Administration of the Federal Aid Program

Jamie Rappaport Clark

Statement of Jamie Rappaport Clark, Director, the U.S. Fish and Wildlife Service, Department of the Interior, before the Senate Committee on Environment and Public Works, regarding Administration of the Federal Aid Program

July 19, 2000

Thank you for the opportunity to discuss the Fish and Wildlife Service's administration of the Federal Aid in Wildlife Restoration Program (Pittman-Robertson Program) and the Federal Aid in Sport Fish Restoration Program (Dingell-Johnson or Wallop-Breaux Program), and the pending legislation to revise our administrative authorities for those programs, H.R. 3671 and S. 2609.

The Federal Aid program became the source of considerable controversy following testimony by the General Accounting Office before the House Resources Committee last year, and often unfounded charges by various organizations. We acknowledge many of the concerns GAO pointed out in their House testimony last year. Where they identified problems--and there were problems--we have worked aggressively, and we believe, successfully, to resolve them.

We believe enactment of legislation to clarify authorities for administration of the Federal Aid program could be beneficial to the program, and play an important role in reassuring America's sportsmen and sportswomen that their tax dollars are being used for the intended purposes. However, there are three elements of both bills with which we have considerable concern, which I will detail later in my statement. We could support enactment of either bill if these concerns are addressed.

At the same time we acknowledge many of GAO's concerns, I want to assure the Committee that the sensational charges made in elements of the news media and by some organizations are completely unfounded. No funds have been stolen, no grants have been made to animal rights or anti-hunting groups, nor has any illegal expenditure been made with these funds.

As you know, the grant programs established under the Federal Aid in Sport Fish Restoration Act (Wallop-Breaux Act), Federal Aid in Wildlife Restoration Act (Pittman-Robertson Act), Clean Vessel Act (pump-out), and the Coastal Wetlands Planning, Protection and Restoration Act provide a broad array of benefits to the States. These funds have helped states restore fish and wildlife habitats, develop thousands of boating access sites and sanitation pumpout facilities, and restore thousands of acres of wetlands. In addition, millions of the Nation's young hunters have taken hunter education courses offered by the States, making hunting a safer family activity.

Funds for these programs are collected from excise taxes paid by sportsmen on firearms and ammunition, archery equipment, fishing tackle and motorboat fuels. These programs are administered by the Service through our Division of Federal Aid. They are perfect examples of user-pay, user-benefit conservation mechanisms and they are being studied by other countries as potential models for their own conservation efforts.

This year, the Fish and Wildlife Service provided almost $500 million to states to manage the Nation's fish and wildlife resources and related programs from excise taxes provided by sportsmen. Since the beginning of the first grant program--the 60 year old Wildlife Restoration program--over $7 billion has been provided to the States.

I would also like to point out that the Federal Aid program picture is not entirely a negative one. Additional funds have been made available for allocations to the States as a result of a Federal Aid initiative. In 1998, the Service initiated a Working Group, comprised of representatives from the offices of Senator John Breaux and Congressman John Tanner (representing the Congressional Sportsmen's Caucus), International Association of Fish and Wildlife Agencies (IAFWA), Wildlife Management Institute, Archery Merchants and Manufacturers Organization, Internal Revenue Service, the Customs Service, and the Bureau of Alcohol Tobacco and Firearms, to review the accuracy and timing of excise tax collections and deposits in the Wildlife Restoration Account.

As a result of this Working Group's efforts, more than $20 million was recovered and transferred to the Account. These funds were allocated to the States in fiscal year 1999.

Our efforts also identified ways to transfer excise taxes to Treasury more rapidly from the Internal Revenue Service. Over $10 million in excise tax collections are now available for apportionment a year earlier than in the past. These earlier transfers lead to more interest accrual to the accounts. In addition, we initiated with Treasury's Bureau of Public Debt, a reconciliation of the Sport Fish Restoration and Boat Safety Accounts within the Aquatic Resources Trust Fund, which has returned significant funds to the Sport Fish Restoration Account. Other efforts, such as coordinating closely with the Corps of Engineers to identify their long-term construction schedule under the Coastal Wetlands Planning, Protection and Restoration Act, led to improvements in investment strategy for those funds, in that we were able to invest at higher rates.

We have also initiated, with assistance from the States and industry, a training program for IRS District Office Excise Tax agents who are responsible for monitoring collection of the program excise taxes. The program is designed to give them a better understanding of what items are to be taxed and how the revenues are used by the States.

We feel that our oversight and management of revenues has been aggressive, innovative and productive, resulting in many tens of millions of dollars being available for the Federal Aid programs. We look forward to the time in the near future when we will be able to say the same of our internal operations related to these programs.

I want to begin my detailed discussion of this issue by pointing out that a considerable number of changes to improve administration of the Federal Aid program were underway at the time the 1999 GAO review began. Additional actions have been taken as a result of the 1999 GAO House testimony. I would note that we have not received a final report from the GAO on their current review of the program, although I have formally asked for it in writing.

In 1993, GAO released a report on administration of the program that made the following recommendations: 1) require the Washington and Regional offices to document and support all administrative cost charges made to the Federal Aid program; 2) equitably allocate among all applicable programs the costs of initiatives that benefit the Service or Department as a whole; and 3) follow established policies and procedures when selecting special investigations (which later became the Administrative Grants and Director's Conservation Fund), consider the priority needs of the States in making these grants, and monitor them to ensure objectives are achieved and results disseminated.

Later that year, we initiated a new budget review process to ensure that all requests for Federal Aid funds were adequately justified, and the Federal Aid program began maintaining files of all direct charges to the Sport Fish Restoration program.

In 1994, we implemented another of the GAO recommendations by revising the formula by which Service programs were assessed for general administrative services, which reduced amounts assessed against the Federal Aid office, and we required that calculation of the amount needed for these general administrative services be reviewed annually. We ended the practice of charging overhead costs to the State grants portion of the account, and implemented the practice of describing cross program initiatives involving Federal Aid in the Service's Budget submission.

We implemented another GAO recommendation by publishing in the Federal Register policy and procedures for funding special investigations, redesignated as Administrative Grants; this was published annually from 1994 until the program was terminated in 1999. We also referred all proposed grants which met the criteria to the Grants in Aid committee of the International Association of Fish and Wildlife Agencies, (IAFWA) which represents all of the State wildlife agencies, in order to receive their advice on priorities for funding these programs, again as recommended by GAO.

In 1997, we issued guidance to Regional Directors relating to approvals for charges against the Federal Aid accounts.

Taken together, these initiatives represent an agency response to every recommendation that was made by GAO in 1993, and in a manner consistent with those recommendations.

We also had our own on-going efforts to improve the program. In 1996, we initiated, apart from the GAO recommendations, a new program to audit the State's use of funds apportioned under the Federal Aid program. We also began to design a new grant management information and tracking computer system.

In September of 1998, we published a Federal Register query to solicit public input to identify better ways to manage administrative grants. Subsequently, we decided to terminate the administrative grants program. In a May 12, 1999, letter to the IAFWA, the Service announced its plans to eliminate the grants program due in part to concerns received in response to the Federal Register notice regarding the management of these grants. In July, we published a Federal Register notice terminating future Federal Aid administrative grants.

During the Fall of 1998, in our review of the uses of administrative funds, we became concerned about the Director's Conservation Fund. While these funds supported many worthwhile conservation projects, it was decided to reduce the funding available during Fiscal Year 1999 and to terminate the program for future years. Notification was made on this decision in March 1999.

Another initiative of the Service was the establishment of a State/Federal Review Team to review administration of the Federal Aid program. During a meeting with the IAFWA in March 1999, the Service initiated an oversight evaluation of Washington and regional-level administration of the Federal Aid program to be conducted in cooperation with our State partners. The State/Federal Review Team met formally for the first time on July 27 and 28, 1999, and then again on August 4, 5 and 6. The Team identified ways in which the Federal Aid program could be more efficient, effective and responsive. During this evaluation, the Review Team also considered current and previous GAO findings and recommendations to improve program management.

In addition, we have established a new audit program for grant funds in all the states. The audit cycle will complete in-depth audits of all States by the end of Fiscal Year 2001. The audits are being conducted independently by the Defense Contract Audit Agency. These audits are coordinated fully with the Office of Inspector General and they cover only audit areas not covered by state auditors under the Single Audit Act. Many state departments of natural resources have had little or no audit coverage in over 15 years.

I want to stress that all of these actions and decisions were taken well in advance of receiving any input from the GAO from its 1999 review of the program.

I would now like to address the specific issues raised by GAO in their House testimony last year. First, GAO's testimony refers to an $85 million discrepancy as the Service attempted to reconcile accounts in its new grant financial management and information system. However, this figure was not then accurate, and the nature of the actual discrepancy must be put in context. Many of these errors represent differences among balances in a system maintained by the Division of Federal Aid and the official administrative accounting system used to track all Service funds.

Since 1986, the Division of Federal Aid had maintained its own records rather than rely upon the Service-wide Federal Financial System (FFS) as the primary system to track its funds, as Federal Aid did not believe the FFS system provided the information it needed. The primary difference is that the Division of Federal Aid kept track of amounts obligated for transfers to the States, while the FFS system tracked actual expenditures (i.e. the transfer of the funds to the States). The obligations and expenditures did not occur at the same time, leading to apparent discrepancies in the bookkeeping when records from one system were compared to the other.

In 1998, in order to address this and other problems, the Federal Aid Office and the Service's Division of Finance commenced a joint effort to identify the specific grant records, correct data errors, and most importantly, create an interface between the systems. This reconciliation has been a time and labor intensive effort, but we have fully reconciled these records, with every dollar accounted for. We are also confident that we will complete implementation of the new interface later this month, and that it will eliminate recurrence of this problem.

It is important to note here that the error was in how Federal Aid maintained its own set of books, which were not reflective of how money was actually expended by the financial arm of the Service, and that no funds have been lost.

Second, to address the financial management weaknesses within the Federal Aid program that the GAO identified, we established six internal working teams and a management structure structure
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to guide the efforts of the teams. The structure and approach are based upon discussions held with Federal Aid representatives and auditors for both GAO and the Inspector General. These teams focused on financial reconciliation, grants management, audit resolution and the Federal Aid Information Management System (FAIMS). Recommendations from each team are being implemented into the program.

Third, GAO's testimony identified a "missed opportunity to earn over $400,000 in interest income." GAO is referring to an advance payment of $9.7 million the Service transferred to the Bureau of Census for work on the National Survey of Hunting, Fishing and Wildlife Associated Recreation. The advance payment represented the amount we believed at the time was necessary for the Bureau of the Census to ensure on-schedule completion of the survey. We recognize that interest income was lost. To avoid similar future losses, we have, in coordination with the Bureau of Census, developed a cash forecast of the needs to support the survey work and instituted a policy to make only those payments essential for incremental progress in carrying out the survey. Thus, interest income will not be lost in the future.

Fourth, GAO's testimony noted travel discrepancies in the Office of Federal Aid. Concurring that this problem warranted immediate attention, the Service rescinded the open travel authorization for the entire office, re-apprised all staff of Service travel rules and regulations, and required all Office travel to be approved by the Assistant Director for External Affairs until last month, when the new Division Chief was in place.

We also reviewed all international travel between 1994 and 1999, and found 6 trips which appeared related more to conservation in the host nation than the administration of the Federal Aid program. Those costs have been repaid to the Federal Aid accounts.

Fifth, GAO's testimony noted that the Service does not have a routine audit program for the review of the use of administrative funds. In 1998, the Service initiated efforts with the Defense Contract Audit Agency (DCAA) to establish such an audit program, but DCAA ultimately advised us they would be unable to develop this program. The Service agrees that an audit program for administrative funds is important and has contracted with an outside auditing firm to conduct such an audit. We expect to receive an interim report on their audit of FY 1999 administrative funds next month, and an audit of the current fiscal year's funds will begin following completion of the FY 1999 audit.

Another issue discussed by GAO was a stated lack of uniformity or guidance with respect to Service regional office uses of administrative funds. Although direct administrative support services constitute a legitimate use of administrative funds, the Service has sought to provide a workable degree of consistency - recognizing that our State clients and their needs vary dramatically from Region to Region. As noted earlier, we issued guidance on this issue in 1997. Thus, contrary to the GAO testimony, there was and is guidance on this subject.

We unfortunately must acknowledge that not all Regions followed this guidance. I have had a direct and pointed discussion about this with all of our Regional Directors following the House hearings, and believe this issue is resolved.

Lastly, GAO's testimony refers to an accumulation of "over $100,000 in contract generated fees, the disposition of which is unclear." The Service has thoroughly reviewed the contract in question and finds no ambiguity whatever regarding the "fees" generated under this contract. The contract specifically states that the Government pays to the contractor the costs of providing services to cooperators. The contractor is allowed to charge non-cooperators, primarily non-government organizations and private researchers, costs for copying, compiling, and mailing information they request. Thus, the "generated funds" are not "profits" to the contractor, but are fees the contractor collects to offset its costs.

Now, I would like to address the Service's use of administrative funds to provide grants. This has been one of the most contentious issues in the House Committee's review of the Federal Aid program. The Federal Aid in Wildlife Restoration Act authorizes the Service to use up to 8 percent of the funds in the program for administration and execution of the program. The Federal Aid in Sport Fish Restoration statute authorizes the Service to use up to 6 percent of funds (after making certain deductions) for necessary investigations, administration and execution of that program. Congress gave the Secretary and the States considerable flexibility to determine within the parameters of the law which programs or projects to fund. We acknowledge that our management processes for overseeing these grant funds were deficient. But we also believe that under current law the Service enjoys considerable leeway in identifying and funding timely and important conservation opportunities with these funds.

We would point out that the concept of awarding of grants utilizing administrative funding from the Sport Fish and Wildlife Restoration programs to provide information and assistance to the Service and the State fish and wildlife agencies has been an ongoing process, over many years, withstanding legal scrutiny from the Department of the Interior Solicitor's Office, and has been supported by State agencies.

As far back as 1955, the Solicitor's Office issued an opinion recognizing that administrative funds could be utilized to fund a project aimed at surveying the expenditures of boaters and anglers. In 1986, the Assistant Solicitor for Fish and Wildlife affirmed the 1955 opinion, and endorsed the concept that the funding of administrative grants was justified where the information developed from such projects would be valuable in administering the Federal Aid Program, and would be useful to States in determining the types of restoration projects for which Federal assistance was being sought.

Acquiring such information serves the administration of the Federal Aid program, and the authority for the Service to enter grant agreements for this purpose is delegated from the Secretary's authority under the Fish and Wildlife Coordination Act (16 U.S.C. 661), which authorizes the Secretary to provide assistance to and cooperate with Federal, State and public or private agencies or organizations for a broad range of fish and wildlife purposes.

While we recognized that corrective measures were needed to improve management of the Administrative Grant program, and began to identify better ways of managing the program prior to its cancellation, we maintain that the Service's use of administrative grants to fund special projects has served a valuable function to both the Service and the States in administering the Federal Aid program. Nonetheless, as I have already stated, we have terminated the Administrative Grants Program.

Both H.R. 3671 and S.2609 address this issue by providing a statutory basis for the grants. We have no objection to this, and would defer to the States as to the amount of funds which should be available for these grants.

The Fish and Wildlife Service took very seriously the criticism of our management of the Federal Aid program by the General Accounting Office, although as noted above we strongly disagreed with certain elements of their statement. We have taken a number of actions to improve the program since the GAO testimony, in response to their concerns and the recommendations of the Federal-State Review Team.

In part due to the Team's recommendation and in part due to our own on-going workload analysis, we have instituted re-alignments in both the Washington and Regional Offices which will place Federal Aid, Migratory Birds and other state-related programs under the same management. Until recently, Federal Aid was under the Assistant Director for External Affairs, who also supervises the Service's Congressional and Public Affairs programs. The time needed for these two activities makes it virtually impossible for this individual to provide effective day-to-day management or oversight of the Federal Aid program.

In addition, the chief of the Washington office of the Federal Aid program was assigned to other duties earlier this year, and then accepted a position at another agency. His replacement, an individual both familiar with the program and with a strong financial background, is now on board. Similarly, in the Regional Offices, the Federal Aid offices now report to senior managers with strong mandates.

This last year we have initiated cost saving measures in every area of the our administration of the program, returning $3 million of the funding available to us to the States for their use this year, and are actively pursuing ways to further economize in program expenditures. As part of this effort, we are initiating an analysis of the program operations nationally, with the assistance of an outside contractor, to determine the number of staff and the expertise needed to properly administer this program. We are also reviewing, and have met with the States regarding, ways to streamline compliance with Federal requirements relating laws such as the Endangered Species Act, National Environmental Policy Act, Americans with Disabilities Act, and the various civil rights statutes.

We believe that we have undertaken strong and effective action to address the problems within our Federal Aid office. We are not yet where we want to be, but we are getting there. We welcome the oversight provided by this Committee as an important element in ensuring that we operate operate
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these programs in an effective and efficient manner.

I mentioned at the beginning of my statement that we had three concerns over the pending bills. The first and most important is that in their effort to downsize our administrative effort, the bills do not provide sufficient funds to administer the program. Both bills provided $14,180,000 for FY 2001, and declining amounts over the next two years, after which time the funding level would increase with the cost of living. Currently, we are authorized not to exceed 8% of the Wildlife Restoration funds and not to exceed 6% of the Sport Fish Restoration funds for administration, or about $32 million annually.

We have proposed to reduce this to not to exceed 4% for each program, or approximately $18.8 million, and a language change that would provide for including the "small grants" programs statutorily created within the Sport Fish program as part of base on which the 4% is calculated.

We are thus proposing a 50% reduction in administrative funds under the Wildlife Restoration account, and a reduction of one-third in available funds under the Sport Fish Restoration account. However, we cannot go lower than this and properly run the program.

The House funding level, which is repeated in S. 2609, is inadequate. The House Committee majority decided that there should be 63 employees administering the program nationwide, with a budget of $10,000,000, and set forth in the Committee report the numbers of persons, titles and grade levels they felt were appropriate for each Federal Aid office. In contrast, we currently have an authorized full time employee (FTE) level for the program of 146, and due to our efforts to economize, approximately 120 people actually on board.

In negotiations after we strongly objected to this funding level, the majority staff offered to provide funding for the current staff, with a phase-down to a lower staff number. Among the information we had provided to the House Committee was that the total cost in salary and all benefits for an average Federal Aid employee was $76,000. They reached the $14,180,000 figure by on-the-spot multiplication of the $76,000 figure by the 57 additional employees now on the payroll, and adding that to the amounts they had previously calculated were needed for the 63 FTE program. They subsequently provided us with corrections to those calculations, and we have shared them with your Committee's staff.

However, in doing this, they provided no additional funds for overhead for these additional 57 employees. The very existence of these employees would result in additional costs to us for telephones, computers, rent, utilities and other indirect costs. The funding levels in these bills would realistically support approximately 85 employees, and could result in a Reduction in Force (RIF) for the Federal Aid program.

The most frustrating aspect of this for us is that there has been no public suggestion from GAO, the States, or any organization representing hunters, anglers or boaters - those who pay the taxes and benefit from the programs - that the Federal Aid program is overstaffed.

We therefore strongly urge the Committee to adopt the reduced administrative funding levels for these programs that we have proposed, rather than the unworkably lower amounts called for in the two bills. We support the requirements in both bills that a budget justification for use of these funds be submitted to the authorizing Committees each year, so you will have every opportunity to review how we propose to spend these funds. Furthermore, if the review of the program staffing and expertise needs now underway results in our finding ways to operate the program at less cost, we will share that information with you and reduce our spending accordingly. However, that review cannot be completed in time to be reflected in this legislation.

In addition to this issue, the bills both set forth 12 categories of allowable expenditures. While we have no problems with these, we are concerned that there is no provision for unanticipated needs. We propose that we be authorized to make an expenditure outside of these 12 categories if the Secretary notifies this Committee and the House Resources Committee in writing in advance, and waits 30 days for any comments you may have. This is the same process used with the Appropriations Committees for reprogrammings, and has worked well for many years.

Our last concern is that Title III of both bills contains statutory provisions for specific positions and management structures within the program. This is unwarranted micromanagement. If the Director of the Service is to be held directly accountable for the operation of this program -- and it is quite clear that there will be significant Congressional oversight for years to come -- then the Director should be able to manage it in the manner he or she believes most effective. We therefore urge the Committee to delete sections 302 and 303.

The oldest Federal Aid program-- the Pittman-Robertson Program-- is more than 60 years old. The Dingell-Johnson or Wallop-Breaux program will celebrate its 50th year during the year 2000. Since their inception, these programs have contributed over $7 billion to the States and U.S. affiliated territories for their fish, wildlife, wetlands, and boating projects. Without these programs, many states would not have realized the fish and wildlife management successes that they now enjoy. Successful administration of this program requires a complex network of management systems. Over the past several years, the Service has been working energetically to improve these systems so that we can keep pace with the evolving needs of the States. These ongoing improvements, and others which we will develop as a result of recommendations from the Congress, the GAO, and the States, will enable us to continue to keep our Federal Aid Programs at the forefront of fish and wildlife conservation in the new millennium.

That concludes my formal statement. I will be pleased to respond to any questions you may have.

Disclaimer: All statements are not the opinions or position of those testifying, rather they are the official positions taken by the Administration.