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the records, I know they are all familiar to Mr. Grant, are readily available to you in our prior hearings.

Now you, in turn, Mr. Secretary, have started one of these land resource programs and I look at it, frankly, with a little trepidation, as far as it being a cure for any of the agricultural problems. It might have some value in its own right, as a recreation activity or in some

other way.

From our investigation in this area we find that in many instances there is no documentation of land ownership and eligibility; in other words, you enter into a contract and make payments, but there is no evidence that you are paying it to the right man. It may be you are, but your regulations don't require any evidence of this at all. We also find in many instances where the Department can pay the farmer in five equal payments, or a lump sum, that the lump sum has been paid on the basis of what a farmer promises to do, without any requirement that the work be done at all.

In other words, he gets the money but there isn't anything in the regulations that would require him to do the work. He could take his money and go south, as far as the regulations for this program are concerned.

One of the findings of our investigation is that there is no limitation on the scope of a conservation practice or amount of cost share payments by the U.S. Department of Agriculture. Another weakness we find is that you have no requirement that the practices be carried out on the acres covered in the contract. And I think about 30 percent of the land in some instances wasn't producing to start with. You have in a number of cases provided funds for recreational projects, where the economic feasibility was not proven for it-nor did you pass on it. In several cases the farmers indicated to our investigators that they were having trouble coming up with their share. Now, this is then a kind of mixed program. How much of it is agriculture, and how much is recreation for our friends in the cities and how much is to put somebody in a city business out in the country, I don't know. I do know that funds have been advanced under your program where you have entered into cost-sharing to be done on earthmoving related to creation of horseshoe, badminton, basketball, baseball, and tennis courts.

One midwestern State's cost-share on a golf course ran $24 per acre, as compared to $3.20 if you put vegetation cover under ACP.

In another case the cost-share payments are in excess of the $2,500 limitation, which you do under the ACP program, which we have such a problem with each year.

In one instance, total cost was $17,734 for a hunting, fishing, and camping enterprise, which figures $285 per acre. Also, it clearly indicates the possibility that per acre costs in some cases might exceed the value of the land. In other words, you spend more on improving the land than it was worth to start with.

And there is nothing in the regulations to require that the recreation facility be made available to the public. You might help someone on this, insofar as your regulations are concerned, to provide a first-class hunting, fishing and camping enterprise for his family, and keep everybody else out.

30-080-64-pt. 1-15

You had about $6,150,000 in 1963 for the old soil bank holdover or the conservation reserve, and $1,850,000 under your new pilot program.

For the next fiscal year, for 1965, you have $6 million under the old program and $5 million for the new one making a total of $11,350,000. I will make available to you the report of our investigation. But if you start off on a $5 or $6 million program, as loose as this situation seems to be, you might end up with more adverse publicity than your predecessor did in this same type of program. If these regulations are not prepared and carried out in the beginning, certainly the past proves that this program can't last, and somebody is going to be embarrassed.

I wish you would read this report and supply for the record what action you take to investigate it, what you expect to do to correct the particular instances, and what change in regulations you make prior to the conclusion of this committee hearing. Changes in regulations are going to be essential if in my opinion the committee is to go along with this program, even on an experimental basis.

Secretary FREEMAN. I appreciate, Mr. Chairman, being advised in connection with this and I can assure you I will give the matter of these regulations and the operation of this pilot program my personal attention. If there is some administrative slackness in connection with it, we will take action to correct it.

(The information is as follows:)

Hon. JAMIE L. WHITTEN,

DEPARTMENT OF AGRICULTURE,
Washington, D.C., March 24, 1964.

Chairman, House Appropriations Subcommittee on Department of Agriculture and Related Agencies, U.S. House of Representatives, Washington, D.C.

DEAR MR. WHITTEN: When I appeared before your committee recently, you requested that I examine the report of your investigators, the provisions of the cropland conversion program and the manner in which the 1963 program was carried out in the field and then supply for the record what corrective actions we propose to take for the future. At that time, I assured you that I would give the matter of the operation of this pilot program and the regulations pertaining to it my personal attention. I want to express to the committee my appreciation and the appreciation of ASCS for the opportunity to review the report of the investigators. The investigation was thorough and the investigators were very cooperative and considerate in their work with our offices.

We have followed up on each specific criticism some of which dealt with problems ASCS already had encountered in the pilot program and for which they already had developed corrective proposals for future programs. In the course of this examination, I think we have covered all of the items to which you called my attention when I met with your committee. Comments are enclosed on those matters which we understand were of concern to the committee. If you desire further information on these or any other matters with respect to this program, we shall be glad to submit it.

Sincerely,

ORVILLE L. FREEMAN, Secretary.

RESPONSE TO CRITICISM OF CROPLAND CONVERSION PROGRAM STATED IN APPROPRIATION HEARINGS, HOUSE SUBCOMMITTEE

1. No limit was placed on the amount of cost-sharing assistance in meeting the conservation needs of a particular project or area

All cost-sharing assistance was limited to not more than 80 percent of the cost of the practice; usually it was only 50 percent. We imposed no top on the total extent of the practices for which cost sharing could be used in meeting the conservation problem. Experience was needed on how extensive an offer was needed in order to induce participation. Also we needed experience on how extensively

we might encounter needs for practices in order to judge whether limits were necessary. As a result of the experience in the pilot program, we expect to establish in future programs, a maximum limit per acre for conservation cost sharing. This limitation will be set low enough to eliminate inordinately expensive conservation problem areas from the program unless the farmer is willing to bear all of the costs above those encountered in usual situations. Our intent will be to achieve the maximum conversion with available funds rather than to solve the most severe conservation problems. This rule will leave to the farmer a choice as to whether he shifts land to grass, trees, or recreation while at the same time protecting the program against excessive costs regardless of which alternative use the farmer makes of the land. Also, it is proposed to adopt arrangements for future programs which will prevent the total obligation under an agreement from being in excess of the average value of comparable cropland in the locality even though we only found two instances under the 1963 cropland conversion program where total payments to the farmer exceed the value of the designated cropland. 2. Determination of eligibility of landowner and of land

In some cases the investigators found no documentation of the determination that the landowner was eligible and that the land was eligible to participate in the program.

In the pilot program, ASC committees were dealing with a relatively few farmers, usually well known to the committee, its employees, and those of the Soil Conservation Service. These people fully discussed the program with the farmer and some of them visited his farm. Therefore, it was not necessary to require the filing of documentary proof of ownership of the land. Each participating farmer certified that he met the eligibility requirements of the program. Each owner expressly represented on the agreement that he was owner of the land. No cases of misrepresentation of ownership were reported by the investigators. Under an expanded program, we would, of course, require documentary proof of ownership if ASCS representatives did not have personal knowledge of the man's eligibility.

uses.

To be eligible for the higher adjustment payment, the land must have been in a row crop or small grain during one of the last 3 years or in certain program Records developed from participation by the farm in other ASCS programs often established whether or not the land had been so used. Farmers were required to certify as to the eligibility of the land. A determination as to the past use of the land not only was made but the determination was verified by an inspection of the land either before signing the contract or during the first year of the contract. Often the specific crop uses which made the land eligible were recorded field by field. This will be required for future programs. No cases of improper determination of land eligibility were reported by the investigators. 3. Lump-sum payments

Lump-sum adjustment payments were provided in the 1963 pilot program for the purpose of making maximum assistance available to the producers at the time it was most needed in making the conversion from one use to another. Experience has borne out that this was particularly effective in connection with all types of diversion including the shifting into recreation enterprises as well as the utilization of land shifted into grass. It should be pointed out that a producer has a choice of taking the adjustment payment in five equal annual installments in lieu of lump-sum payment. It is planned to continue this provision for future programs. It is also pointed out that the owner of the designated land is required to sign the agreement in all cases and is responsible for compliance thereunder. Therefore, the owner is responsible and liable for any refunds of payments required.

4. Cost-share payments for measures on other than designated cropland acres

In many instances, especially in connection with the development of recreation projects, it is essential to the success of a project to carry out land treatment measures on other than designated cropland. This was recognized by the Congress as expressed in paragraph (e) (1) of section 101 of the Soil Conservation and Domestic Allotment Act which authorized this program. It is believed the proposed limitations to be placed on cost-share payments plus the limitation placed on the total obligations for a project, as expressed in item 1 above, will provide adequate protection to avoid excessive cost in connection with land treatment measures carried out on noncropland. It is also pointed out that the designated cropland must be maintained in a conservation use for the period of agreement even though we may spend some cost shares on other than designated land.

5. Recreation project considerations

During the 1963 trial period all applications for recreation projects were jointly scrutinized by representatives of the Forest Service, SCS, and ASCS for practicability and cost. Likewise, the national RAD Board's recommendations were sought with respect to approval of a project in a given country. A $200 maximum per acre figure was used as a guide for arriving at the amount to be approved for each project. This maximum figure included all conversion payments, cost shares and technical service costs for each project. In some instances a higher limitation appeared to be justified and was granted. In most cases this result was due to adjustments between the actual measured acreage designated as compared to the estimated acreage used when the project was approved or an increase in cost shares or technical service costs required to complete the project as compared to estimated costs for these items at time of project approval.

SCS is reimbursed for all technical service rendered. In many instances, especially in connection with recreational projects involving the development of water recreation activities, these costs represent a substantial part of the total cost of the project and are difficult to accurately predetermine. Also the technical service charges reported by the investigators include service charges made for projects in the counties which did not result in a cropland conversion program agreement and, therefore, in some cases the average per acre figure reported does not represent a true obligation for the specific project.

The Macon County, N.C., project has been canceled by the producer because of the substantial reduction in the acreage actually designated as compared with his intended diversion at time of project approval. This reduction in acreage reduced the project maximum authorization to $1,400. Also, the producer was unable to obtain needed financing.

The project authorizations for Chelan and Island Counties, Wash., were approved at the present level because of the following circumstances:

(a) Agreements were erroneously approved, due to misunderstanding, permitting the designation of substantially less acres than the producer intended to divert at time the project was approved.

(b) On the basis of these erroneous agreements, the producers proceeded to establish the practices required to make the diversion and made commitments to complete the work. In view of this the producers and representatives of the SCS and ASCS conferred on the situation and arrived at some adjustments in total costs. However, because of the outstanding nature of the project and the fact that commitments had been made to the producers on signed and approved agreements and some payments made thereunder, authority was granted to honor the agreements at the higher limitations.

The Harrison County, Ind., project reflects a high per acre obligation due to including technical service charges which were made on other projects in Indiana which did not result in cropland conversion program agreements.

Cost-share payments for developing horseshoe, badminton, basketball, and tennis courts in connection with recreation projects were limited to earthmoving for necessary drainage and leveling. These types of recreation facilities are often essential to the success of an income-producing recreational project, especially a project designed to attract all members of a family to the farmer's facility. The elements for which cost sharing was authorized are those associated with conservation of soil and water. The cost was not shared for such facilities as benches, backstops, playing equipment, or hard surfacing.

Cost sharing in connection with the development of golf courses was limited to establishing vegetative cover (land preparation, seed, and necessary minerals) for fairways. No cost sharing was authorized for the establishment of greens, traps, or other necessary elements. The establishment of grass on fairways requires considerably more effort, seed, and materials per acre than an ordinary pasture seeding. For example, at 50 percent of the cost, the cost-share payment per acre for establishing grass cover for a golf course in a midwestern county might be $24 per acre, whereas the average cost share for establishing grass under the ACP in the Midwest would be about $12 per acre.

For future programs, county committees will be required to consult with persons and groups most qualified in the area to determine the need for additional recreational facilities of the type being considered. It is believed this was done in connection with most recreation projects being developed under the 1963 program. This, of course, will involve some consideration of the financial success of the project but this is a judgment which in the final analysis must rest with the applicant.

6. Public use of recreation projects

It is our belief that public use of recreation coversions is implicit in the regulations and if a participant refuses to make the project available to "other than his own family" USDA is empowered to institute action for recovery of adjustments and cost-share payments. State and county operating officials are being instructed to initiate action of this nature whenever a situation comes to their attention where the use of a recreation facility is being limited to his own family. Steps will be taken to ascertain that this provision is brought to the attention of all future applicants.

Mr. WHITTEN. In regard to failure to account for oversea shipments of U.S. commodities, there are several other countries involved that are not covered by our investigation report. Turkey, Colombia, and Vietnam are the countries in which shortages have occurred, or a failure to report exists.

Now, we realize that in most of these programs we are dealing with surpluses. We realize that through the years the United States, through Public Law 480, has used commodities in an effort to help underdeveloped areas. We realize that under the food for peace program we are selling for foreign currencies, or they are getting it without really paying us for it, and since they are paying for it with their currency, they are probably not near so demanding insofar as quality and things of that nature. That in itself is a temptation to the American seller to unload most any kind of quality that they will take. I think it has led to American business, based on investigations of our committee, buying some good wheat, some sorry wheat and some inbetween wheat, mixing it up and shipping it abroad to the point that they can get by with it. This has led to a lowering of the reputation of American commodities abroad.

We saw this in one of the citrus States on a different basis during the war when citrus was hard to come by. They exported anything that grew on a tree, you might say. As a result, as soon as competition came into the picture, it took them years to regain the reputation of citrus from their area.

I mention all of these things to commend you in one instance for recognizing it in the changing the grades of wheat. The same type of thing could well apply to cotton, where they buy it from you at one grade, and then sell it in world trade for what the foreign country or the buyer will pay for it. They insist that has been the practice throughout the years, and doubtless it has.

But the pressure on you is probably not the same when we are sellto foreign countries under Public Law 480 as when dollars are involved. So I hope these things will have your attention and you will provide for the record the facts insofar as you see them, plus the changes in your regulations that we can expect.

Secretary FREEMAN. Very good, sir.

(The information referred to follows:)

The Department of Agriculture makes every effort to assure that commodities which are sold under titles I and IV of Public Law 480 are of good quality and of the type and grade which will meet the requirements of the importing country. When an agreement is signed with a new country our technicians and specialists meet with representatives of the importing country, explain to them U.S. marketing practices, and recommend the grade and quality that we think they should purchase in order to meet their requirements. When purchase authorizations are issued they specify the minimum grades that will be eligible for financing under the program. Very often our technicians will assist representatives of the importing country in developing specifications for tenders. In

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