Inspector general: USDA needs management controls, IT security fixes amidst audits, investigations
March 07, 2014 | 04:10 PM
Agriculture Secretary Tom Vilsack and Deputy Secretary Krysta Harden have focused on the importance of avoiding fraud and payment errors within USDA, but they need to push that message deeper into the management levels of the department, USDA Inspector General Phyllis Fong told the House Agriculture Appropriations Subcommittee this week as she detailed her investigations and audits of a range of agencies.
Phyllis Fong
“Many USDA agencies place their primary focus on administering programs and providing benefits — often at the cost of designing sufficient controls to ensure that program funds serve their intended purposes,” Fong said in her opening testimony at a hearing Wednesday.
“This problem cuts across USDA and has emerged in agencies in all departmental mission areas. While individual audits and investigations may bring to the fore problems specific to particular agencies and programs, USDA needs to prioritize compliance and monitoring as vital elements of proper program management.”
Fong also noted that under the Improper Payments Information Act, federal agencies must publish and meet annual reduction targets for each program that has been declared high-risk for improper payments, and work with the Office of Management and Budget to resolve the problem.
USDA is out of compliance for the second year, Fong said, and if the problem of overpayments, underpayments and payments to ineligible recipients persists it will have to submit a proposal to Congress on how to improve the rate.
According to a March, 2013 report, USDA in fiscal year 2012 made $4.4 billion in improper payments, a 5.11 percent error rate in 16 programs run by seven agencies: the Food and Nutrition Service, the Farm Service Agency, the Commodity Credit Corporation, the Natural Resources Conservation Service, Rural Development, the Forest Service, and the Risk Management Agency.
An IG official said an audit report for fiscal year 2013 will be published on April 15.
Fong added that the IG office is evaluating the Farm Service Agency’s compliance activities and conducting reviews of the Risk Management Agency’s national performance reviews to determine how useful they are in ensuring program compliance, and also looking at the Foreign Agricultural Service’s controls over the private voluntary organizations to which it grants money.
It is also investigating last month’s unusual situation at the Rancho Feed Corp. in northern California, where more than 8.7 million pounds of meat products were recalled because the company processed diseased and unsound animals without full federal inspection.
Later in the hearing, Rep. Robert Aderholt, R-Ala., the subcommittee chairman, asked Fong what she would recommend for a USDA focus to address its problems.
“It all comes back to the basic issue of leading the department,” she said. “You have to set a strong tone. I believe the secretary and deputy secretary have set that tone” that agencies should avoid fraud of payment errors.
When situations require attention, Fong said, “we do find that the department responds.” But she also said, “That message needs to permeate the organization. Each agency has its challenges.”
Fong also said that, with the departure of so many employees with “institutional knowledge” and with smaller staffs, smaller budgets and less training, USDA needs to focus on communication with the state governments that manage programs.
On Internet security, another issue that crosses agency lines, Fong said, “It is safe to say that over the last few years we have found significant issues with the overall IT processes.”
Her office has made 49 recommendations and USDA still needs “to tighten up and come into compliance,” but she said it is also fair to say that the department is improving slowly. She said she had recommended that the chief information officer focus on a priority list and accomplish one item at a time before moving to the next.
Reps. Jeff Fortenberry, R-Neb., Rep. Chellie Pingree, D-Maine, and Rep. Sanford Bishop, D-Ga., all urged Fong to investigate violations of farm subsidy rules, payment limitations and who should be considered “actively engaged” in farming.
But Fong and Karen Ellis, the assistant secretary for investigations, both noted that the Supplemental Nutrition Assistance Program, better known as SNAP or food stamps, amounts to 56 percent of the USDA budget and they must devote more resources to violations of that program because the amounts of money involved are so much greater than in the farm or other USDA programs.
Ellis said that the IG’s office devotes most of its attention to retailer fraud while the states, which qualify individuals for benefits, focus on recipient fraud.
The work on farm programs and crop insurance does not bring in the same amount of money as the work on SNAP, Fong said, although she added that farm program work had yielded $33 million in investigative recoveries and the crop insurance work included a large North Carolina tobacco case.
Nevertheless, Fortenberry, Pingree and Bishop urged her to make farm program integrity a priority, and Fong said she would follow their request.
“Nothing gets under people’s skin like subsidies going to the wrong people,” Pingree said.
Fortenberry, the lead Republican on efforts to impose payment limits and rules on who can be considered actively engaged in farming and eligible subsidies, said he is interested in the question of “exotic legal arrangements” farmers and landowners use to help that help skirt payment limitations and actively engaged rules.
Pingree added that “when lawyers work out arrangements” to avoid payment limits that too “gets under people’s skins.”
Rep. Sam Farr, D-Calif., the ranking member on the subcommittee, noted that Fong’s written testimony included a section on the Foreign Agriculture Service’s lack of controls on $86.3 million that the U.S. Agency for International Development transferred to it for reconstruction activities in Afghanistan, which was the subject of a recent IG investigation.
Farr said he believes a lot of war expenditures amount to a “fraud” on the taxpayers and that Congress is not asking enough questions about war-related spending.
Fong noted that when FAS accepted the money its managers knew they did not have the proper controls to handle it and that FAS is no longer accepting money for this type of program.
FAS has had more leadership changes at the top during the Obama administration than any other division of USDA.
Gil Harden, the assistant inspector general for audit, testified alongside Fong, and said the IG office had found it difficult to investigate this situation.
“There was a lot of finger-pointing and people who were running the programs are no longer there,” Harden said.
In 2013, Fong noted in her testimony, the Council of the Inspectors General on Integrity and Efficency gave the USDA IG’s office an award for excellence because audited findings and criminal prosecutions resulted in more than $84 million in questioned costs.
Fong noted that the IG brings $12 back to the government for every dollar it spends on audits and investigations, even though it is operating at the lowest staffing level in its history. Fong thanked the subcommittee for an increase in its fiscal year 2014 budget, but asked for another increase to provide more effective oversight of USDA’s activities.
Phyllis Fong
“Many USDA agencies place their primary focus on administering programs and providing benefits — often at the cost of designing sufficient controls to ensure that program funds serve their intended purposes,” Fong said in her opening testimony at a hearing Wednesday.
“This problem cuts across USDA and has emerged in agencies in all departmental mission areas. While individual audits and investigations may bring to the fore problems specific to particular agencies and programs, USDA needs to prioritize compliance and monitoring as vital elements of proper program management.”
Fong also noted that under the Improper Payments Information Act, federal agencies must publish and meet annual reduction targets for each program that has been declared high-risk for improper payments, and work with the Office of Management and Budget to resolve the problem.
USDA is out of compliance for the second year, Fong said, and if the problem of overpayments, underpayments and payments to ineligible recipients persists it will have to submit a proposal to Congress on how to improve the rate.
According to a March, 2013 report, USDA in fiscal year 2012 made $4.4 billion in improper payments, a 5.11 percent error rate in 16 programs run by seven agencies: the Food and Nutrition Service, the Farm Service Agency, the Commodity Credit Corporation, the Natural Resources Conservation Service, Rural Development, the Forest Service, and the Risk Management Agency.
An IG official said an audit report for fiscal year 2013 will be published on April 15.
Fong added that the IG office is evaluating the Farm Service Agency’s compliance activities and conducting reviews of the Risk Management Agency’s national performance reviews to determine how useful they are in ensuring program compliance, and also looking at the Foreign Agricultural Service’s controls over the private voluntary organizations to which it grants money.
It is also investigating last month’s unusual situation at the Rancho Feed Corp. in northern California, where more than 8.7 million pounds of meat products were recalled because the company processed diseased and unsound animals without full federal inspection.
Later in the hearing, Rep. Robert Aderholt, R-Ala., the subcommittee chairman, asked Fong what she would recommend for a USDA focus to address its problems.
“It all comes back to the basic issue of leading the department,” she said. “You have to set a strong tone. I believe the secretary and deputy secretary have set that tone” that agencies should avoid fraud of payment errors.
When situations require attention, Fong said, “we do find that the department responds.” But she also said, “That message needs to permeate the organization. Each agency has its challenges.”
Fong also said that, with the departure of so many employees with “institutional knowledge” and with smaller staffs, smaller budgets and less training, USDA needs to focus on communication with the state governments that manage programs.
On Internet security, another issue that crosses agency lines, Fong said, “It is safe to say that over the last few years we have found significant issues with the overall IT processes.”
Her office has made 49 recommendations and USDA still needs “to tighten up and come into compliance,” but she said it is also fair to say that the department is improving slowly. She said she had recommended that the chief information officer focus on a priority list and accomplish one item at a time before moving to the next.
Reps. Jeff Fortenberry, R-Neb., Rep. Chellie Pingree, D-Maine, and Rep. Sanford Bishop, D-Ga., all urged Fong to investigate violations of farm subsidy rules, payment limitations and who should be considered “actively engaged” in farming.
But Fong and Karen Ellis, the assistant secretary for investigations, both noted that the Supplemental Nutrition Assistance Program, better known as SNAP or food stamps, amounts to 56 percent of the USDA budget and they must devote more resources to violations of that program because the amounts of money involved are so much greater than in the farm or other USDA programs.
Ellis said that the IG’s office devotes most of its attention to retailer fraud while the states, which qualify individuals for benefits, focus on recipient fraud.
The work on farm programs and crop insurance does not bring in the same amount of money as the work on SNAP, Fong said, although she added that farm program work had yielded $33 million in investigative recoveries and the crop insurance work included a large North Carolina tobacco case.
Nevertheless, Fortenberry, Pingree and Bishop urged her to make farm program integrity a priority, and Fong said she would follow their request.
“Nothing gets under people’s skin like subsidies going to the wrong people,” Pingree said.
Fortenberry, the lead Republican on efforts to impose payment limits and rules on who can be considered actively engaged in farming and eligible subsidies, said he is interested in the question of “exotic legal arrangements” farmers and landowners use to help that help skirt payment limitations and actively engaged rules.
Pingree added that “when lawyers work out arrangements” to avoid payment limits that too “gets under people’s skins.”
Rep. Sam Farr, D-Calif., the ranking member on the subcommittee, noted that Fong’s written testimony included a section on the Foreign Agriculture Service’s lack of controls on $86.3 million that the U.S. Agency for International Development transferred to it for reconstruction activities in Afghanistan, which was the subject of a recent IG investigation.
Farr said he believes a lot of war expenditures amount to a “fraud” on the taxpayers and that Congress is not asking enough questions about war-related spending.
Fong noted that when FAS accepted the money its managers knew they did not have the proper controls to handle it and that FAS is no longer accepting money for this type of program.
FAS has had more leadership changes at the top during the Obama administration than any other division of USDA.
Gil Harden, the assistant inspector general for audit, testified alongside Fong, and said the IG office had found it difficult to investigate this situation.
“There was a lot of finger-pointing and people who were running the programs are no longer there,” Harden said.
In 2013, Fong noted in her testimony, the Council of the Inspectors General on Integrity and Efficency gave the USDA IG’s office an award for excellence because audited findings and criminal prosecutions resulted in more than $84 million in questioned costs.
Fong noted that the IG brings $12 back to the government for every dollar it spends on audits and investigations, even though it is operating at the lowest staffing level in its history. Fong thanked the subcommittee for an increase in its fiscal year 2014 budget, but asked for another increase to provide more effective oversight of USDA’s activities.
- USDA — Office of Inspector General
- — Statement of the Inspector General before the Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies
- — Improper Payments Elimination and Recovery Act of 2010 Compliance Review for Fiscal Year 2012
- — Section 632(a) Transfer of Funds from USAID to USDA for Afghanistan
- Council of the Inspectors General on Integrity and Efficiency
