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[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.]

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