[Senate Hearing 109-488]
[From the U.S. Government Printing Office]
S. Hrg. 109-488
NOMINATIONS OF CHARLES R. CHRISTOPHERSON AND JAMES M. ANDREW
=======================================================================
HEARING
before the
COMMITTEE ON AGRICULTURE,
NUTRITION, AND FORESTRY
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
NOVEMBER 10, 2005
__________
Printed for the use of the
Committee on Agriculture, Nutrition, and Forestry
Available via the World Wide Web: http://www.agriculture.senate.gov
______
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COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY
SAXBY CHAMBLISS, Georgia, Chairman
RICHARD G. LUGAR, Indiana TOM HARKIN, Iowa
THAD COCHRAN, Mississippi PATRICK J. LEAHY, Vermont
MITCH McCONNELL, Kentucky KENT CONRAD, North Dakota
PAT ROBERTS, Kansas MAX BAUCUS, Montana
JAMES M. TALENT, Missouri BLANCHE L. LINCOLN, Arkansas
CRAIG THOMAS, Wyoming DEBBIE A. STABENOW, Michigan
RICK SANTORUM, Pennsylvania E. BENJAMIN NELSON, Nebraska
NORM COLEMAN, Minnesota MARK DAYTON, Minnesota
MICHEAL D. CRAPO, Idaho KEN SALAZAR, Colorado
CHARLES E. GRASSLEY, Iowa
Martha Scott Poindexter, Majority Staff Director
David L. Johnson, Majority Chief Counsel
Steven Meeks, Majority Legislative Director
Robert E. Sturm, Chief Clerk
Mark Halverson, Minority Staff Director
(ii)
C O N T E N T S
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Page
Hearing(s):
Nominations of Charles R. Christopherson and James M. Andrew..... 01
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Wednesday, November 10, 2005
STATEMENTS PRESENTED BY SENATORS
Chambliss, Hon. Saxby, a U.S. Senator from Georgia, Chairman,
Committee on Agriculture, Nutrition, and Forestry.............. 01
Crapo, Hon. Mike, A U.S. Senator from Idaho...................... 02
WITNESSES
Christopherson, Charles R. Jr., of Texas, to be Chief Financial
Officer, U.S. Department of Agriculture........................ 04
Andrew, James McRae, of Georgia, to be Administrator of the Rural
Utilities Service, U.S. Department of Agriculture.............. 06
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APPENDIX
Prepared Statements:
Christopherson, Charles R.................................... 16
Andrew, James Andrew......................................... 19
Document(s) Submitted for the Record:
Christopherson, Charles R. (Biographical Information)........ 22
Andrew, James Andrew (Biographical Information).............. 46
Questions and Answers Submitted for the Record:
Harkin, Hon. Tom............................................. 77
Salazar, Hon. Ken............................................ 79
NOMINATIONS OF CHARLES R. CHRISTOPHERSON AND JAMES M. ANDREW
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WEDNESDAY, NOVEMBER 10, 2005
United States Senate,
Committee on Agriculture, Nutrition, and Forestry,
Washington, DC
The committee met, pursuant to notice, at 9:02 a.m., in
Room 328A, Russell Senate Office Building, Hon. Saxby
Chambliss, chairman of the committee, presiding.
Present or submitting a statement: Senators Chambliss,
Thomas, Crapo, Harkin and Salazar.
STATEMENT OF HON. SAXBY CHAMBLISS, A U.S. SENATOR FROM GEORGIA,
CHAIRMAN, COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY
The Chairman. This hearing will come to order, and good
morning.
We are here today to hear testimony from two nominees for
important posts at the U.S. Department of Agriculture: James
Andrew, nominee for the position of Administrator of Rural
Utilities Service; and Charles Christopherson, nominee for the
position of Chief Financial Office.
It is with great pleasure that I welcome Jim Andrew to the
committee. Jim has been a businessman, a community leader in
Georgia for many years. I am pleased that he is willing to come
to Washington and engage in public services at the Federal
level.
The Rural Utilities Service provides important services in
rural America, including electrification, telecommunications,
drinking water and waste disposal systems, broadband access,
telemedicine and distance learning. Millions of rural Americans
have better lives because of these programs, and we are
fortunate that people like Jim Andrew are willing to give of
themselves in service to our country to improve the lives of
our fellow citizens.
I appreciate that Jim shares my love for golf, and more
importantly, that he shares my commitment to continue to make
our country a better place for all Americans, especially for
those in our rural areas.
And on a personal note I would say that I have known Jim
for, gee whiz, longer than either one of us want to remember at
this point in time, but we have been friends through the years.
Jim is from Jenkins County, Georgia, near a little town called
Millen, and Jim grew up in the rural electrification industry
in our State, and the fact that he is from Millen, Georgia, and
the fact that he was employed by the George Electric Membership
Corporation early, is a sign of how significant a contribution
he has made to the rural utility industry in Georgia,
particularly the Georgia Electric Membership Corporation,
because I was involved in that industry for 25 years
representing a co-op in my hometown, and because Jim is from
Millen, he was selected by the godfather of the Electric
Membership movement in Georgia, Mr. Walter Harrison.
That says an awful lot about you, Jim, because knowing Mr.
Walter like I did for so many years, knowing his love for rural
America and for the electric utility system, the fact that he
chose you to go to work at GEMC says an awful lot about your
commitment to rural America, and your commitment to the
electric utility industry, so needless to say, I am very
pleased that you have decided to, at this stage in your life,
to move to a different level and come to Washington to serve
your country in a different capacity. And as a Georgian and as
a personal friend, I am very, very proud to have you here this
morning.
I also welcome Chuck Christopherson, and am pleased that he
is willing to take on the task of being Chief Financial Officer
of USDA. If the Department of Agriculture were a private
enterprise, it would be the sixth largest company in the United
States. USDA has over 100,000 employees, 14,000 offices and
field locations, $128 billion in assets, and provides
approximately $100 billion in loan guarantees and insurance.
Obviously, it is a major job to oversee the finances of such a
large organization, and I am grateful that Chuck Christopherson
is willing to take on this important responsibility to ensure
that USDA performs its duties commensurate with the standards
that American taxpayers deserve and expect.
My colleague Senator Harkin is here. Tom, I will be happy
to recognize you for any opening comments you wish to make.
The Chairman. All right.
The Chairman. I would like to turn to Senator Mike Crapo
for any opening comments you wish to make, Senator.
STATEMENT OF HON. MIKE CRAPO, A U.S. SENATOR FROM IDAHO
Senator Crapo. Thank you very much, Mr. Chairman. I
appreciate your holding this hearing, and I especially
appreciate the opportunity to make a personal introduction of
Mr. Charles Christopherson. Those that submit themselves to the
confirmation process deserve our respect, and we owe it to them
and the public to consider their nominations in a timely
fashion, and I appreciate the fact that we are doing that
today.
Today we consider two important positions at the Department
of Agriculture. The Chief Financial Officer plays an important
role in instituting the processes that promote the sound
stewardship of taxpayer dollars. The Rural Utilities Service
Administrator manages many of the programs that are so vital to
our rural communities. Both positions require strong managers,
and in both cases the President and Secretary Johanns have made
good choices.
Clearly Mr. Andrew is well qualified. His background shows
a devotion to rural America and the experience to succeed at
RUS. He will be administering programs of great importance to
the communities in my State, and I look forward to supporting
his confirmation and working with him when he is confirmed. I
should warn you, however, Mr. Andrew, that I have a keen
interest in many of the RUS programs and will probably be in
touch frequently.
I want to take a moment now to introduce Charles
Christopherson, who has been nominated to serve as the
Department of Agriculture's Chief Financial Officer. As CFO he
will have responsibility over USDA's financial management
functions. Although he now lives in Texas, Mr. Christopherson
has deep roots in Idaho. Mr. Christopherson's family is from
Twin Falls, Idaho. Twin Falls sits on the Snake River in the
center of Southern Idaho in an area known as Magic Valley.
By the way, my mother was born in Kimberly, which is just a
little town a couple of miles outside of Twin Falls, and I
spent a lot of my years there visiting my grandparents. So even
though I live in Idaho Falls, Twin Falls is a very special
place to me and the Magic Valley is a special part of my
childhood.
The Magic Valley has long been home to strong agricultural
industry. Mr. Christopherson's connections to this important
part of Idaho will serve as a good reminder of the impact that
USDA's policies have in our own communities.
I am also confident that his education and business
experience will be a great asset to the Department. I do want
to point out that Mr. Christopherson is a graduate of Brigham
Young University's Marriott School of Management. While I have
a little bias in his college selection, because I too am a
graduate of BYU, the accounting program is nationally
recognized.
Mr. Christopherson's business experience demonstrates his
ability to thrive at every level and to apply his experiences
effectively to each succeeding endeavor. He has had success in
financial management, integrating controls in operations and
finance, and working to turn around companies that are in
difficult financial situations. But one thing that has
impressed me is the fact that as a consultant he went into
well-established, well-performing companies and made a
difference.
Mr. Christopherson has demonstrated the tools to be an
effective CFO for the Department of Agriculture, and I support
the President's nomination of him, and look forward to working
with him, and recommending him to my colleagues.
Thank you.
The Chairman. Thank you, Senator Crapo.
Senator Thomas, do you have any opening comments you wish
to make?
Senator Thomas. Not really, Mr. Chairman. I just want to
thank you for having this. I think it is important that we move
these offices to fill them, and certainly I am impressed with
the nominees we have. I guess I have to admit some particular
interest in the rural electric aspect of it, having spent a
good deal of my career in that area, but I think they are very
important, both of them, for the future of agriculture, and as
rural electric responsibilities and service areas change, we
are going to see a lot of changes there. So I certainly am
supporting them.
Thank you for having this hearing.
The Chairman. Senator Salazar, any comment you wish to
make?
Senator Salazar. I would only say, Mr. Chairman, thank you
for holding this hearing. Thank you as well for holding the
hearing yesterday on fuel costs and agriculture, and Senator
Harkin, thank you as well.
And to Mr. Christopherson and Mr. Andrew, I look forward to
working with you on issues relating to agriculture, and matters
relating to utilities and making sure that the parts of America
that are sometimes forgotten are not forgotten in your minds or
in the minds of this committee or this country. I look forward
to supporting your nominations.
The Chairman. Gentlemen, before I ask you to present any
opening statements, would you both raise your right hand? Do
you solemnly swear the testimony you're about to give before
this hearing today will be the truth, the whole truth and
nothing but the truth, so help you God?
Mr. Andrew. I do.
Mr. Christopherson. I do.
The Chairman. To each of you, do you agree that if
confirmed you will appear before any duly constituted committee
of Congress if asked?
Mr. Andrew. Yes.
Mr. Christopherson. Yes.
The Chairman. Mr. Christopherson, we will turn to you first
for any opening statement you wish to make
STATEMENT OF CHARLES R. CHRISTOPHERSON, JR., OF TEXAS, TO BE
CHIEF FINANCIAL OFFICER, U.S. DEPARTMENT OF AGRICULTURE
Mr. Christopherson. Thank you, sir.
Mr. Chairman, Senator Harkin, and distinguished members of
the committee, I am grateful and honored to be here today as
the President's nominee for the Chief Financial Officer of the
U.S. Department of Agriculture.
With me today are my wife, Colleen, and my eldest daughter,
Chelsey. We have three other children at home in Texas. We have
Alexa, age 8, Chase, age 4, and Caleigh, age 2. I apologize
that they cannot join us today. However, if Caleigh and Chase
were here, I believe that they would be much more entertaining
than my opening statement.
I am humbled to be considered for a position with the
Department of Agriculture. The myriad programs of the USDA
affect the lives of all Americans, and they have affected mine.
I was born in the farming community of Twin Falls, Idaho. The
majority of my family, including grandparents, father, brother,
uncles, aunts and cousins, still live in the greater Twin Falls
region. When I was young, my grandfather managed the largest
tractor repair facility in the area. At certain times of the
year, which was planting and harvesting, we would get calls in
the evenings or on weekends, and we would climb into the pickup
truck and head out to the farm to repair a tractor. So you can
say fairly young in my career I was already serving the farmer.
I have been exposed to the broad scope of the USDA
programs. Growing up, my parents were in the forest products
industry, and so therefore, they worked with the U.S.
Department of Agriculture's Forest Service. In my career I
became familiar with the USDA's Rural Development Agency while
I was employed with one of the largest rural telecommunications
carriers in the United States.
This telecommunications company provided a strong
foundation for my executive career. At this company the
executive management team mentored the managers and the
managers mentored their teams. The teams worked hard and the
culture accepted no less than the best performance. In this
environment, our small financial team implemented new
technology and reorganized processes to exceed current best
practice standards for a financial close. These adjustments
automated key processes that increased integrity of the
information. Reporting timelines were reduced from
approximately 20 days to 4 business days. We used cutting edge
technology to report information to the desktop computers of
our executives. The improvements also provided other benefits,
including a reduction in audit fees, quicker audit opinions and
fewer audit notes. Almost 15 years ago this was a remarkable
accomplishment for a public corporation and it was an honor to
manage this team.
Since that time I have had the opportunity to consult and
lead teams in the structuring of business processes,
information reporting, budgeting and management systems. Our
clients were several of the largest corporations in retail,
equipment manufacturing, mining, oil and gas, electric,
construction, telecommunications and government. I have held
executive management positions in corporate operations and
finance. I have served as an officer and director with the
titles of Chief Operating and Chief Financial Officer. Some of
these positions were in companies with added complexities due
to the blending of cultures of a new industry consolidation or
the resource management of a turnaround.
I fully understand that the USDA is one of the largest
entities in the United States with a financial structure and
support systems that have been perpetually modified since the
days of President Lincoln. This is a large and highly complex
organization. It has its challenges, but has a tremendous
workforce with experienced professionals.
It is my understanding that since 2002 we have received
unqualified clean opinions, and for the last year, for 2004, we
did so while meeting the accelerated November 15th due date.
This is a great testament to the financial team at the
Department of Agriculture. Also, I would be remiss if I did not
take the opportunity to publicly commend the employees of the
National Finance Center for their performance. Despite the
devastation of Hurricane Katrina and the deployment of
employees to backup sites, employees were able to process a
payroll for more than 560,000 Federal employees, and they did
this on time.
That said, there are challenges ahead and opportunities for
improvement. If confirmed by the Senate I will use my
experience to help the more than 1,700 members of the financial
team to find the processes that will increase the accuracy and
timeliness of information. My philosophy is that with better
information faster, we can address problems sooner and at a
lower cost. I believe that for any weakness in the systems and
controls we can find short-term solutions to minimize the
financial risk and find long-term economical solutions to fix a
problem permanently. In addition, not only should we measure
the performance of this financial organization against other
Government entities, but we should also measure it against the
business practices in the private sector.
This is a great opportunity to serve the United States. I
fully understand that the financial management of this
organization is no small task, and if confirmed, the
responsibility will not be taken lightly.
Thank you for your consideration, and I welcome your
questions.
[The prepared statement of Mr. Christopherson can be found
in the appendix on page 4.]
[The biographical information of Mr. Christopherson can be
found in the appendix on page 22.]
The Chairman. Thank you.
Mr. Andrew?
STATEMENT OF JAMES McRAE ANDREW, OF GEORGIA, TO BE
ADMINISTRATOR OF THE RURAL UTILITIES SERVICE, U.S. DEPARTMENT
OF AGRICULTURE
Mr. Andrew. Mr. Chairman, Senator Harkin, and distinguished
members of the committee, it is an honor to have been nominated
by President Bush to serve as Administrator of the RUS in the
rural development mission area of the United States Department
of Agriculture. I am further humbled by the experience of
appearing before this committee. Like you, agriculture has been
vitally important to my family, my livelihood and my community
for many years. And, Mr. Chairman, if I might say so, Mr.
Harrison and my mama would both be proud.
With me today is my wife, Mary. Next month we will
celebrate our 41st anniversary. Mary and I have two adult
children, a son living in Baltimore, a daughter living in
Atlanta. Mary and I live in rural Jenkins County, Georgia, near
the town of Millen. We moved there 37 years ago to help
preserve Mary's family farm after her father became seriously
ill.
I was born in Alabama and raised in a small southeastern
town called Geneva. After high school I left home and attended
the University of Alabama, where I earned a degree in business
administration. I also served in the Alabama Army National
Guard for over 8 years, six months of which I was on active
duty.
The value of hard work was instilled in me at an early age.
As early as age 10, I began helping my father in his small farm
equipment business, where I worked assembling implements and as
a mechanic's helper, back then called a ``grease monkey.''
Since that time I have had very few periods in my life when I
did not earn a paycheck.
Over the course of my career I gained experience in the
corporate world as well as small business owner. My corporate
experience includes work in sales and management for a large
electrical distribution equipment manufacturer, and financial
consultant in a brokerage division of a large insurance
company. Then after a period as marketing director for the
Georgia Electric Membership Corporation, I decided to start my
own business in the nearby town of Waynesboro, Georgia.
Over 28 years ago I established an agricultural irrigation
company that specialized in the design, sale, installation and
service of center pivot irrigation. Over time my business
expanded to include construction of agricultural and commercial
steel buildings. While growing my business, I was asked to
serve on the dealer councils of a steel buildings manufacturer
and a center pivot irrigation equipment manufacturer. After
more than 20 years I sold the business, and the new owners
asked me to remain as a consultant. I continued to consult for
that company and several other companies until my nomination by
the President.
In addition to my endeavors as a small business owner, I
was also involved in the various community development
activities in my county and beyond. I was a founding member of
the board of directors of a community bank, and I was also
serving as chairman of that board when we sold to a larger bank
that is dedicated to serving rural communities. I remained on
the board of the merged holding company until my nomination.
In 1976 I was elected to serve on the board of my local
electric cooperative, and I remained on that board for 25
years. During that time, I served two terms as an officer and
two terms as president. The board of my local co-op elected me
to represent the co-op on the board of Georgia Electric
Membership Corporation. I served as an officer and president of
that association until the board elected me to represent
Georgia on the board of the National Rural Electric Cooperative
Association, NRECA. I served 16 years on that board. Six of
those years I served as an officer, including two as president.
As president of NRECA, I served on the board of the National
Rural Electric Cooperative Finance Corporation, CFC, a
supplemental finance cooperative owned by the members.
If confirmed as Administrator of RUS, it will be the
culmination of my life experiences and my service to rural
America.
The Rural Utilities Service and its predecessor agencies
have earned a unique place in American history. By combining
Federal resources with the ingenuity of the American people,
RUS has brought reliable electricity, clear telecommunications
and safe drinking water to rural America.
Today our Nation is facing new challenges, and there is
still much more work to be done. Under the leadership of
Secretary Johanns and Under Secretary Dorr, I believe USDA
Rural Development has a unique opportunity to make major
contributions to the immediate and long-term future of rural
America. If confirmed as Administrator of RUS, I will use my
experience as a small business owner and industry leader to
ensure that RUS delivers its programs as efficiently as
possible so we can have the maximum impact on the lives of
rural Americans and communities throughout the country.
Mr. Chairman, and members of the committee, if I am
confirmed to this position, I will work with each of you to
earn your respect and your support as we work together to
strengthen America.
Thank you, and I will be happy to answer any questions.
[The prepared statement of Mr. Andrews can be found in the
appendix on page 6.]
[The biographical information of Mr. Andrew can be found in
the appendix on page 46.]
The Chairman. I thank both of you gentlemen.
Just a quick anecdote that my colleagues will appreciate.
In my conversation with Jim yesterday he was telling me, as
happens in all rural towns that each of you come from just like
I do, word spreads pretty quick when somebody is being
considered for something like this. They already think Jim is
the Secretary of Agriculture back in Jenkins County. He ran
into one of his farmer friends the other day in the post
office. The first thing he said to him was, ``You got to save
my FAS office.''
[Laughter.]
The Chairman. All of us have had that experience.
Mr. Andrew, the USDA Office of Inspector General published
a report on September 30, 2005 regarding the lending practices
of the RUS Broadband Grant and Loan Programs. The report
outlined areas of concern that suggest the emphasis of the
program had shifted away from the rural communities that would
not, without Government assistance, have access to broadband
technologies. Are you aware of this issue, and can you comment
on this matter?
Mr. Andrew. Yes, Mr. Chairman, I'm aware of it. I read the
report. I also read the response to it, and because I have not
been in a position to have any input to it, at this point I
don't think I'm qualified to speculate on a response to it. But
I can assure you that it is on the front burner of everything
I'll be looking at, and I'll be glad to work with you when I
get over--if I get over to the position.
The Chairman. What particular skills or work experiences do
you feel would make you uniquely qualified for this position?
Mr. Andrew. Mr. Chairman, as I said, beginning early on in
life, everything I've ever done in my life I think has worked
towards this particular job, both in the rural electrification
efforts and rural development and things I'm interested in in
rural development and rural communities. Living in a rural
community all my life I think prepares me for this.
The Chairman. Mr. Christopherson, I would imagine that your
experience in the management and operation of several
companies, some of them distressed companies, has impressed
upon you an appreciation for effective financial management.
Most of the businesses you have been associated with in the
past are of a much smaller scale than Department of
Agriculture. Can you comment on how you will provide effective
management and oversight for such a large institution, and how
your previous experience qualifies you for the position of
Chief Financial Officer?
Mr. Christopherson. Well, Mr. Chairman, there's no doubt
that this is a very complex organization with over 300
different programs and to account for those different programs
is going to be a difficult task. In addition, I don't have a
lot of exposure to the systems or what's happened necessarily
in the past, but it will be a very large task.
First of all, you know, I recognize out the door very
complex organizations. I've consulted for very large, very
complex organizations in my past, and gratefully, we were able
to add a great benefit to many of those companies. The nice
thing with this position is I'll actually have the chance to
focus only on the finance side. In my past I've had additional
responsibilities with these companies in both operations and
finance as we're moving through a turnaround or through an
industry consolidation.
The Chairman. As part of the Improper Payments Information
Act of 2002 all Federal agencies are required to annually
identify programs susceptible to improper payments, and to
implement statistical projections or mitigation plans. The
Office of Inspector General recently found that the Office of
Chief Financial Officer did not provide USDA agencies with
prescriptive and detailed guidance to assess programs and
activities acceptable to significant improper payments, thus,
likely limiting OCFO's ability to monitor and limit improper
payments.
Could you please comment on the importance of limiting
improper payments and expenditures and how you would address
providing agencies with the USDA the necessary guidance to
assess programs susceptible to improper payments?
Mr. Christopherson. Well, any time there's improper
payments, for a financial person--and I'm sure for taxpayers--a
light goes off on our head and we're all worried about leaks in
the system or what that could affect. In the battery of the
information I've actually received over the last couple of
days, there was a report that came out that was, you know, a
FSA report that actually talked about this subject, and it
appeared that the issue was addressing clarity in instruction
and to be concise. I would expect that with multiple programs
that you're going to have some issues in that area.
Upon confirmation, I am happy to look into this area, am
happy to make sure that the instructions that we give, as
stewards of the taxpayers' monies, are very concise and that we
put out report cards and check forms and have the right
information delivered to our programs so that they can function
properly.
The Chairman. As I mentioned to you yesterday in our
conversation, you have a wealth of experience in the area of
financial management, but I think what you are going to find at
USDA, we operate a lot differently from the way the private
sector operates, and there is going to be a real challenge in a
number of areas. This is one area, improper payments and
overpayments, that I think is going to merit a lot of your
attention, because while we want to do what the farm bill
requires us to do relative to the payments to our farmers, it
is always an area that can be abused, so I will hope that you
will give this primary importance.
Senator Harkin?
Senator Harkin. Thank you very much, Mr. Chairman.
I want to congratulate both of you on your nominations and
welcome you here today. You are here on a very special day here
in Washington, D.C. Today is a special day. It is a day noted
on calendars all across the country. Today is a day celebrated
in song and verse all over America. Today is a day when the
people of Georgia and the people of the United States pause to
give thanks for a very dedicated public servant, for today is
the birthday of our chairman, Saxby Chambliss.
[Applause.]
The Chairman. I think there is some collusion among our
staffs.
Senator Harkin. I think so.
[Laughter.]
Senator Harkin. I have been told this is the 10th
anniversary of your 39th birthday. Well, happy birthday, Mr.
Chairman, and many, many, many more.
Well, again, welcome. I am sure that you will both get
through fine. I do not know Mr. Christopherson; I have met
before maybe in passing, I do not know particularly. I know
that Mr. Andrew and I have met in the past when you were on the
NRECA Board for all those years and on the Agricultural
Committee, so I congratulate you both.
I just have one thing that I just wanted to cover, Mr.
Andrew, with you, and that has to do with broadband. In the
2002 Farm Bill, there is a Section 6103 that we put in, both
the Senate and the House, we worked together on it. It is in
the final version of the farm bill. It is law now. It set up a
loan program for broadband technology in rural areas. We put in
$2 billion in sort of a revolving loan fund, $2 billion. Our
goal was to get broadband into rural America as fast and as
rapidly as possible. Well, not much happened. Things sort of
dragged along, not much happened.
In April of 2004 President Bush spoke to a rural
development conference in Des Moines, Iowa. Senator Grassley
and I were both there, Congressman Latham, a few others. And in
his speech the President said that his goal was to have
broadband to all of rural America by 2007. Well, I applauded
very loudly for that, as others did. After the speeches and the
President shook hands with people, then he came behind the
curtain. And his people came out and asked if I wanted to say
goodbye to the President. I said, ``Sure.''
So we went behind the stage, and it was Senator Grassley
and I were both back there. The President came by and just
chit-chatted a little bit. I said to the President, I said,
``Well, Mr. President, I really appreciate what you said about
getting broadband out by 2007.'' I said, ``But, you know, you
might run into a little problem.'' And I sort of smiled at him.
He said, ``Well, what's that?'' I said, ``Well, there's a
provision in the farm bill; we put in $2 billion to do that,
and quite frankly, the Department of Agriculture has been
dragging its feet.'' At that time--this was April of 2004--we
had about $1.6 billion, 1.7, that had been unexpended. They
only expended just a few hundred million at that point. And so
I told him that. And I said, ``I have been hearing from people
around Iowa, who want to get these loans, that want to expand
broadband, and the red tape is just endless.'' Senator Grassley
chimed in and said, yes, he has been hearing the same thing.
The President, of course, is very interested. He called
over his staff and said, ``Get this down and let us look into
that.'' And so we gave it to some staff person that came over
and we told him what it was about. That was in 2004, April.
Now we are in November of 2005. There is now still about
1.4, 1.5 billion dollars still left in that fund. I have been
tracking this because I just cannot understand why we cannot
move a little bit better.
And so I began asking questions about how we implement and
how RUS--this is under your jurisdiction, under RUS--how we
implement it. This is not in the law. These are the rules that
RUS came up with. One, that the equity and cash requirements
are too high and unreasonable. RUS requires that companies have
at least one year's cash balance in the bank to cover the
entire operations of the company. Even if the company has non-
broadband stuff, they have to cover that too, so not even the
broadband, all operations of the company. So it has resulted in
kind of a situation where a company seeking a $5 million loan,
a small company seeking a $5 million loan has to have $5
million in the bank. If they have $5 million in the bank, why
do they need a loan?
Further, in determining the cash requirement, RUS does not
take into account actual revenues of a company. For example,
you could have a small company that already has 10,000
customers. They want to extend broadband out, but they cannot
put down the revenue base from the 10,000 customers as a
monthly revenue stream. I know it sounds bizarre, but this is
what is happening.
Requirements in the application process in terms of how the
public notice goes out. The public notice goes out, and then
what happens is it takes 12 months. In fact, I have it here.
The review applications have been between 6 to 9, even 12
month, before even hearing back from the Agency on their
application. In the meantime what happens is a competitor out
there sees that, knows that they are going to apply for this
loan, and they sneak in there in front of them.
I can go on and on. There is a whole bunch of things
happening on this. A September USDA Inspector General report
had a number of complaints about the administration of this
program. Nothing seems to happen. I have been on this thing for
a year and a half or two now on this, and nothing ever seems to
happen. I hope I do not sound too cynical, Mr. Andrew, but it
almost sounds to me like the big cable companies and the big
telephone companies that are not servicing rural America, but
like to go downtown, they like to go into our towns of 15,000
and 10,000, they like to service a downtown area. They like
that. They get that. But like the old rural electrics, they do
not want to go out to that farmstead out there. They do not
want to come to my hometown of 150 people. They do not want to
do that. But they will go downtown and pick those off like
that.
Again, I do not want to sound too cynical, but it almost
sounds like the cable companies and the big phone companies
have gotten to somebody, and said, ``We do not want this
program to work.''
So, Mr. Andrew, I am hopeful. I know you are down the
pecking order on this thing, but you are still the head of RUS.
You have a long history in knowing what rural electric did for
America.
We were not risk adverse when we put telephone lines out to
our farmsteads and our small towns in America. We knew there
was risk in doing that, but we managed it. RUS manages rusk. It
is not risk adverse. And that is what I am asking in broadband,
manage the risk. Do not be so risk adverse that you say, ``We
cannot give a loan out there because we want to make absolutely
100 percent certain that the company we give it to will not
default and will not fail.'' Some of them will. Some of them
will. Some of them will go under and probably sell off to
somebody else.
I just wanted to get that off my chest because I have been
so frustrated. Now you are going to take over that position
there, and to the extent that you are in that position, and
when you come back up here next year or when you appear before
our Appropriations Committee on Ag Approps, on which is also
sit, I am going to be asking the same questions. I will not be
asking it just of you.
I brought this up with everyone. Mr. Dorr sat here. I will
not go into all that history, but he sat there and he talked
about broadband and getting broadband out. Secretary Johanns, I
have known Secretary Johanns for a long time. He says the same
thing. When the President of the United States is interested in
it, I say, well, something is going on, and I do not know what
it is.
So I hope that you can take that message back, and I hope
you can take the wonderful experience you have had, and the
leadership you have had in NRECA and rural electrics, and say,
``This is what we need to do with broadband.'' Broadband to
rural America today is what rural electric was to rural America
50, 60, 70 years ago, and we have to get it out to our small
towns and communities and our farmers.
Mr. Chairman, thank you for your indulgence. I do not
really have a question, I guess. Just I hope you will--oh, yes.
Will you personally work to modify the regulations and
application process--
Mr. Andrew. Almost dodged it.
Senator Harkin. --to get this thing going?
Mr. Andrew. Almost dodged it. Senator Harkin, let me say
this. There is a lady sitting behind me that shares your
concern. There is a gentleman sitting behind me also that once
introduced me saying that I lived so far in the country you had
to go towards town to go hunting. And that's the size of it.
When she tries to get on the Internet, and she can go and
start the dishwasher to running before it ever gets up and
running again, then I hear about it.
Senator Harkin. Yes.
Mr. Andrew. So it is not only you who will be asking these
questions, but so will she.
[Laughter.]
Senator Harkin. Good.
Mr. Andrew. And it's on the front burner, and I guarantee
you that I will look after it, and I would like to come discuss
it with you. I would like to discuss ideas that we might come
before it. Now right now I'm not qualified to have any.
Senator Harkin. I understand that.
Mr. Andrew. But I'd like to come forward with some, and I
know it's an issue with you, and I'd like very much to discuss
it with you.
Senator Harkin. You listen to her every day.
[Laughter.]
Mr. Andrew. Don't you?
[Laughter.]
Senator Harkin. Thank you.
Mr. Andrew. Thank you, sir.
The Chairman. Senator Crapo?
Senator Crapo. Thank you very much, Mr. Chairman. I do not
really have a question either. I have a comment on another part
of the farm bill in 2002 that we have not been able to get
implemented well that is very important and dear to me, and I
just want to make it something that both of you are aware of
because I think that both of you may have the ability to help
us make it a reality.
It is program that we authorized in the 2002 Farm Bill
called Project SEARCH. What it is, is a project that focuses on
helping small communities, communities of less than 2,500
people, to meet the environmental mandates that they have to
meet under other laws such as the Clean Water Act, the Safe
Drinking Water Act and so forth. What we find is that many of
our rural communities face these mandates under Federal law,
but the cost of the systems that they are required by Federal
law to implement are not achievable because they do not have
the economies of scale that larger population centers have that
can finance them.
So these small communities then get fined because they
cannot come up with the money to meet the mandates of Federal
law, and it is a never-ending downward spiral for these small
communities.
So a number of years ago, about 5 or 6 years ago, I got a
project for Idaho started, and we called it Project SEARCH. The
acronym is Special Environmental Assistance for Regulations of
Communities and Habitat Grants Programs. I do not know how we
came up with that, except that I guess we liked the acronym and
we found some words to meet it.
What it means is we were trying to find some simplified
ways to get grant monies to small communities so that they
could get past all the red tape and get down to getting the
resources to be able to meet some of these Federal mandates,
and particularly in the infrastructure that they need for clean
water and safe drinking water. It is similar to broadband. The
infrastructure that is so critical in our rural communities is
what will help them participate in the economy of our Nation
and of our world, and we have to be able to assist them.
Anyway, we got this in the farm bill, and then we did not
fund it. It is authorized but not funded. So it is really not
USDA's fault right now that they are not implementing it
because Congress has not give the USDA the dollars to do it
with. However, getting those dollars is not just our task. I
was also talking to my chairman and our ranking member here to
help on this program because at some point, and especially as
we work on the next farm bill and as we work with our
appropriators, I am going to be asking for your help to try to
get the funding for this program so that the USDA can implement
it. It also helps if the USDA is interested in this program and
helping request in its budget requests for this to be funded so
that they can implement it.
I just wanted to raise this to your attention and let you
know--I will conclude by non-question comment here with this--
we did get this for the State of Idaho. We got a millon dollars
about 4 or 5 years ago as a pilot project to see how it would
work, and it was a phenomenal success. There are communities,
2,500 and less communities all over Idaho who were literally
saved. We put together a team that evaluated the requests for
participation in this grant program. They had way more
applications for this million dollars in Idaho than there were
dollars to go out. But the small number of communities that we
were able to give a little money to, were literally saved,
sometimes from litigation and from fines, and frankly, they
were able to implement in their communities the kinds of
systems and infrastructure that they needed to help improve the
quality of life and to meet the Federal mandates and to get
themselves back on course.
I just wanted to raise your attention to Project SEARCH,
and I want you to know that I hope to see it coming forward in
next year's budget requests from the Department, and I will
commit to help from my end to try and see if we cannot get the
money in the budget for it.
Thank you.
The Chairman. Thank you.
Well, gentleman, as I said earlier, you have got a real
challenge ahead of each one of you in these respective
positions, and I am very confident that based on the
qualifications of each of you, that you are going to be able to
meet those challenges, and we as a committee are here to help
you. I hope you will never hesitate to call on us to work with
you on any particular issues that you have within your
respective offices, and we look forward to dialogues with you.
At this time I would ask unanimous consent that we report
these two gentlemen out of the committee, these nominations in
a favorable way, with the understanding that any member of the
committee who wishes to submit questions can do so by the end
of today, and that you will respond to them immediately. Is
there objection?
[No response.]
The Chairman. If not, they will be reported out.
This hearing is concluded. Thank you very much.
[Whereupon, at 9:44 a.m., the committee was adjourned.]
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A P P E N D I X
November 10, 2005
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DOCUMENTS SUBMITTED FOR THE RECORD
November 10, 2005
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QUESTIONS AND ANSWERS
November 10, 2005
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