[Senate Hearing 109-488]
[From the U.S. Government Printing Office]

                                                        S. Hrg. 109-488



                               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


28-422                      WASHINGTON : 2006
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                   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

            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


                            C O N T E N T S



Nominations of Charles R. Christopherson and James M. Andrew.....    01


                      Wednesday, November 10, 2005

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


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


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



                      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.


    The Chairman. This hearing will come to order, and good 
    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 
    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 
    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.


    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 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 
    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 
    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 
    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 
    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


    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 
    [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?

                         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 
    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 
    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 
    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.''
    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 
    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 
    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.
    The Chairman. I think there is some collusion among our 
    Senator Harkin. I think so.
    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 
    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 
    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.
    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.
    Mr. Andrew. Don't you?
    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 
    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.]

                            A P P E N D I X

                           November 10, 2005








                           November 10, 2005























































                         QUESTIONS AND ANSWERS

                           November 10, 2005