oversight

U.S. Department of Agriculture: Analysis of Budgets, Fiscal Years 1999-2000

Published by the Government Accountability Office on 1999-06-17.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

      United States
GAO   General Accounting  Office
      Washington, D.C. 20548

      Resources, Community,            and
      Economic Development             Division


      B-282778

      June 17,1999

      Congressional Committees

      Subject: U.S. Deuartment of Agriculture: Analvsis of Budgets, Fiscal Years 1999-2000

      We examined the U.S. Department of Agriculture’s (USDA) appropriation for fiscal year
      1999 and its budget request for fiscal year 2000 for selected programs and initiatives.
      Our objectives were to identify potential rescissions to USDA’s appropriation for fiscal
      year 1999 and potential reductions or deferrals to its budget request for fiscal year 2000.’
      To identify potential rescissions, we reviewed USDA programs and projects that are
      expected to have large year-end unobligated balances for fiscal year 1999. To identify
      potential reductions or deferrals, we reviewed programs and initiatives for which USDA
      is requesting large funding increases in its fiscal year 2000 budget.’ USDA is requesting
      a total of $55.2 billion in funding for fiscal year 2000.

      Besults     in Brief

      The Department of Agriculture could have about $1.7 billion in appropriated funds
      remaining unobligated at the end of fiscal year 1999, some or all of which could be
      available for congressional rescission or as a reduction to the Department’s fiscal year
      2000 appropriation request. In April 1999, Department officials stated that by the end of
      fiscal year 1999, Agriculture agencies would obligate much of the funds now shown as
      unobligated. Historically, however, the Department’s budget projections that such
      funds would be obligated during the year often have not been realized. Moreover, the
      policy of some Agriculture agencies of estimating zero balances for year-end
      unobligated funds, even though some of the funds are expected to remain unobligated,
      appears to conflict with the Office of Management and Budget’s guidance on estimating
      year-end unobligated balances. Additionally, some unobligated funds that are retained
      as contingencies against unanticipated expenses appear excessive. For example, the
      Risk Management Agency expects an unobligated balance of $1.4 billion for fiscal year
      1999, about 60 percent of that agency’s fiscal year 1999 obligations.




      ‘A rescission is a cancellation of budget authority that is otherwise available for obligation. A deferral is a temporary
      withholding or delaying of an obligation or expenditure of budget authority.
      2Theprograms identied for both objectives do not represent all of the USDA programs estimated to have unobligated
      balances or funding increases, but rather are programs we selected because of the large amount of funds involved (see
      the scope and methodology section for more information on the programs we selected).


                                       GAOLRCED-99-201R           Analysis   of USDA’s Budgets,        Fiscal Year 1999-2000
B-282788
For fiscal year 2000, the Department of Agriculture is requesting about $2.4 billion in
additional funds for selected new initiatives and existing programs, some or all of which
could be available for congressional reduction or deferral. This amount includes an
additional $900 million for a contingency reserve for the Food Stamp Program and an
additional $500 million for an anticipated increase in the program’s participants. In
April 1999, Department officials stated that the funding for these new initiatives and
existing programs is justified and necessary. However, this may not be the case. For
example, for fiscal year 1999, the Department requested $1 billion for the Food Stamp
Contingency Reserve (the reserve is used if there is an unexpected increase in the
number of food stamp participants). The Congress disagreed with the size of the
Department’s request and chose to reduce the funding for the reserve to $100 million.
And although the Department is requesting $18.4 billion in benefit funding for the Food
Stamp Program for fiscal year 2000 ($500 million more than in fiscal year 1999) based on
its forecast of increased participation in the program, the Congressional Budget Office
has estimated that only $17.8 billion will be needed ($600 million less than requested).

Year-End     Unobligated       Funds for Selected          USDA Programs

We found that USDA could have about $1.7 billion in appropriated funds remaining
unobligated at the end of fiscal year 1999. (See enc. I for detailed information on
estimated year-end unobligated balances for selected USDA programs, fiscal years 1999-
2000.) Some or all of these funds could be available for congressional rescission of
budget authority for USDA’s fiscal year 1999 appropriation or, alternatively, could be
used to reduce USDA’s fiscal year 2000 appropriation request. Department officials said
that during the remainder of the year, USDA agencies would obligate much of these
funds. However, our review of past year-end unobligated balances found that in several
instances, USDA’s budget projections that funds would be obligated during the year
were not always realized. For example, we found that USDA estimated no unobligated
funds would remain at the end of fiscal year 1998 for four programs that had actual
unobligated balances totaling about $277 million at the end of that fiscal year.’ Such
large unobligated balances raise questions about whether some of these funds could be
used elsewhere to meet other congressional funding priorities.

USDA officials also said that it is the policy of some of the Department’s agencies to
estimate zero balances for programs historically having year-end unobligated funds,
even when managers anticipate some funds will remain unobligated at year’s end. This
practice appears to conflict with the Office of Management and Budget’s (OMB)
Circular A-11, which requires federal agencies to provide the Congress with a realistic
estimate for each program having an unobligated balance. Realistic estimates would
give congressional decisionmakers more useful information for maldng budget
decisions than arbitrary estimates of zero.

 In another instance, we also found that the level of unobligated funds retained as a
 contingency against unanticipated expenses appears excessive. Specifically, the Risk

 these programs were research and education activities under the Cooperative State Research, Education, and
 Extension Service; the Emergency Conservation Program under the Farm Service Agency; and the conservation
 operations and the Watershed and Flood Prevention Program under the Natural Resources Conservation Service.


 2                            GAO/RCED-99-201R        Analysis   of USDA’s Budgets,     Fiscal Years 1999-2000
B-282788
Management Agency (RMA), for fiscal year 1999, had an unobligated balance of $1.4
billion, a portion of which is retained as a reserve against unforeseen losses in its crop
insurance programs. The $1.4 billion is roughly equal to about 60 percent of RMA’s
fiscal year 1999 obligations. RMA recognizes that this may be an excessive reserve, and
for fiscal year 2000, it proposed a reserve of $800 m.iIIion.

Finally, we identified that USDA could have about $60 miII.ion in unobligated funds for
construction projects administered by the Strategic Space Plan, the AgricuItural
Research Service, and the AnimaI and Plant Health Inspection Service. (See enc. II for
detailed information on estimated year-end balances for selected USDA construction
projects, fiscal year 1999.)

Large Funding         Increases       for Selected       USDA Initiatives           and Programs

For fiscal year 2000, USDA is requesting about $2.4 billion in additional funds for
selected new initiatives and existing programs. (See enc. III for detailed information on
large funding increases for selected USDA programs, f=caI year 2000.) Some or alI of
these funds could be available for congressional reduction or deferral of the budget
authority sought by USDA in its fiscal year 2000 request. While USDA officials state that
additional funding for these new initiatives and existing programs is justified and
necessary, arguments can be made to the contrary. For example, for fiscal year 1999,
the Congress did not agree with the rationale behind USDA’s $1 billion funding request
for the Food Stamp Contingency Reserve and chose instead to fund the reserve at $100
million. USDA has not used the reserve since fiscal year 1992-or to date in fiscal year
 1999. We note that USDA, in its fiscal year 2000 budget, is once again requesting $1
billion for the reserve (a $900 million increase over f=caI year 1999).

For fiscal year 2000, USDA is also requesting $18.4 billion in benefit funding for the
Food Stamp Program (a $500 million increase over its current fiscal year 1999 estimate
of about $17.9 billion). USDA’s request is based on its economic forecasts that show
some weakening of the U.S. economy and, thus, increased program participation.
However, the Congressional Budget Office’s (CBO) economic forecasts indicate that
only $17.8 billion wiR be needed for fiscal year 2000, $600 million less than USDA’s
estimate. Moreover, USDA’s requested increase goes against the mukiyear trend of
declining participation in the Food Stamp Program. Participation has steadily declined
from about 27.5 miIIion recipients in fiscal year 1994 to about 20 million recipients in
fiscal year 1998-a 27-percent decIine.4

Agency Comments

We provided a draft of this report to USDA for its review and comment. We met with
the Chief; Budget Control and Analysis Division, Office of Budget and Program Analysis,
and with other officials of that organization. USDA generally agreed with the facts and



“In 1998,USDA provided about $17 billion in food stamp benefits to about 20 million recipients.



3                              GAO/RCED-99-201R          Analysis   of USDA’s Budgets,       Fiscal Years 1999-2000
B-282788
information presented in the report and provided several technical changes and
clarifications. We have incorporated those changes as appropriate.

Scope and Methodology

Our objectives were to identify potential rescissions to USDA’s appropriation for fiscal
year 1999 and potential reductions or deferrals to USDA’s budget request for fiscal year
2000. To accomplish these objectives, we identified USDA programs that could have
large year-end unobligated balances for fiscal year 1999 or large increases in funding for
fiscal year 2000 by reviewing the President’s Fiscal Year 2000 Budget and USDA’s 2000
Budget Explanatory Notes for Committee Appropriations5 Regarding unobligated
balances, we selected USDA programs that had either (1) fiscal year 1999 estimated
unobligated balances of $10 million or more or (2) showed estimated unobligated
balances of zero for fiscal year 1999 and 2000 but had consistently had unobligated
funds remaining in previous fiscal years. To develop a historical perspective on
programs that consistently had actual year-end unobligated balances, we reviewed
USDA’s Explanatory Notes covering fiscal years 1995 through 1999. (See enc. I for a
 detailed description of these unobligated balances.) To identify construction projects
 that could have year-end unobligated balances for fiscal year 1999, we reviewed budget
 information for major construction projects administered by USDA’s Strategic Space
 Plan, the AgriculturaJ Research Service, and the Animal and Plant Health Inspection
 Service. (See enc. II for a detailed description of these unobligated balances.)
 Regarding large funding increases for fiscal year 2000, we selected programs or
 initiatives for which USDA is requesting funding increases of $20 million or more. (See
  enc. III for a detailed description of these proposed funding increases.)

In the three enclosures to this report, for each program or account discussed, we
provide various budgetary information. In enclosure I, we state the applicable agency
or unit, the program’s fiscal year 2000 appropriation request, and its estimated year-end
unobligated balance for fiscal years 1999 and 2000. In enclosure II, we cite the
applicable agency or unit; the construction project’s total appropriation as of fiscal year
 1999; its unobligated balance as of February 28,1999; and its projected unobligated
balance as of September 30,1999. In enclosure III, we state the agency or unit and the
program or account’s net budget authority for fiscal years 1999 and 2000. In all three
 enclosures, we provide our observations wherever we have questions about USDA’s
 rationale for having these unobligated balances or funding increases. In addition, for all
 efforts we examined, we reviewed pertinent USDA documents and interviewed USDA
 officials, in particular, officials from USDA’s Office of Budget and Policy Analysis.
 Lastly, we also interviewed offkials at CBO and the Congressional Research Service to
 obtain their perspectives on issues relating to these unobligated balances and large
 funding increases.

 We conducted our review from March through June 1999 in accordance with generally
 accepted government auditing standards.



 ?ThePresident’s Budget and USDA’s Explanatory Notes are issued in early February each year.


 4                             GAO/RCED-99-201R        Analysis   of USDA’s Budgets,      Fiscal Years 1999-2000
B-282788



We are sending this report to you because of your role in overseeing the activities and
funding of the USDA programs that are discussed. We are also sending copies of this
report to Daniel Glickrnan, Secretary of Agriculture, and to Jacob Lew, Director, Office
of Management and Budget. In addition, we will make copies available to others on
request.

If you or your staff have any questions, please contact me at (202) 512-5138 or Ron E.
Wood at (202) 512-2608. Key contributors to this report were Kurt W. Kershow and
Patricia M. Crown.




Directowood     +
 Agriculture Issues



Enclosures - 3




                       GAOLRCED-99-201R   Analysis   of USDA’s Budgets,   Fiscal Years 1999-2000
B-282788

List of Congressional   Committees

The Honorable Richard G. Lugar
Chairman
The Honorable Tom Harkin
Ranking Minority Member
Committee on Agriculture, Nutrition,
 and Forestry
United States Senate

The Honorable Ted Stevens
Chairman
The Honorable Robert C. Byrd
Ranking Minority Member
Committee on Appropriations
United States Senate

The Honorable Thad Co&ran
Chairman
The Honorable Herbert Kohl
Ranking Minority Member
Subcommittee on Agriculture,
 Rural Development, and
 Related Agencies
Committee on Appropriations
United States Senate

The Honorable Larry Combest
Chairman
The Honorable Charles W. Stenholm
Ranking Minority Member
Committee on Agriculture
House of Representatives

 The Honorable Bill Young
 Chairman
 The Honorable David R. Obey
 Ranking Minority Member
 Committee on Appropriations
 House of Representatives

 The Honorable John Kasich
 Chairman
 The Honorable John Spratt
 Ranking Minority Member
 Budget Committee
 House of Representatives




 6                      GAO/RCED-99-201R   Analysis   of USDA’s Budgets,   Fiscal Years 1999-2000
B-282788


The Honorable Joe Skeen
Chairman
The Honorable Marcy Kaptur
Ranking MIinority Member
Subcommittee on Agricuhure,
 Rural Development, FDA, and
 Related Agencies
Committee on Appropriations
House of Representatives

The Honorable Bob W. Goodlatte
Chairman
The Honorable Eva CIayton
Ranking Minority Member
Subcommittee on Department Operations
 Oversight, Nutrition, and Forestry
Committee on Agriculture
House of Representatives

The Honorable William Goodling
Chairman
The Honorable William Clay
Ranking Minority Member
Committee on Education and
 the Workforce
House of Representatives




7                    GAO/RCED-99-201B   Analysis of USDA’s Budgets,   Fiscal Years 1999-2000
ENCLOSURE I                                                                                                  ENCLOSURE I



                       Estimated   Year-End   Unobligated Funds for Selected         USDA Promams,
                                                Fiscal Years 1999-2000

 Iollars in millions
 ‘rogram/account              FY2000       Year-end                    GAO’s question/agency’s         response
                         ppropriation     unobligated
                              request / Fy, ;;; ant

 iooperative State       ?search, Edu   Ition, an Extension I Service (CSREES)
 lesearch and                    $469          $0      $0 (3AO’s question: Given that CSREES, historically, has
 iducation                                                 1ended the fiscal year with unobligated funds, how accurate is
 rctivities                                                1:he agency’s zero estimate for FY1999, and why does
                                                           ICSREES carry unobligated funds from year to year? See
                                                           IExplanatory Notes (EN), p. 10-27; President’s Budget (PB), p.
                                                           75.

                                                           Agency’s response: The zero estimate for year-end r/l999
                                                           is not accurate because some level of unobligated funds will
                                                           be carried forward to FY2000. Most of the unobligated funds
                                                           were provided for competitive research and education grants,
                                                           and the agency retains these funds until they are expended.
                                                           Because of the length of the competitive process, the agency
                                                           cannot obligate all funds within the fiscal year they are
                                                           received. Some unobligated funds must be carried forward,
                                                           but what the amount of carryover will be is not known until
                                                           year-end closing, so the agency’s policy is to estimate that no
                                                           unobligated funds will remain.

                                                           GAO’s observation: Since FYI 995, year-end unobligated
                                                           funds carried forward to the next fiscal year have been $0.4
                                                           million (FYI 995), $44 million (FY1996), $18 million (FYI 997),
                                                           and $44 million (FYI 998). Under OMB Circular A-l 1,
                                                           agencies are required to provide the Congress with their best
                                                           estimate of year-end unobligated funds.

                         gency (RMA)
 -edera Crop                     $997                       GAO’s question: Why does RMA continuously carry a high
 nsurance Corp.                                             level of unobligated funds, and how does RMA determine the
 %nd                                                        level of unobligated funds to maintain? EN, p. 21-4; PB, p. 93.

                                                            Agency’s response: RMA recognizes that the amount of
                                                            unobligated funds has grown excessive and plans to decrease
                                                            the level in FY2000 by $640 million. RMA usually uses a
                                                            portion of the unobligated funds in the next year for
                                                            indemnities, delivery expenses, and research and
                                                            development costs; a portion is also retained as a reserve
                                                            against unforeseen losses. The level of unobligated funds tha
                                                            RMA maintains is based on estimated premium losses,
                                                            delivery expenses, and other costs for the fiscal year.

                                                            GAO’s observation: RMA overestimated its FY1999 needs
L                                                           based on projections for disaster assistance funds. Payment


8                                                   GAOIRCED-99-2018   Analysis   of USDA’s Budgets,   Fiscal Years 1999-2000
ENCLOSURE I                                                                                                   ENCLOSURE I

Program/account                FY2000       Year-end                 GAO’s question/agency’s          response
                         appropriation    unobligated
                               request      balance
                                         FY1999 FY2000
                                                         of disaster assistance monies was to be predicated on a
                                                         requirement that producers obtain crop insurance for FYs
                                                         1999 and 2000; however, these funds will be received too late
                                                         in FY 1999 for producers to obtain insurance for crop year
                                                         1999. RMA estimates it will carry forward $1.4 billion in
                                                         unobligated funds to FY2000. Although RMA plans to reduce
                                                         the level of unobligated funds to $800 million by the end of
                                                         FY2000, this level would still roughly equal about 30% of 1
                                                         year’s obligations. This may still be excessive.

Farm Service Agency (FSA)
imergency                          $0       $0        $0 GAO’s question: Given that the program, historically, ends
Zonservation                                             each fiscal year with unobligated funds, how accurate is the
This program is funded                                   agency’s zero estimate for FY1999, and why does FSA carry
by emergency                                             unobligated funds from year to year? How does FSA
wpplemental
zppropfiations.
                                                         determine the level of unobligated funds to maintain? EN, p.
                                                         18-37; PB, p. 99.

                                                         Agency’s response: The zero estimate for year-end FY1999
                                                         is not accurate because some level of unobligated funds will
                                                         be carried forward to FY2000. This is an emergency program,
                                                         and funds are received late in the fiscal year from a
                                                         supplemental appropriation, so all monies cannot be obligated
                                                         before year-end. Although unobligated funds are routinely
                                                         carried forward (these are no-year monies), estimating the
                                                         amount is difficult because FSA never knows how much it will
                                                         receive in its supplemental appropriation. The agency’s policy
                                                         is to estimate that no unobligated funds will remain available
                                                         for carryover to the next fiscal year.

                                                         GAO’s observation: Since FY1994, year-end unobligated
                                                         funds carried forward to the next fiscal year have been $55
                                                         million (FY1994), $17 million (FY1995), $22 million (FYl996),
                                                         $79 million (FY1997), and $84 million (FY1998). These
                                                         amounts are high enough that FSA could devise a method to
                                                         conservatively estimate the amount of unobligated funds it
                                                         expects to carry into the next fiscal year. Moreover, if
                                                         substantial historical information about supplemental
                                                         appropriations for emergencies exists, USDA could estimate a
                                                         portion of its emergency conservation needs in its regular
                                                         appropriation request and, thus, have a portion of these needs
                                                         subject to budgetary scoring. Under OMB Circular A-l 1,
                                                         agencies are required to provide the Congress with their best
                                                         estimate of year-end unobligated funds.




9                                                GAO/RCED-99-201R   Analysis   of USDA’s   Budgets,   Fiscal Years 1999-2000
ENCLOSURE I                                                                                                 ENCLOSURE I

Program/account                    FY2000
                                     Year-end                  GAO’s question/agency’s response
                             appropriation
                                   unobligated
                                     balance
                                   request
                                 FY1999 1 FY2000
Natural Resources Conservation Service (NRCS)
Conservation               $681       $0       $0 GAO’s question: Given that the program, historically, ends
Operations                                        each fiscal year with unobligated funds, how accurate is the
                                                  agency’s zero estimate for FY1999, and why does NRCS
                                                  carry unobligated funds from year to year? How does NRCS
                                                  determine the level of unobligated funds to maintain? EN, p.
                                                  17-18; PB, p. 114.

                                                         Agency’s response: The zero estimate for year-end p/1999
                                                         is not accurate because some level of unobligated funds will
                                                         be carried forward to FY2000. NRCS’ policy is to always
                                                         estimate that no funds will be carried forward to the next fiscal
                                                         year. For FY99, NRCS is currently maintaining a relatively
                                                         small amount of unobligated funds ($14 million) as a
                                                         contingency against emergencies to avoid overobligating.

                                                        GAO’s observation: Since FYI 995, year-end unobligated
                                                        balances have been $7 million (FYI 995), $35 million
                                                        (FY1996), $31 million (FY1997), and $14 million (FY1998).
                                                        These balances are roughly equal to about 1 to 5% of annual
                                                        obligations. Under OMB Circular A-l 1, agencies are required
                                                        to provide the Congress with their best estimate of year-end
                                                        unobligated funds.
 Vatershed and                         $83   $0      $0 GAO’s question: Given that the program, historically, ends
 :lood Prevention                                       each fiscal year with unobligated funds, how accurate is the
 ‘his program is partially                              agency’s zero estimate for FY1999, and why does NRCS
 ended by emergency                                     carry unobligated funds from year to year? How does NRCS
 uppiemental
 Nppropriations.
                                                        determine the level of unobligated funds to maintain? EN, p.
                                                         17-14; PB, p. 116.

                                                         Agency’s response: The zero estimate for year-end FYI 999
                                                         is not accurate because some level of unobligated funds will
                                                         be carried forward to FY2000. These funds support two
                                                         components--the first operates on roughly $80 million to $100
                                                         million in routine appropriations from the Congress; the
                                                         second operates with $100 million or more in supplemental
                                                         emergency funds provided late in the fiscal year. Although
                                                         unobligated funds are routinely carried forward (these are no-
                                                         year monies), estimating the amount that will be carried
                                                         forward is difficult because NRCS never knows how much it
                                                         will receive in its supplemental appropriation. The agency’s
                                                         policy is to estimate that no unobligated funds will remain
                                                         available for carryover to the next fiscal year.

                                                          GAO’s observation: Since FY 1995, year-end unobligated
                                                          balances have been $140 million (FY1995), $53 million
                                                          (FYI 996), $172 million (FYI 997), and $135 million (FY1998).
                                                          In FY1998, unobligated funds carried forward from FY1997
                                                          were roughly equal to about 75% of annual obligations. In
                                                          FY 1999, unobligated funds carried forward from FY 1998 are


 IO                                               GAO/RCED-99-201R    Analysis   of USDA’s Budgets,   Fiscal Years 1999-2000
ENCLOSURE I                                                                                                      ENCLOSURE I

 Jrogram/account               FY2000        Year-end                    GAO’s question/agency’s         response
                         appropriation      unobligated
                               request        balance
                                          FYI 999 FY2000
                                                            roughly equal to about 58% of planned obligations. Under
                                                            OMB Circular A-l 1, agencies are required to provide the
                                                            Congress with their best estimate of year-end unobligated
                                                            funds. NRCS’ amounts are high enough that the agency coulc
                                                            devise a method to conservatively estimate the unobligated
                                                            funds it expects to carry into the next fiscal year. Moreover, if
                                                            substantial historical information about supplemental
                                                            appropriations for emergencies exists, USDA could estimate a
                                                            portion of its emergency flood prevention needs in its regular
                                                            appropriation request and, thus, have a portion of these needs
                                                            subject to budgetary scoring.
 “oreign Agricultural     Service (FAS)
 =AS and General                  $138       $19      $19 GAO’s question: Why does FAS carry an unobligated
 Sales Manager                                            balance of $19 million for GSM activities (e.g., salaries,
 :GSM) Funds                                              expenses, and projects)? PB, p. 157.

                                                            Agency’s response: The Agency for International
                                                            Development (AID) forwards monies to FAS to fund projects
                                                            FAS has undertaken on behalf of AID. These funds remain on
                                                            FAS’ books until the project is complete. As funds flow in and
                                                            out of FAS’ account, FAS maintains $19 million in the account
                                                            as a contingency to meet obligations should something
                                                            unforeseen occur.

                                                            GAO’s observation: According to the EN to USDA’s FY2000
                                                            budget, FAS will receive about $37 million for AID projects in
                                                            FY1999 and FY2000. FAS’ contingency of $19 million is
                                                            roughly equal to half a year’s program funds. This appears
                                                            excessive.
 -0reign                                                    GAO’s question: Why will FAS carry forward a total
 Jssistance                                                 unobligated balance of $150 million to FY2000? PB, pp. 159-
 ‘rograms,                                                  60.
 ‘.L. 480:
                                                            Agency’s response: FAS, using a proscribed formula,
 ritle I                          $12        $21      $21   determines an allotment of commodity purchases for each
 ritle II & Ill Grants           $787        $51      $17   participating country. FAS sets funds aside to support the
 ).L. 480 Program                $116        $78      $78   entire allotment, but depending on world agricultural
 ‘.L. 480 subtotal               $915       $150     $116   conditions, some countries will not use their full allotments.
                                                            This leaves funds unobligated that must be carried over to the
                                                            next fiscal year.

                                                            GAO’s observation: Since FY1995, aggregate balances for
                                                            unobligated funds carried forward to the next fiscal year have
                                                            been $54 million (FYI 995), $62 million (FYI 996), $106 million
                                                            (FY1997), and $121 million (FY1998). Recent year-end
                                                            balances are roughly equal to about 11% of annual
                                                            obligations.




11                                                 GAOLRCED-99-2018    Analysis   of USDA’s   Budgets,   Fiscal Years 1999-2000
ENCLOSURE I                                                                                              ENCLOSURE I

~rogramiaccount         FY2000         Year-end                    GAO’s question/agency’s         response
                  appropriation      unobligated
                        request        balance
                                    FY1999 1 FY2000
‘ood and Nutrition Service (FNS)
ood Stamp                 $22,477       $0       $0 GAO’s question: Given that the program, historically, ends
Vogram                                              each fiscal year with unobligated funds, how accurate is the
                                                    agency’s zero estimate for FY1999, and why does FNS carry
                                                    unobligated funds from year to year? How does FNS
                                                    determine the level of unobligated funds to maintain? EN, p.
                                                    27-43; PB, p. 166.

                                                       Agency’s response: FNS receives 1-year funds for
                                                       mandatory Food Stamp Program payments. Unobligated
                                                       funds for food stamps are returned to the Treasury and are not
                                                       available for the next fiscal year. Recently, FNS’ funds for
                                                       Employment and Training activities for food stamp recipients
                                                       have been designated no-year funds. The $87 million in
                                                       unobligated funds carried forward to FY1999 is from the
                                                       Employment and Training Program and will be obligated in
                                                       FY1999; the zero estimate is accurate.

                                                       GAO’s observation: Insufficient time has passed since the
                                                       transition from 1-year to no-year appropriations for the
                                                       Employment and Training Program to establish a history for
                                                       unobligated funds carried forward to the next fiscal year.
                                                       However, the $87 million FNS carried forward to FY1999
                                                       equals about 35% of FY1998 obligations for the Employment
                                                       and Training Program.

:hild Nutrition            $4,636      $90        $0 GAO’s question: Why does FNS anticipate that unobligated
                                                     funds for this program will increase $80 million in FY1999, and
                                                     will FNS obligate all $90 million in FY2000? EN, p. 27-52; PB,
                                                     p. 167.

                                                       Agency’s response: These funds are 2-year monies, and
                                                       FNS, historically, has carried an unobligated balance of
                                                       several hundred million forward each year. However, the
                                                       balance carried forward to FY1999 was only $10 million and,
                                                       although the balance is expected to grow to $90 million in
                                                       FY1999, FNS expects to obligate all remaining funds by year-
                                                       end FY2000.

                                                       GAO’s observation: Since FY 1995, ending balances for
                                                       unobligated funds carried forward to the next fiscal year have
                                                       been $141 million (FY1995), $384 million (FYI 996), $605
                                                       million (FY 1997), and $10 million (FY1998). These year-end
                                                       balances are roughly equal to about 1 to 7% of annual
                                                       obligations.
                          A-- ---    A_ ---     *---




 12                                           GAO/ICED-99-2018     Analysis   of USDA’s Budgets,   Fiscal Years 1999-2000
ENCLOSUREII                                                                                                  ENCLOSUREII



            Estimated    Year-End    Unobligated      Funds for Selected         USDA Construction       Projects,
                                                     Fiscal Year 1999

Dollars in thousands
Construction                           Total Unobligated   Unobligated                           Status
woject                        appropriation   balance as       balance
                               as of FY1999    of 2/28/99 projected for
                                                                9130199
 4nimal and Plant Health Inspection Service (APHIS)
 Vational Plant                      $25,000       $2,834           $74 The project received $1 million for the design of
 Sermplasm                                                               Phase III in FY1993. Phase III was subsequently
 Quarantine Center                                                       dropped,  but aspects of Phase III were included in
 Seltsville, Maryland                                                    Phases I and II. APHIS is using the funds for
                                                                         construction contingencies. Total project costs
                                                                        were $22.1 million; approximately $2 million was
                                                                         reprogrammed to the Medfly Eradication Program in
                                                                         March 1995. About $739,511 will remain
                                                                         unobligated for construction contingencies at the
                                                                         end of FY 1999.
 Vlethods                               $672         $569           $69 The project, which was relocated from Texas, last
 Ievelopment Rearing                                                     received an appropriation in FY 1994. Design is
 %Cility     Phoenix, Arizona                                           complete,   and APHIS is negotiating a construction
                                                                        contract. Contract award is anticipated for June
                                                                         1999. About $69,000 will remain unobligated at the
                                                                        end of FYI 999 for construction contingencies.
 Vational Wildlife                   $15,500       $3,500        $3,500 The project received $3.5 million in FY1999 for
 qesearch Center                                                        additional work on the support wing of the Animal
 =ort Collins, Colorado                                                  Research Building. APHIS reports that a $2.5
                                                                        million unobligated balance shown in the
                                                                         Explanatory Notes to the FY2000 budget is a
                                                                         mistake. The completion of the support wing is on
                                                                        hold awaiting a decision by APHIS’ Wildlife Service
                                                                        on possible research facility requirement changes.
                                                                        Moreover, Colorado has revised its building codes
                                                                        since design work was completed; Colorado State
                                                                        University must determine how this will impact the
                                                                        original design. Because the schedule for this
                                                                        determination is uncertain and the original design
                                                                        work may change, all of the $3.5 million in
                                                                        unobligated funds may remain unobligated at the
                                                                        end of FY1999.
 3ison Quarantine                     $1,000       $1,000        $1,000 Design and construction are on hold pending
 -acility                                                               selection of a construction site by an APHIS-led
 yellowstone National Park,                                             task force that includes the National Park Service,
 dontana                                                                Montana State University, and local Indian tribes
                                                                        and completion and approval of an Environmental
                                                                        Impact Statement. All or most of the $1 million on
                                                                        hand will likely remain unobligated at the end of
                                                                        FYI 999.
 \PHIS subtotal                     $42,172       $7,903         $4,643




13                                                 GAOIRCED-99-201R   Analysis    of USDA’s Budgets,   Fiscal Years 1999-2000
ENCLOSURE II                                                                                                ENCLOSURE II

:onstruction                         Total Unobligated   Unobligated                            Status
woject                     appropriation    balance as       balance
                            as of FY1999     of 2/28/99 projected for
                                                              9130199
Agricultural Research Service (ARS)
Yater Conservation                   $896          $896          $896 This project is being reduced in scope and is on
.aboratory                                                             hold pending direction from the Congress. Funds
laricopa, Arizona                                                      appropriated in FY1995 and FY 1999 will be used
                                                                       for planning; $896,000 will remain unobligated at
                                                                       the end of FY1999.
iurricanes Andrew                 $15,000       $11,175       $10,677 The Congress appropriated funds for emergency
md lniki Repair                                                        repairs in FYI 992. ARS plans to use some of the
Vorida, Hawaii, and                                                    appropriated funds for renovation and new
.ouisiana                                                              construction. In the past, we have questioned
                                                                       redirecting funds appropriated funds for repairs to
                                                                       new construction (see our report, GAO/RCED-94-
                                                                        132R); however, USDA’s Office of General Counsel
                                                                        has decided this is a permissible use of these
                                                                       funds. Most or all of the unobligated funds will be
                                                                        obligated in FY2000 for construction.
‘oultry Disease                    $1,077        $1,005        $1,005. This project is on hold pending resolution of bio-
-aboratory                                                              containment planning throughout ARS and the
Ithens, Georgia                                                         report from the Strategic Task Force on Federally
                                                                        Funded Agricultural Research Facilities. This will
                                                                        leave about $1 million in unobligated funds at the
                                                                        end of FY1999.
Soil Erosion Center                $4,320            $25            $0 ARS is proposing to redirect the balance of $25,000
Nest Lafayette, lndiana                                                 in unobligated funds to a legal claim regarding the
                                                                        modernization of Building 001 at the Beltsville Area
                                                                        Research Complex.
Segional Poultry                   $2,262          $655          $100 This is a modernization effort of an existing facility.
3esearch Center                                                         Most of the funds will be used for redesigning the
East Lansing, Michigan                                                  Research Center. ARS expects to award a design
                                                                        contract and obligate most of the remaining funds
                                                                        by March 2000. About $100,000 will remain
                                                                        unobligated at the end of FY 1999.
Soil and Water                     $1,125             $3            $3 The Congress appropriated $825,000 in FY1995 for
Laboratory                                                               Phase Ii construction. About $3,000 will remain
Morrii, Minnesota                                                        unobligated at the end of FY 1999.
U.S. Vegetable                    $18,462          $762           $154 ARS has awarded the Phase I construction
Laboratory                                                               contract. Unobligated funds of about $154,000 will
Charleston, South Carolina                                               remain available for construction contingencies.
U.S. Pacific Basin                 $4,500         $4,500            $0 According to ARS, the predesign and design of the
Research Center                                                          Main Laboratory and Rearing Facility is on
Hi/o, Hawaii                                                             schedule, and the design contract will be awarded
                                                                         in the fourth quarter of FYI 999.
National Animal                     $4,900        $4,900        $3,401 These figures include $1.9 million reprogrammed
Disease Center                                                           from the National Swine Center. About $1.5 million
Ames, Iowa                                                               will be used for design in the fourth quarter of
                                                                         FY1999. About $3.4 million will remain unobligated
                                                                         at the end of FY1999 for future construction and
                                                                         related contingencies.




14                                                GAOIRCED-99-201R    Ana.lysis   of USDA’s Budgets,   Fisca.l Years 1999-2000
ENCLOSURE II                                                                                                 ENCLOSURE II

Construction                        Total Unobligated   Unobligated                              Status
project                    appropriation   balance as        balance
                            as of FY1999    of 2/28/99 projected for
                                                             9130199
U.S. Grain Marketing              $3,850       $2,913          $700 A contract for the construction of Phases I and II will
Research Laboratory                                                 be awarded in the fourth quarter of FY1999. About
Manhattan, Kansas                                                   $700,000 will remain unobligated at the end of
                                                                    FY1999 for contract contingencies.
National Agricultural             $3,700         $221          $100 About $100,000 will remain unobligated at the end
Library                                                             of FYI 999.
Beltsville, Maryland
Insect Rearing Facility           $1,100       $1,100           $75 This is a replacement facility. A design contract has
Stoneville, Mississippi                                             been awarded; design will be completed by the
                                                                    second quarter of FY2000. About $75,000 will
                                                                    remain unobligated at the end of FY1999.
Pest Quarantine and               $7,906       $7,795        $7,384 Planning and design are under way and should be
Integrated Pest                                                     completed in the fourth quarter of FY1999. About
Management Facility                                                 $7.4 million will remain unobligated at the end of
Sidney, Montana                                                     FY1999 for future construction.
Jornada Range                     $7,400       $7,302        $6,700 ARS expects the design to be completed by the
Research Station                                                    fourth quarter of FY1999. About $6.7 million will
Las Cruces, New Mexico                                              remain unobligated at the end of FYI 999 for future
                                                                    construction.
National Center for             $15,921       $13,801            $0 Design is under way; the construction contract is
Cool and Cold Water                                                 scheduled to be awarded in the third quarter of
cl\quaculture                                                       FY1999.
Leetown, West Virginia
                                                                        GAO’s observation: Although ARS officials said
                                                                        they anticipate obligating all available funds, they
                                                                        probably will retain about 5% of unobligated funds
                                                                        for construction contingencies.
tiestern Human                  $11,350       $11,350        $9,750 Forced to vacate the Presidio, ARS is planning a
Nutrition Research                                                  new facility at the University of California - Davis,
Center                                                              where staff is currently scattered among several
!lavis, California                                                  buildings. About $9.7 million will remain
                                                                    unobligated at the end of FY1999 and will remain
                                                                    unobligated until ARS has sufficient funds to award
                                                                    a construction contract. ARS is requesting an
                                                                    additional $9 million in FY2000 for construction.
National Center for             $24,970        $9,733        $1,200 ARS received $8.2 million in FY1999 for design
Agricultural Utilization                                            ($1.2 million) and construction ($7 million) of
qesearch                                                            section 3 of the chemical plant. About $1.2 million
‘eoria, Illinois                                                    will remain unobligated at the end of FY1999. ARS
                                                                    is requesting $1.8 million for FY2000 for design
                                                                    work to modernize the chemical wing (which is
                                                                    separate from the chemical plant).

                                                                        GAO’s observation: While ARS officials said they
                                                                        believe they can award a construction contract ($7
                                                                        million) before the end of FY1999, they agreed that
                                                                        the award would occur very near year-end and that
                                                                        any delay before then would probably force the
                                                                        award into the next fiscal year, thus leaving
                                                                        additional funds unobligated at year-end.


15                                               GAOIRCED-99-201R      Analysis   of USDA’s Budgets,   Fiscal Years 1999-2000
ENCLOSURE II                                                                                                          ENCL0SUR.E II

Zonstruction                           Total       nobligated     Unobligated                          Status
woject                         apropriation        balance as          balance
                               IS of FYI 999        of 2l28l99    lrojected for
                                                                        9/30/99
southern Regional                  $17,202             $6,230              $300 ARS is requesting $5.5 million in FY2000 for
qesearch Center                                                                 Phases II and III. ARS received $6 million in
Jew Orleans, Louisiana                                                          FY1999, of which about $300,000 will remain
                                                                                unobligated at the end of p/1999.
Agricultural Research             $109,117             $7,594            $4,358 ARS is requesting $13 million in FY2000 for
Zenter                                                                          construction of Phase I of the Beltsville Human
3e/tsvi//e, Maryland                                                            Nutrition Research Center. About $4.4 million will
                                                                                remain unobligated at the end of FY1999.
‘Iurn Island Animal                $20,683             $7,322            $4,989 ARS is requesting $8.2 million for FY2000 for
Iisease Center                                                                  construction of a replacement boiler plant, sewage
Sreenport, New York                                                             decontamination plant, and other miscellaneous
                                                                                projects. Construction of the Waste Water
                                                                                Treatment Plant is on hold pending resolution of a
                                                                                remediation request with EPAIDEC. About $4.9
                                                                                million will remain unobligated at the end of FY1999
                                                                                for construction. This includes about $1.8 million for
                                                                                the Waste Water Treatment Plant.

                                                                               GAO’s observation: This is a joint APHIS and ARS
                                                                               project. APHIS is requesting $3.2 million in
                                                                               FY2000, which would be allocated to ARS. For the
                                                                               total project, APHIS is funding 40% of the
                                                                               construction work at the facil&; ARS, 60%.
Eastern Regional                    $12,3OC             !§5,OOi         $3,30( ARS is requesting $4.4 million for FY2000 for con-
Research Center                                                                struction of Phase 6 of the Chemical Wing Labora-
Philadelphia,   Pennsylvania                                                   tory. About $3.3 million will remain unobligated at
                                                                               the end of FY 1999 for future construction.
Western Regional                     $6,08C1              $63;              $( ARS is requesting $2.6 million for FY2000 for the
Research Center                                                                design work to modernize the Research and
Albany, California                                                              Development Facility.
Human Nutrition                                1          $811            $59( ARS will award $500,000 for construction of a
Research Center                                                                storage shed.
Grand Forks, North Dakota
ARS subtotal                        $298,521 I      $105,732      $55,69(
Departmental Admir             ration/Strate! $( : Space Plal [SSP)
Beltsville Office Facilii            $87,714          $5,200           $0 USDA anticipates obligating about $2 million to $2.5
WC)                                                                       million in FY1999 for road improvements for the
Prince George’s Comfy,                                                    BOC. However, the City of Greenbelt, Maryland,
Maryland                                                                  has filed suit to block this construction work, making
                                                                          award of a construction contract before year-end
and                                                                       less certain.
Agriculture South
                                                                                  Other obligations will cover costs associated with
Building                                                                          Phase I of the modernization effort for the South
Washington, D. C.
                                                                                  Building (Wing 3), namely, moving staff, tenant fit-
                                                                                  out, and construction contingencies.
SSP subtotal                        $87,714            $5,200                $0
Total                              $428,405          $118,835          $60,333




16                                                         GAOLRCED-99-201R       Analysis   of USDA’s Budgets,   Fiscal Years 1999-2000
ENCLOSURE III                                                                                                  ENCLOSURE III



     Estimated      Large Funding    Increases   for Selected New USDA Initiatives              and Existing     ProEframs,
                                                    Fiscal Year 2000

     Iollars in millions
     Program/account            FY net budget                      GAO’s question/agency’s         response
                                  authority
                               FY1999 1FY2000
     Office of the Secretary
     %nd for Rural                  $0    $60 GAO’s question: (1) Does prior-year legislation provide USDA a $60
     4merica                                  million appropriation in FY2000? If so, please provide a copy of the
                                              relevant portion of legislation. (2) If the Congress blocked the funding for
                                              this initiative in FY1999, why should it fund the initiative in FY2000? (3) Is
                                              the $60 million annual appropriation adequate; if so, why is USDA
                                              proposing an additional $15 million annually across 4 years beginning in
                                              FY2OOi? See Explanatory Notes (EN), p. 1-14; President’s Budget (PB),
                                              p. 60.

                                                 Agency’s response: Authorizing legislation provides USDA $60 million
                                                 annually from FYI 999 to FY2003. These monies are to remain available
                                                 for 2 years. While the Congress may again block the funds for FY2000 as
                                                 it blocked them for FYI 999, USDA is requesting appropriation of the
                                                 authorized funding for FY2000. Moreover, because the Congress did not
                                                 appropriate funds in FYI 999, USDA is proposing legislation to authorize,
                                                 in addition to the funding currently authorized, $15 million for each fiscal
                                                 year from 2001 through 2004, thus restoring the $60 million authorized but
                                                 not appropriated for FY1999.

                                                 GAO’s observation: The Congressional Budget Office (CBO) disagrees
                                                 with USDA’s assumption that it can ask the Congress to appropriate the
                                                 $60 million blocked by the Congress in FY1999 for this program without
                                                 requesting new legislation that would count the appropriation as new
                                                 budget authority for budgetary scoring purposes. (USDA sees this
                                                 funding as being “carried over” from one year to another, not as new
                                                 money.) CBO believes this money is no longer available to USDA unless
                                                 new legislation is passed and the funds are scored as new spending.

     4gricultural Marketing Service (AMS)
     Gnds for                 $588     $669 GAO’s question: Planned obligations and outlays appear to be
     Strengthening                          declining. If so, what is the increase for? See EN, p. 15-32; PB, p. 90.
     Markets, Income,
     md Supply                              Agency’s response: The fund involves purchasing commodities and
                                            distributing disaster assistance funds. The $81 million increase is needed
                                            to rebuild the fund’s contingency reserve account to $300 million. Public
                                            law permits AMS to carry reserves of $300 million as a contingency
                                            against unanticipated needs.




17                                                GAO/RCED-99-201R     Analysis   of USDA’s   Budgets,   Fiscal Years 19994000
ENCLOSUREIII                                                                                                ENCLOSUREIII

      lrogramlaccount        FY net budget                      GAO’s question/agency’s response
                               authority
                            FY1999 1FY2000
      ,gricultural Research Service (ARS)
      ‘arious Research         $154      $196 GAO’s question: Given that USDA is beginning the third phase of the
      litiatives                              Human Nutrition Research Initiative, what justifies an increase of $20
                                              million (29%)? Similarly, what justifies a $22 million increase (25%) for
                                              research on soil, water, and air? Could USDA’s proposed $25 million
                                              decrease for research in plant sciences be redirected to one of these
                                              areas? EN, pp. 9-14, 16,38; PB, p. 72.

                                                Agency’s response: The $20 million increase is part of a 5-year funding
                                                effort that started in FY1998 and is needed to make up for the shortfall in
                                                funding for FY1999. In FY1999, the Congress chose to fund only $2.25
                                                million out of the $10.5 million requested for this program. The $22 million
                                                for Soil, Water, and Air Research includes increases for high-priority
                                                research areas, such as air quality, global change, and sustainable
                                                ecosystems, that USDA believes are important. In addition to the $25
                                                million decrease in funding for the Plant Science research efforts, ARS is
                                                proposing an additional reduction in ongoing ARS projects totaling $35
                                                million. These combined reductions are essentially financing a portion of
                                                the proposed increases in ARS research.

      >ooperative State Research, Education, and Extension Service (CSREES)
      ntegrated Activities     $30      $73 GAO’s question: Given that in FY1999 the Congress did not fund four of
      new initiative)                        the eight initiatives proposed by CSREES, why should the Congress
                                             appropriate $33 million in FY2000 for these same initiatives? EN, p. 1O-
                                             81; PB, p. 74.

                                                Agency’s response: Integrated Activities is a new program account.
                                                Four of the eight initiatives that make up the account are new, and USDA
                                                did not request funding for them in FYI 999. In FY1999, USDA did
                                                request funding for the other four initiatives under other program
                                                accounts. Of these four, only one was not funded, while three were
                                                funded at their FY1998 levels. Although the Presidents Budget shows an
                                                increase of $73 million for the account, the increase is really $43 million
                                                because those initiatives funded under other program accounts in FY 1999
                                                received about $30 million.

      qesearch and              $119      $200 GAO’s question: Can CSREES award $200 million in competitive grants
      Education Activities-                    in FY2000? What caused the estimate for required funding for FY1999 to
      Vational Research                        decline from $163 million (PB, p. 75) to $119 million (EN); was the award
      nitiative (NRI)                          of available grant monies prevented or delayed in FY1999?

                                                Agency’s response: CSREES will not be able to award all of the $200
                                                million in grants in FY2000. Funding for NRI is available until expended,
                                                and some portion of the $200 million will be carried over for obligation in
                                                FY2001. The award of monies available for PI1999 was not prevented 01
                                                delayed; the FYI 999 estimate of obligations for NRI is $163 million, as
                                                reported on p. 75 of the President’s ‘Budget. This amount includes $119.2
                                                million in new budget authority and $43.4 million in carryover from
                                                FY 1998.




 18                                                GAO/WED-99-2018     Andysis   of USDA’s   Budgets,   Fisca.l Years 1999-2000
ENCLOSURE III                                                                                                 ENCLOSURE III

     Program/account          FY net budget                          GAO’s question/agency’s response
                                authority
                             FY1999 FY2000
     Initiative for Future        $0      $120 GAO’s question: (1) Does prior-year legislation provide USDA a $120
     Agriculture and Food                      million appropriation in FY2000? If so, please provide a copy of the
     Systems                                   relevant portion of the legislation. (2) If the Congress blocked the funding
                                               for this initiative in FY1999, why should it fund the initiative in FY2000?
                                               (3) Is the $120 million appropriation for FY2000 adequate; if so, why is
                                               USDA proposing an. additional $30 million annually across 4 years
                                               beginning in 2001? See EN, p. 10-90; PB, p. 75.

                                                 Agency’s response: Authorizing legislation provides USDA $120 million
                                                 annually from FY1999 to FY2003. These monies are to remain available
                                                 for 2 years. While the Congress may not appropriate the authorized funds
                                                 as it did for FY1999, USDA is requesting appropriation of the authorized
                                                 funding for FY2000. Moreover, because the Congress did not appropriate
                                                 funds in FY1999, USDA is proposing legislation to authorize, in addition to
                                                 the funding currently authorized, $30 million for each of fiscal year from
                                                 2001 through 2004, thus restoring the $120 million authorized but not
                                                 appropriated for FY 1999.

                                                 GAO’s observation: This case is similar to the Fund for Rural America.
                                                 Specifically, CBO disagrees with USDA’s assumption that it can request
                                                 restoration of the blocked FY1999 monies for this program without
                                                 requesting new legislation that would count this funding as new budget
                                                 authority for budgetary scoring purposes. (USDA sees this funding as
                                                 being “carried over” from one year to another, not as new money.) CBO
                                                 believes this money is no longer available to USDA unless new legislation
                                                 is passed and the funds are scored as new spending.

     3upport Services Bureau
     :New initiative)              $0      $74 GAO’s question: Will USDA be ready to use the requested $74 million in
                                               FY2000? How much of the $74 million is one-time startup costs? How
                                               much of the increase is offset by decreases in the Farm Services
                                               Agency’s (FSA), the Natural Resources Conservation Service’s (NRCS),
                                               and Rural Development’s budgets? See EN, p. 28-6; PB, p. 95.
                                                 Agency’s response: USDA will use all $74 million in FY2000. These
                                                 funds, along with $16.2 million in funds from the Commodity Credit
                                                 Corporation (CCC), will support ongoing Service Center Modernization
                                                 initiatives. The funds are not one-time startup monies for the Support
                                                 Services Bureau, but rather related modernization efforts, such as the
                                                 colocation of field offices. NRCS’ budget includes a decrease of about
                                                 $31 million in budget authority shifted to the Support Services Bureau.
                                                 Ideally, the FSA and Rural Development budgets should include similar
                                                 offsets for those functions transferred to the Support Services Bureau but
                                                 do not because their budgets are too tight.

                                                 GAO’s observation: FSA and Rural Development lacked offsets for the
                                                 Support Services Bureau. NRCS’ decrease of $31 million will be replaced
                                                 by funds requested for other NRCS initiatives. Moreover, FSA currently
                                                 has authority to use $16.2 million of CCC borrowing authority in FY2000
                                                 for its modernization initiatives and is requesting an additional $35 million
                                                 in CCC borrowing authority for its computer support functions.


19                                                GAO/RCED-99-201R      Analysis   of USDA’s Budgets,   Fisca.l Years 1999-2000
ENCLOSURE-III                                                                                                ENCLOSTJFiEIII

      Program/account      FY net budget                       GAO’s question/agency’s response
                             authority
                         FYl999 1FY2000
  ) Animal and Plant Health lnsoection Service tAPHIS)
                             $484      $554 GAO’s question: What is the special fund that is the source of the $70
                                            million increase in salaries and expenses shown in the President’s Budget
                                            for APHIS? See PB, p. 79. Where in the ENS is the increase in budget
                                            authority from this source identified?

                                                Agency’s response: APHIS is requesting an increase of about $10
                                                million in appropriations for salaries and expenses. The President’s
                                                Budget shows another $60 million in revenues from APHIS’ Agricultural
                                                Quarantine Inspection (AQI) account, which contains AQI user fees
                                                collected in excess of $100 million. For FY2000, APHIS proposes raising
                                                AQI user fees to cover the program’s anticipated costs and to rebuild the
                                                AQI reserve balance (see EN, pp. 14-15 and 14-17). Item #lO of the
                                                Project Statement on EN, p. 14-17, estimates increased AQI user fee
                                                revenues of only $4.8 million for FY2000 because it does not include
                                                revenues from the proposed increase in user fees, while the President’s
                                                Budget estimates additional AQI revenues of $60 million from increased
                                                user fees that have yet to be approved by USDA.

                                                GAO’s observation: Given that appropriations would not change, net
                                                budget authority would decline by about $1 million if additional revenues
                                                from higher user fees are not available.

       :ood Safety and Ins   rction SE rice (FS i
       salaries and               $618    $653  5AO’s question: What portion of the $36 million increase will be used
       ixpenses                                 or retraining existing personnel in how to perform marketplace reviews,
                                                lnd does the increase reflect a one-time investment in retraining? Can
                                                -SIS accomplish retraining and increase the number of marketplace
                                                ,eviews by 80,000 (400%) as indicated in the President’s Budget? See
                                                EN, pm13-3; PB, p. 82.

                                                 4gency’s response: Of the $36 million increase, $10.8 million will be
                                                 used to convert and redeploy 388 existing FSIS employees as Consumer
                                                 Safety Officers and to hire 250 new Consumer Safety Officers. The
                                                 *equested increase will cover salary upgrades and relocation costs and
                                                 sllow FSIS to hire and redeploy, as necessary, more highly skilled, better
                                                 educated, more versatile inspection personnel. Since the increase covet?
                                                 salary costs, it is not a one-time expense. Moreover, FSIS will try to
                                                 conduct the additional 80,000 marketplace reviews for FY2000.

                                                 GAO’s observation: Given that FSIS will have to hire, retrain, and move
                                                 employees to achieve the 400% increase in marketplace reviews,
                                                 increasing marketplace reviews from 20,000 to 100,000 in 1 year seems
                                                 overly ambitious. Possibly some of the funding associated with increasin!
                                                 these reviews could be deferred to FY2001.




 20                                                GAO/RCED-99-201RAnalysisofUSDA'sBudgets,FiscalYears1999-2000
ENCLOSURE III                                                                                               ENCLOSURE III

         IProgram/account     FY net budget                       GAO’s question/agency’s       response
                                authority
     [
         Commodity Credit C Lporatic
         XC-Funded ADP            $             GAO’s question: Since FSA has experienced cost overruns and
         Expenses                               exhausted a multiyear automated data processing (ADP) appropriation
                                                meant to carry the agency through FY2002, why should the Congress
                                                provide additional appropriations of $35 million annually for ADP? See
                                                PB, p. 108.

                                                Agency’s response: For FY2000, USDA proposes to increase the
                                                current cap on CCC expenditures for information technology for fiscal
                                                years 1997 to 2002 by a total of $105 million. The proposal would
                                                increase the cap from $188 million to $293 million and assumes that $35
                                                million would be available for each year from FY2000 through 2002.
                                                Under the current cap, only about $16.2 million will be available for curren
                                                operations and information technology expenditures at the end of 1999,
                                                and that level is not adequate. Given the historic operation and
                                                maintenance needs of USDA programs, it is doubtful that the $35 million
                                                will be available for Service Center Modernization initiatives or FSA’s
                                                share of the Common Computing Environment.

                                                GAO’s observation: The EN indicates that the $16.2 million remaining
                                                under the current cap will be used to support the Service Center
                                                Modernization Initiative (for which USDA has requested $74 million in new
                                                funding--see the Support Service Bureau’s new initiative discussed
                                                elsewhere on this table) rather than for current information processing
                                                needs. We question why, if funds are not available for current operations,
                                                USDA is targeting funds to support its modernization effort. Moreover, the
                                                Congress restricted the use of CCC borrowing authority for information
                                                technology because of $16.2 million remaining under the current cap will
                                                be used to support the Service Center Modernization Initiative (for which
                                                USDA has requested $74 million in new funding--see the
                                                program/account, “Support Services Bureau,” on this table) rather than for
                                                current information pr&essing needs

         Vatural Resources ( bnserva   n Servic 3 NRCS
         Zonservation           $64       $681 GAO’s question: NRCS is requesting a net increase of about $40
         3perations                             million; however, given that a $31 million decrease at NRCS for
                                                information technology will -be funded elsewhere within USDA’s budget
                                                (by an appropriation for the new Support Services Bureau), isn’t NRCS
                                                proposing a gross increase of $68 million (11%) for Technical Assistance?
                                                Why is the increase needed when workload factors are declining?
                                                Regarding the $20 million for competitive gra?ts to be awarded locally,
                                                does NRCS have a strategy for ensuring competition and preventing
                                                abuse? EN, pp. 17-l 9 through 17-24; PB, p. 114.

                                               Agency’s response: Yes, the $68 million increase includes $17 million
                                               in anticipated pay increases, $20 million for partnership grants, $3 million
                                               for additional environmental monitoring and research, $8 million (97 staff
                                               years) for technical assistance to animal feeding operations, $15 million
                                               for global climate change research, and $5 million ($1.5 million for 20 staff
                                               years) to support state and local geographic information systems. The
                                               total conservation workload for NRCS and the conservation partnership is


21                                               GAOLRCED-99-201R     Analysis   of USDA’s Budgets,   Fiscal Years 1999-2000
ENCLOSURE III                                                                                          ENCLOSURE III

     Vogramlaccount       FY net budget                      GAO’s question/agency’s       response
                            authority
                         FY1999 FY2000
                                          not declining. However, NRCS’ percentage of the workload is declining,
                                          while state and local participation in NRCS’ overall workload is increasing.
                                          The $20 million for competitive grants will be awarded through
                                          memorandums of agreement. NRCS has not developed a new strategy
                                          for how these agreements would be handled but will continue to apply the
                                          rules and regulations currently used for these agreements to ensure
                                          competition and prevent abuse.

                                          GAO’s observation: The Conservation Operations account is the major
                                          salaries and expenses account for NRCS. For fiscal year 2000, NRCS is
                                          proposing a gross increase of about $68 million for Technical Assistance
                                          within this account. Of that amount, only $9.5 million is for additional
                                          NRCS staff. The rest is for NRCS staff pay increases or for supporting
                                          local and state geographic information systems or animal feeding
                                          operations.

     Metlands Reserve       $128    $207 GAO’s question:      The budget proposes a $79 million (62%) increase
     +ogram                               (using CCC budget authority) to support proposed wetland acreage
                                          enrollments. Is this increase needed to support only the FY1999
                                          enrollments (120,000 acres) for year 2000, or does it support both
                                          FY1999 and FY2000 enrollments? Will NRCS accomplish the planned
                                          enrollment of 120,000 acres in FY1999? If not, could funds for their
                                          support in FY2000 be deferred to the next fiscal year? EN, p. 17-60; PB,
                                          p. 120.

                                          Agency’s response: This increase applies directly to the FY2000
                                          enrollment and does not apply to the FYI 999 effort. The full enrollment of
                                          120,000 acres will be accomplished in p/1999.

                                          GAO’s observation: Given the length of the enrollment process, NRCS
                                          may not be able to obligate, and thus may not need, all of the $79 million
                                          for FY2000.

     Rural Housing Service (RHS)
     dental Assistance       $583   $640 GAO’s question:      Why is RHS seeking multiyear funding? Could RHS
                                          meet its needs with annual appropriations? (Note: RHS is requesting a
                                          $57 million increase in funding for FY2000.) EN., p. 24-31; PB, p. 127.

                                          Agency’s response: The budget asks for $640 million to finance the 5-
                                          year RHS agreements for rental assistance payments. RHS does not
                                          need all the money in the first year; funds are needed over a 5-year perioc
                                          (RHS estimates that each of the 5 years would require $121 million for
                                          rental assistance payments). However, RHS states approval of the 5-year
                                          funding is needed to demonstrate a 5-year commitment of funds to
                                          prospective landlords.




22                                           GAO/RCED-99-201R     Analysis   of USDA’s Budgets,   Fiscal Years 1999-2000
ENCLOSURE III                                                                                             ENCLOSURE III

     %ogram/account         FY net budget                    GAO’s question/agency’s response
                               authority
                          FY1999 ) FY2000
     ‘ood and Nutrition Service (FNS)
     -ood Stamp               $100 $1,000 GAO’s question: Given that the Congress reduced contingency funds to
     ‘rogram                              $100 million in FYI 999 and the economic forecasts are for continued
     contingency fund)                    growth, could FNS operate with $100 million as a contingency fund in
                                          FY2000? EN, p. 27-41; PB, p. 116.

                                             Agency’s response: The FY2000 food stamp budget assumes benefits
                                             of $18.4 billion and requests $1 billion in contingency funds, but it
                                             estimates that none would be used. While the economy shows no signs
                                             of deterioration, the contingency fund is, by its very nature, an insurance
                                             fund that would be available only in the event of unforeseen
                                             circumstances. A contingency fund of $100 million would cover
                                             approximately 2 days’ worth of benefits, so it would not be sufficient to
                                             provide adequate insurance to cope with unforeseen circumstances.

                                             GAO’s observation: Considering the declining participation in the Food
                                             Stamp Program and given that the Congress in FY1999 chose to fund the
                                             contingency fund at $100 million, it could also choose to do so for
                                             FY2000.

     -ood Stamp            $17,900 $18,400 GAO’s question: Why is FNS requesting $18.4 billion in benefit costs for
     ‘rogram                               FY2000 when its FY1999 current estimate is $17.9 billion? What factors
                                           or assumptions are driving this increase? Why is FNS’ estimate $600
                                           million higher than CBO’s FY200 estimate of $17.8 billion? EN, p. 27-43;
                                           PB, p. 166.

                                             Agency’s response: For FY2000, FNS is anticipating an increase in
                                             participants and therefore is requesting more funding for benefits.
                                             Increased benefit costs are driven by assumptions of increased
                                             participation, unemployment, and cost of monthly food consumption
                                             (Thrifty Food Plan) (see EN, p. 27-44). CBO estimates of benefit costs for
                                             FY2000 are lower than FNS’ because they are using slightly different
                                             assumptions.

                                             GAO’s observation: Given that CBO’s assumptions estimate a smaller
                                             number of food stamp participants and associated costs than FNS’ and
                                             that economic forecasts for FY2000 cover a range of scenarios, the
                                             Congress may choose to fund the Food Stamp Program at CBO’s
                                             estimated level and determine later in FY2000 whether additional funding
                                             is needed.

     Yomen, Infants, and   $3,924    $4,105 GAO’s question: For FY2000 USDA is requesting a net increase of
     >hildren (WIC)                         $181 million in discretionary funding for WIC to support an anticipated
                                            1OO,OOO-personincrease in program participation. Is this requested
                                            increase reasonable and needed?

                                             Agency’s response: USDA believes this estimate is reasonable and that
                                             the increase is justified. However, it acknowledges that arguments can be
                                             made both ways regarding whether WIC participation will increase by
                                             100,000 in FY2000. There are some complex issues involved, including a
                                             provision of U.S. immigration law the may have a dampening effect on


23                                             GAO/WED-99-2018     Ana.lysis   of USDA’s Budgets,   Fiscal Years 1999-2000
ENCLOSURE-III                                                                                          ENCLOSUREIII

      Vogram/account      FY net budget                      GAO’s question/agency’s        response
                             authority
                         FYI 999 FY2000
                                           participation. Planned efforts to mitigate this immigration law’s unintended
                                           effect, could result in increased participation among legal and illegal
                                           immigrants in the future. However, it is uncertain much increased
                                           participation would result from these mitigation efforts.

                                           GAO’s observation: Given that arguments can be made either way
                                           regarding whether WIC participation will increase by 100,000, the
                                           Congress may choose to fund only part of the net $181 million increase
                                           requested.

      ChildNutrition,       $23     $43 GAO’s question: The budget request includes a $20 million (87%)
      Iiscretionary                     increase in discretionary funds for studies and surveys, education and
      ictivities                        training, and computer support and processing. Specifically, $13 million
                                        of the increase will fund a school breakfast demonstration project to
                                        evaluate the effects of providing breakfast to all children regardless of
                                        income. Can the school breakfast demonstration project be reduced or
                                        eliminated? EN, pp. 27-52,27-56; PB, p. 167.

                                           Agency’s response: Last year, the Congress considered legislation to
                                           expand the school breakfast program to all children at no cost. Recent
                                           studies have suggested a link between school breakfast and improved
                                           educational performance. However, these studies are insufficient to
                                           asses the likely impact of a universal no-cost breakfast program. USDA
                                           must resolve this information gap by conducting a thorough evaluation of
                                           a pilot universal breakfast program. Eliminating or reducing this funding
                                           will prevent USDA from doing so, and prevent the Congress and the
                                           administration from making informed decisions about proposals to expand
                                           the school breakfast program.

                                           GAO’s observation: The Congress may decide that the families that can
                                           afford to pay for their children’s breakfasts should do so; thus, the $13
                                           million would not be needed. If the studies are conducted, USDA needs
                                           to ensure that they contain analyses of the improvement in performance
                                           versus the cost of the program.

      Total              $25,292 $27,710
      Estimated FY2000            $2,418
      increase




      (150143)


 24                                           GAO/RCED-99-201R     Analysis   of USDA’s Budgets,   Fiscal Years 1999-2000
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