcome your
thoughts. We're trying to put a standards on computers security
so that we will be able to grade them, same as we did on Y2K.
Mr. Viadero. Our response is in for SR 1993.
Mr. Horn. We could welcome those of you on the firing line
to say what are the basic minutes an agency has to have if you
are going to be serious about computer security so if they
haven't come in, just mark it personal. I would like to see it
before I give it to the staff.
Mr. Viadero. Yes, sir.
Mr. Horn. So I appreciate that. I hope the CFO's have a
crew working on that. That to me is very essential. A lot of it
is going to be government funded of other governments in a
number of things around here, rather than individuals but we
need to protect ourselves from both. The individual, the happy
smart type in high school and community college and
universities, except I think a few are sitting in Federal
prison now and a few more will be, but we do want some basic
things that make some sense that would be respected by the
community that's got to administer it.
Mr. Viadero. We will have it up to you Mr. Chairman and
addressed to you personal.
Mr. Horn. And then one on let's see here, well the
unreconciled balance with Treasury, and then you can depart.
Mr. Viadero. Thank you, sir.
Mr. Horn. Just seems to me that that ought not be that
difficult. Now you're saying the source documents, and they're
so old and the equipment and the processing, you mean they
don't talk to Treasury. So what you would need then I take it,
Ms. Thompson, is a whole new computer set that interfaces with
Treasury. Is that it? Is that what we're trying to guide for?
We're asking the GAO to go out and look at all of these things,
hardware, software. And so we can be serious about it in both
the executive branch and up here in the legislative branch and
know what we're talking about. So we're hopeful that they will
carry that.
Mr. Viadero. I think Mr. Young can shed some light on this
for us.
Mr. Young. I think that the National Finance Center needs
to keep on top of it. What the problem was, they used to plug
the number, in other words to make them match. And they didn't
work the reconciliations on a timely basis. So as a result,
they buildup over time. As they buildup, each month, each day
it gets older it makes it more difficult to go back and track
why there is a difference. So what they need to do is to have a
system that identifies any time there is a difference; and once
that difference is identified, to trace it back and find the
answer for it so it doesn't buildup over time and make it an
impossible situation.
Mr. Horn. Well I can believe that. Let me ask you this: I
think the Inspector General brought to the attention of the CFO
the need to update user fees to accurately reflect the cost of
providing services and other things of value. Now, this year we
learned that despite your direction to do so, one agency did
not update its user fees and therefore lost millions of dollars
it was entitled to. What agency are we talking about?
Ms. Thompson. You're absolutely right, Mr. Chairman. And--
--
Mr. Horn. What's the agency?
Ms. Thompson. Food Safety and Inspections Services, FFIS.
One of the advantages again this comes back to that new
accounting system, they did come up on October 1. If they had
been getting accurate and timely information and reviewing
those reports, this they would have seen on the very timely
basis that the income wasn't coming in and expenses were coming
in as budgeted. They have since obviously gone back and
reviewed those and have increased those fees and certainly now
they will be getting timely information. I have about 13
agencies that are--have fees coming in about 305 different
programs. But I'm pleased to say that this last year in the
1999, 9 of the 13 have reviewed the fees or are just about
finished in reviewing those fees. So we are making progress in
that area.
Mr. Horn. What about this one agency. It seems to me if I
were the CFO and they were crossing me I would either take care
of it and scare the living daylights out of them or I would go
to the Deputy Secretary and the Secretary and say look, are you
going to back me up on this or aren't you?
Ms. Thompson. They have a new CFO in place now.
Mr. Horn. They do. So you will have cooperation then.
Ms. Thompson. Yes, sir.
Mr. Horn. OK. Well that's a plus. So I mentioned the need
for measurement standards on a lot of these programs. Is the IG
and the CFO and--GAO I know is working on this, has worked on
it, where are we getting the help at the grassroots such as
Agriculture as what are sensible measures as the effectiveness
and the efficiency, not just in the money, we've always focused
on money but are these programs working? Are they getting done?
Are our partners working with us? So what kind of work is going
on at the grass roots and agriculture on that?
Ms. Thompson. We have a very active group working on
performance measurements. We are just in the process of
reporting to Congress our first annual performance report that
does measure those. Now, again, that goes back to having the
right systems in place to be able to measure. It also goes back
to having the right performance goals. We're still learning on
that. And it's still evolving. I'm in the process of trying to
pull that together. We had 1,600 annual performance goals for
the Department of Agriculture.
Now, I know we're very large and we're very diverse but
that does not really tell you what the Department of
Agriculture's really about and where they're priorities are and
what they're effectiveness is. So this next year as we go
through the process, we're updating the strategic plan; and we
will have one strategic plan for the Department. And then that
will have it set for annual performance goals, and we'll no
longer have 23 or 28 different individual plans and 1,600
performance goals, but we'll have some really meaningful goals
for you in each of the three major goals for the Department.
Mr. Horn. If one asked you, take one measurement from all
the diverse agencies that you work with, what is the key
measurement that ought to be asked about and ought to be
utilized in the strategic plan?
Ms. Thompson. Well I think it would vary from program to
program, but I would look at productivity and the effective
that--you know, not how many loans you made but what of the
effect of the loans, the results of the loans that you made.
Mr. Horn. Now, on the loan issue do you think, since a
number of your agencies have major loaning operations, how do
you get at it other than the fact that they seem satisfied,
they're still in business or whatever it is, what did you think
is the question to be asked?
Ms. Thompson. Think since we're responsible for rural
America, you know, we're making our loans in rural America
whether it's a farm loan, whether it's a single family housing
or whether it's a community loan or a utility loan in rural
America. So what affect did that loan have on the community.
Mr. Horn. Are you going to judge that, and who is going to
judge it, the partner at the grassroots.
Ms. Thompson. Think if you look at utilities, you know,
what was needed and did it provide utilities to how many homes
out there is as a percentage of the homes that needed
utilities. If it's a community development loan, you know, for
a small business, you would look at it, you know, was it a
critical business that was needed to keep rural America going?
If it's a farm loan, you know, did it keep--not only did it
keep the farmer on the land but was he productive in what he
produced?
Mr. Horn. That's quite a bit of information really.
Ms. Thompson. It is. It is.
Mr. Horn. You think that's the one we're all about.
Ms. Thompson. Right.
Mr. Horn. Makes sense.
Mr. Viadero. Mr. Chairman, we're conducting an audit right
now on the overall Department and how it stands on its
performance measures. We are also performing an audit on the
Forest Service--we're doing one on the Department and one the
Forest Service separate. The one on the Forest Service will be
out in May, and the one on the Department will be out in late
September. We'll be happy to send you copies as soon as they're
available.
Mr. Horn. GAO have any thoughts on this? You have done some
work, I know, on performance measures.
Ms. Calbom. Well, you know, I think that it doesn't matter
what you choose to measure, to me one of the real key things is
being able to say what did it cost me to get me there. I mean I
think you always have to be doing a cost benefit analysis and
saying this was a good thing we did but at what cost. And
that's why it's so key to get the financial house in order so
that you can be able to give the taxpayer that information,
what did the taxpayer get for their money. And so it goes hand
in hand.
Mr. Horn. Before the Inspector General leaves, since he
seems to like it here, isn't going to miss--isn't going to
make----
Mr. Viadero. It's always a pleasure to appear before you
Mr. Chairman.
Mr. Horn. Just remember you're under oath with statements
like that.
What do you think of the efforts the Department has taken
to correct the credit reform problems? How is that? What do you
think?
Mr. Viadero. That's a good closing statement.
Mr. Horn. Are you pleased with the progress? We've heard a
lot of words like progress going on around here.
Mr. Viadero. I ask my able-bodied assistant.
Mr. Young. There are a lot of things happening. I guess
there are some problems that won't be taken care of this
current fiscal year. One is the working on just getting the
models in place to make these projections. And that's one
problem we have. The other problem is just making sure they
have all the information necessary to make the projections. In
other words, going back to get a good history what was--has
taken place so they can more accurately estimate what the
subsidies are. It's a very difficult process. And I don't see
it happening in this current fiscal year.
Mr. Horn. Well, so we wait till when, next spring of 2001,
2002? What's realistic.
Mr. Young. I guess we're tracking it. I guess a lot of
things depend on just like everywhere else on the amount of
resources and the expertise--having the expertise to be able to
use the models and produce the actual subsidy numbers. They're
moving along. It's just a slow process. As far as when it's
going to be completed, I'm hoping it will be completed next
year. But I will have to wait and see.
Mr. Horn. Now, is this seen as a management job or is it
seen more as a budget job?
Ms. Thompson. Would say it's a budget job. I've got the
management in place. I don't have the resources. We certainly
need additional people. They're very hard to find. When they
do, we all fight over--we found one the other day and we had
three agencies bidding for that person. So there is that
expertise issue that Mr. Young mentioned but as a budget issue,
you know, if I had $2 million tomorrow I could get that single
family residential loan model in place.
Mr. Horn. Now, are the individuals you're trying to recruit
are these people that have just come out of community colleges
or universities or what?
Ms. Thompson. We're looking for people that have credit
reform background. You know even out of industry there needs to
be a lot of training as I mentioned. There's a big difference
between financial loan accounting and a banking industry for
instance than in our--in the government. But we can train them.
But I have to tell you who would want to come to work in the
government. I can tell you that our beginning accountants,
agreed accountants we are offering them $22,000 to $24,000 a
year. They're not going to get anybody out of school. So you
don't have to worry about getting somebody green out of school.
There isn't anybody who wants to come to work for us at that
point. Then when you move up the chain and try to find somebody
at that mid-level with credit reform or lending experience,
when they can make twice as much in industry or at least 50
percent more makes it very tough.
Mr. Horn. Well are you working with, I know, you're very
decentralized in agriculture and you have soil conservation
this and that and the old days and so forth, but are--have you
got a team that can go down there and analyze how you deal with
this when they don't necessarily have to put the paper up do
they? If there's a default. Or do you require that within
agriculture.
Ms. Thompson. Now we do.
Mr. Horn. You do.
Ms. Thompson. Uh-huh. That was what Congressman Owens was
talking about, are old loans when there was a time there when
the legislation didn't require collateralizing. But yes we've
got a Department-wide across the Department team working on
this. I think Ms. Calbom wants to make an issue.
Ms. Calbom. If I could make a comment, Mr. Chairman, I
think one of the things that we've seen at the other credit
agencies that have been able to successfully implement credit
reform is that they've had to go out and get contractors to get
this baseline of information pulled together because it is a
very arduous task. And that takes some money. It's going to
take you know, $2, $3 million to get that done. But that is
what the other agencies have had to do in order to establish
that historical base so you can make these projections.
Mr. Horn. You find them reliable, the ones that are doing
this now.
Ms. Calbom. There are some contractors that we have
certainly had experience with that, understand this issue quite
well and have done a good job.
Mr. Horn. What about the office of personnel management do
they understand what your needs are and are trying to improve
recruiting or trying to improve the amount of money that goes
with a certain job?
Ms. Calbom. I was surprised to hear Ms. Thompson's comment
on that because that's a little lower I think than we bring in
our starting accountants. So I don't know what your situation
is.
Ms. Thompson. There's a 5, 10 accountant. $22,000. Grade 5,
maybe grade 7.
Mr. Horn. That's grade 5 at what step.
Ms. Thompson. A grade 5 to 7 is the 22,000 to 24,000. And
that's----
Mr. Horn. Those have usually been the GS numbers when
you're getting out of college unless he had a Ph.D. or
something then it was say 9 to 11 or something.
Ms. Thompson. Yes.
Mr. Horn. But they adjusted those salary scales at OPM.
Ms. Thompson. I have only been in the government 2 years,
and I can't answer that.
Mr. Horn. The government isn't like banks or corporations
where their CPO's work on everybody else's board and all get
their salary up. It's a different animal here.
Ms. Thompson. No. I understand from what the people back
here that have been around for awhile they have not adjusted
those salaries.
Mr. Horn. Well, should they?
Ms. Thompson. Absolutely.
Mr. Horn. Well, I think I have great respect for the civil
service. We have to make sure we're getting the next generation
of people that want to serve the public. But it's going to have
to mean face up to the kind of reality of life in Washington,
life anywhere else in America, with rare exceptions you can't
get even a decent house in most places. So maybe Agriculture
will have a lot of loaning to do, just going to call it
something other than a farmer I guess. But that you got to deal
with your authorizing committee.
Ms. Thompson. Yes.
Mr. Horn. Well, thank you. Is there anything any of you
would like to add that you think we've missed? Mr. Williams. We
welcome any thoughts you have.
Mr. Williams. I think we have covered all the points that
we at GAO have expressed an interest in. Well actually we could
add a little bit about that.
A lot of these issues that we've talked about in the Forest
Service over the last 5 or 6 years if you take a look at the
Inspector General's report one of the issues that always seems
to come up is that there's erroneous data coming from the
field. So we put a lot of emphasis on the need to have the
CFO's in the regional office. So that's something that we
continue to encourage the agency to take a look at because they
think that it's important that you have these quality staff out
in the regions producing and monitoring the financial
information that's coming in because you need to have accurate
information. It needs to be coming in on a consistent basis
because you get into problems when you've got individuals in
one region producing information one way and you have
individuals in another region in some cases not as concerned
about the financial management issue as they should be.
That consistency and the reliability of having the CFO's
out in the regions would definitely be an improvement. So
that's why we really focus in to try and get a structure out
there that is similar to what the Forest Service has
implemented at the headquarters. Because one of the things that
we noticed is that that commitment that we observed at
headquarters with the new CFO, we think a structure similar to
that out in the regional offices could improve the operations
considerably.
Mr. Horn. That's a very helpful statement. Anybody else
want to say anything on this?
Ms. Goerl. I would just like to respond to that. I think
one of the key things is quality staff and quality in these
positions. It's very difficult in a highly competitive arena
that we are here now. In the Forest Service we are initiating a
study very shortly and we have set up the work group for the
support to review our field structure. Not only the cost of
staffing, the level of staffing, but also the organizational
and reporting responsibilities.
And my personal belief is that with the new financial
system that we need a different kind of structure out there. We
can probably manage more directly with the new system apply
policies more consistently. But we still need some more
commonality and uniformity in the manner in which we manage
those functions in the field. And, I think we could probably do
it with less people.
Mr. Horn. Do you find that people in the field understand
that the management systems we're trying to get here and the
measurements you're talking about which make a lot of sense to
me that that's to help their situation or do they look at it as
something that's going to hurt their situation?
Ms. Goerl. I think initially because of the autonomous
nature of the Forest Service which goes back years, there was a
little bit of a threat to the likelihood that they would lose
some sort of control, which can always be a concern. But, I
think when we brought them in with us to reengineer the
processes and see the new systems, we got a lot more support, a
lot more really good ideas, and a lot more consensus around the
idea that we need to do something different. We need to be much
more uniform.
That experience has set us in a pretty good position to
take the next step at looking at this new technology where we
have a lot more options on how we can manage in the future,
especially when we look down the road to getting the feeder
systems changed too. Those still require enormous amounts of
manual interaction by a lot of people, all through the Forest
System. And every time you add that dimension, you add more
errors and more opportunity for misinterpretation. So anything
that we can look at that streamlines and more uniformly looks
at how you interpret and enter data for a financial system is a
real value. We're getting a lot of consensus around that. We
need to continue to work with them and bring them along or we
will have people who are suspect of what we are planning.
Mr. Horn. How about the hardware and the software? Are you
trying to get it off the shelf and are there analogies that one
could make with the private sector or university sector
whatever it is on planning and this kind of thing.
Ms. Goerl. Oh, absolutely. I think the--that there is no
reason in today's environment to not use off-the-shelf systems.
And I come to this from my experience as a CFO at Customs
Service and prior to that as a Controller at GSA. I would not
look anywhere but off-the-shelf at this point. And the
sophistication of those for government use have really grown,
especially in the last 5 to 6 years. So there is no reason not
to consider that.
One of the advantages I think that has helped government
but more specifically Forest Service, is Y2K. We upgraded our
infrastructure--hardware and telecommunication infrastructure
so we can not only use that off-the-shelf software a lot easier
and implement it more quickly, but we can use Web-enabled
systems. These systems can be developed quickly, and allow us
to make them available across the country. When you have the
number of people that we have that interact with our financial
system which is close to 2,000 across the country, anything
that I can implement easily on the Web I want to use. I think
we're positioned very well for that. But we're still relying
on, even with our new financial system, very archaic legacy
feeder systems that still require still a lot of people to work
with them. So as much as I want to streamline and improve our
infrastructure, until I get the feeder systems replace, I will
have only so far I can improve. But we're confident that we're
going to get there in the next couple of years.
Mr. Horn. Well that's good. So you want to add anything Mr.
Young?
Mr. Young. No. I think we've said or covered most
everything that we had.
Mr. Horn. OK. Mr. Newby you want to add anything?
Mr. Newby. No.
Mr. Horn. Anybody who wants to say anything this is your
chance. We're very democratic.
Ms. Thompson. Could I just wrap it up a little bit to say
that I am really appreciative of all of the help that both GAO
and the Inspector Generals have given our Department this last
year. I am very encouraged with where we're going and where
we're going to be. And to give you just one example of what Ms.
Goerl was talking about was we're looking at a procurement
system right now that's being used by the Department of
Interior which again is one of those off the shelf. But we do a
lot of the Bureau of Land Management and with Park Services.
We bring that procurement system in, having the information
on that as well, we will be getting not only the savings that
we need and upgrading those systems but also being able to get
a great deal of efficiency in the field by all three of those
agencies being able to share the same system. At the same time,
I am working very hard to get us a Federal payroll system where
all the Federal Government is using the same payroll system.
Because we desperately need a new payroll system. I have talked
with VA and the DOI which are the two biggest payroll servicers
along with us so I think there's a lot of partnership going on
out there which the Federal Government and the taxpayer is
going to benefit significantly and hopefully we can all get
that economies of scale as well and move along faster.
Mr. Horn. That would be primarily at your New Orleans
facility.
Ms. Thompson. It would be the same payroll system used by
the VA and DOI and New Orleans so that means that every time a
Federal employee changes agencies they wouldn't have to start
all over with paperwork almost as a new employee. There's
plenty of business out there for all of us. There is no need
for all of us to be competing on systems development. Let's
compete on service delivery and let's all use the same system.
Mr. Horn. I guess I can say amen to that. Or ``a-woman'' as
the case may be. So thank you all for coming. I want to thank
the staff that prepared this hearing which I found it very
interesting, the--there he is in the door, J. Russell George,
staff director and chief counsel for the Subcommittee on
Government Management, and to my left and your right the
detailee from the General Accounting Office professional staff
member on the committee for Louise DiBenedetto. And we thank
her for all the work she's put in. Bonnie Heald, director of
communications. I don't see her here. But I know she's
listening to this. It's going on House channel 21. Bryan
Sisk, clerk, Ryan McKee, the staff assistant. For the minority
staff, Trey Henderson, counsel, and Jean Gosa, minority clerk
and our faithful court reporter is Julie Thomas. We thank you.
So with that, we're adjourned.
[Whereupon, at 3:56 p.m., the subcommittee was adjourned.]