HEADQUARTERS AND FIELD EMPLOYMENT

Mr. WHITTEN. How do you expect that the ratio between headquarters staff and field staff will change under the current terms of the hiring freeze?

Mr. HOUSTON. Employment data, for the first month of the President's Government-wide hiring freeze, indicates that the FSQS fulltime permanent staff dropped by 110 positions. While headquarters staff did not have the same attrition rate as the field staff, both were decreased and no significant change to the ratio between headquarters and field staff occurred. We have now received revised Agency employment ceilings and the President's hiring restrictions have been rescinded. However, I have instituted an Agency employment freeze for the appropriated activities to manage within the anticipated funding level, including a reduced pay raise supplemental request. Additionally, to ensure that field employment does not drop at an accelerated rate to maintain headquarter staff levels, I have prohibited the movement of Agency personnel from field to headquarters positions, or from line to staff positions located in the field. This is to help ensure the delivery of inspection services.

FINANCIAL MANAGEMENT OF NONFEDERAL FUNDS

Mr. WHITTEN. Please describe in some detail your financial management of non-federal funds. For example, please discuss the source of reimbursements and trust funds and the range or limits of your authority for using these funds.

Mr. HOUSTON. The Food Safety and Quality Service received a total of $89,528,109 of non-federal funds in fiscal year 1980-$31.9 million from reimbursable activities and $57.6 million from trust fund activities.

Reimbursement funds are derived from meat, poultry, and egg processing establishments that request overtime inspection services from the Agency. The Federal Meat Inspection Act, the Poultry Products Inspection Act, and the Egg Products Inspection Act require the provision of mandatory regular inspection services. These acts also authorize USDA to provide overtime inspection services using appropriated funds which will then be reimbursed by the industry. In fiscal year 1980, the Agency was reimbursed $31.6 million by meat and poultry plants and $.3 million by egg products establishments for the cost of providing overtime inspection services.

Trust funds are received for agricultural grading services provided by the Agency to producers of fruits, vegetables, meats, dairy and poultry products. The Agricultural Marketing Act of 1946 authorizes USDA to inspect, certify, and identify the class, quality, quantity and condition of agricultural products when shipped or received in interstate commerce. These services are of a voluntary nature and are provided to the industry upon request. USDA is authorized to assess and collect fees to cover the cost of these services in order that agricultural products may be marketed in an orderly manner.

Reimbursements to the appropriation and trust fund receipts are

FSQS by USDA's National Finance Center. They are deposited into accounts maintained for these purposes in the U.S. Treasury, and may be used only for the program purposes for which they were collected, including the costs of customary agency administrative overhead. Office of Management and Budget regulations provide that a charge which recovers the full cost to the Federal Government should be imposed for a service which provides special benefits to an identifiable recipient, above and beyond those which accrue to the public at large. These charges must include all direct and indirect costs of providing services. These regulations also require agencies to review costs of providing a special service every year and to adjust fees as necessary to recover full costs. FSQS annually reviews and determines the direct and indirect costs of providing reimbursement and trust fund services and establishes such fees as will be reasonable to recover the costs of the services rendered.

FSQS operates a comprehensive system of administrative control over all of its resources. This system is required pursuant to the provisions of the Antideficiency Act, and is designed to ensure that obligations do not exceed the resources available.

Obligations for annual appropriated funds and related reimbursements are planned by quarters during the fiscal year and approved by the Office of Management and Budget. The Antideficiency Act specifically exempts trust funds from the apportionment process; however, all of the funds-appropriated, reimbursements, and trust-are subject to the rest of the financial management process. Allotments of these funds are made at the Administrator's level, the highest level in the Agency, to ensure that overobligation of resources does not occur. Allocations of these funds within the allotments are made at the Deputy Administrator or Division Director level in their respective program or administrative areas of responsibility. They are required to conduct their operations within their allocation levels. They are required to submit annual operating plans for Agency review and approval, detailing their plans by quarter and/or accounting period and by each type of expenditure. Status of funds reviews are held on a monthly basis with top Agency management officials to report the financial and employment results by fund, program, and organizational unit. Comparisons of the actual obligation data reported from the accounting system are made against the operating plans. Progress is monitored and projections to the end-of-year are developed to enable management officials to make decisions that may be required in order to carry out lawful Agency objectives within available resources by fund and activity.

EQUIPMENT

Mr. WHITTEN. In the January budget you were requesting nearly a tripling in the funds available for equipment, from $954,000 to $2.8 million. What is your 1982 estimate under the revised budget, and what will the additional funds buy?

Mr. HOUSTON. While the original budget had $2,820,000 listed for equipment, the revised budget has $2,188,000. Of the $632,000 reduction, $582,000 came out of the residue program and the remainder out of the consumer awareness initiative. The revised residue

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program increase budgets $1,493,000 for equipment, while ongoing programs require the remaining $695,000.

The $1.5 million for equipment in the residue progrm involves $1 million for improvements to the smallest of our field laboratories, the Western laboratory, which presently is unable even to meet certain GSA safety standards. The remaining $500,000 will be required to provide laboratory equipment necessary for analysts to be added in the other two field laboratories.

OIG REPORTS

Mr. WHITTEN. In the January budget you mention that two OIG reports were in progress. What is the expected completion date of these two reports?

Mr. HOUSTON. The two OIG reports in question dealt with the falsification of meat and poultry export certificates. The first surveyed the Import-Export program to determine whether meat and poultry export certificates were being extensively falsified. It was submitted to FSQS on October 7, 1980 for review. The report will be finalized when the Agency submits its response later this year. The second report, issued November 5, 1980, concerned allegations of export certification falsification at a specific plant in Guatemala. USDA's Office of the General Counsel referred the matter to the U.S. attorney in Miami on January 6, 1981, for possible further action. There has been no final disposition of the case.

GRANTS TO STATES

Mr. WHITTEN. How much did you request of the Department and OMB for increased operating costs in the grants to States program? Mr. HOUSTON. FSQS requested an increase of $2,859,000 for increased operating costs in the grants to States program from the Department and from the Office of Management and Budget. This increase was maintained in the present budget.

Mr. WHITTEN. Do the Department and OMB treat this item as a mandatory expense?

Mr. HOUSTON. Because of the nature of State pay raises, that is, that they are mandated by State legislatures for all State programs, the increases in operating costs cannot be controlled by our agency.

Because of this, we view these increases as mandatory and present them as such to the Department. Although these increases were denied before 1980, the Department and OMB now agree with our perception of the necessity of this type of increase.

Mr. WHITTEN. The grants to States program funds up to 50 percent of State costs. How are these costs defined and verified? Mr. HOUSTON. The FSQS inspection program monitors State programs to assure consistency with Federal standards and effective use of resources. To accomplish this, we meet with State policy officials at least annually; with State program officials at least quarterly; and continually review and revise State inspection program budgets and assess State progress in reducing or avoiding

costs.

Mr. WHITTEN. Are there any States that receive less than 50

Mr. HOUSTON. FSQS funds 50 percent of the costs for every State conducting an inspection program and asking Federal assistance. No State receives less than 50 percent, with the recent exception of Wyoming, which through fiscal year 1980 paid for its whole program. Beginning in 1981, Wyoming will resume requesting Federal assistance.

Mr. WHITTEN. Please provide for the record a table which will show the distribution, by State, of grants to States for 1980.

[The information follows:]

Federal-State Cooperative Agreements, Grants to the States Fiscal Year 1980

CONSUMER AWARENESS INITIATIVE

Mr. WHITTEN. Under the revised budget, do you still have a consumer awareness initiative?

Mr. HOUSTON. Yes, we do. However, the revised budget before you now does not include an increase for major initiatives in consumer education or awareness. We must have a consumer awareness initiative under Executive Order 12160. The order requires that an agency's consumer program contain the following components: consumer affairs perspective, consumer participation, information material, education and training, and complaint handling. We have a consumer affairs representative who oversees the implementation of the order to ensure our responsiveness to the