k usually it's not a question whether you know anything about the law at all it's a question whether you node the fact and whether it happens to bring it under the law, but then i don't know how broad the principle is that you have to know what you're doing, it would raise a doubt in the jury's mind about whether you knew it was legal or not. >> i have two responses i can point out. the first is and second, i can give you a real world example. this court has held that there are other ways to prove knowledge or than that a defendant knew a critical fact. for example, the government can prove willful blindlessness. the court has explained that the reason you allow willful blind blindness to substitute for knowledge is because a person who is willfully blind to a fact has the same cullble state of mind as the person who engages in the act. that person is at least as

culpable if not more culpable than the person who knows the facts. >> you're going to send him up the river for 15 years. >> again we believe -- >> is justice culpable? >> we think certainly it's sufficient if the government can prove that the defendant knowingly distributed a drug believing it to be illegal to do so. whether or not he knew what provision of law. >> illegal because in fact it's bad for animals and the law involved prevents veterinarians from using this kind of drug for animal treatment. that's all he knows. that's all he thinks. now, he's guilty of this statute. that doesn't tend to show at all that knowledge that he knows it's an analog. in your opinion, because he feels guilty, as perhaps he should, he's guilty of violating this law. >> well, we do believe that would establish the necessary culpable state of mind. gr can you give me any authority for that? your example of willful blindness is an example of where

in fact in respect to this law he knows there is a risk he is violating doing the conduct. he knows there's a serious risk, and he pays no attention to that at all. >> well we do think -- >> that's not a very strong analogy, i don't think. >> i think what it shows is you don't have to prove actual knowledge of a fact to satisfy a knowledge standard in a statute. again, we think it would be perfectly sufficient for the court to rule in this case when the government proves the defendant is distributing an illicit drug and he believes what he's doing and he's correct inlt that that's enough to satisfy the csa or analog act. >> it might be if there were some evidence in the case on what you're saying. the controlled substance act, he didn't see this listed, and also though he was told something was

legal, he flushed it down the toilet. why don't we leave this to the court below to figure out whether the error was harmless or not? given the absence in the case. >> i acknowledge that is the court's usual practice. and we wouldn't have any problem with the court doing that here. we do think that the evidence you point to tends to show that he may not have believed he was violating the csa specifically, but there's plenty of evidence to show he knew and correctly believed what he was doing was illegal. he sold his product in little baggies and vials. >> it's a controlled substance. >> he has to know it's a controlled substance analog. >> not even an analog, because plenty of people sell things maybe cocaine in fact it's crack. or they sell something else thinking it's a different drug. they just know it's a drug. >> we agree with you 100%.

i think the -- >> you keep saying has to know it's an analog. i think that's wrong. hao he just has to know it's a controlled substance. >> by controlled substance, which is where we differ, he doesn't have to know it's illegal under the controls substances act. that's not our position. >> is this a real world problem? this sounds like the most artificial distinction i have heard in a long time. does virginia have an analog act? this is from virginia, right? >> yes. >> do they have an analog act that is different than the federal analog act? >> i don't know. >> do the states have analog acts, period or analog acts that are different from the state analog acts? unless the case involves a chemist, your proof the person knows it's an analog is going to be that the person engaged in conduct to try to hide it from law enforcement. it's going to be for the jury to

determine based on circumstantial evidence whether the person knew that this thing was illegal under some law, and if it's not the federal controlled substances act, i don't know what act it's going to be. the defense is going to be, i knew it was illegal, but i thought it was illegal under the state analog act. it wasn't illegal under the federal controlled substances act. is that what we're worrying about here? >> that sort of get to the points. the way you sort of characterize what might be the right instruction that you have to prove that the defendant knew it was illegal under some drug law, we're fine with that. i think petitioner would like the instruction to be the government has to prove that the defendant knew it was illegal under the controls substances act or under the analog act. >> the question i'm acting the practical question, is we have several controlled substances act in the analog provision. what is this other body of law that might come into play here? >> well i'm not sure there is one, but our point is that most

defendants aren't aware of any body of law. they just know what they're doing is illegal. wetient shouldn't have to prove he had a specific statute of conviction in his mind. >> i take your point that this is going to have a very small practical effect in terms of what either the prosecutor or the defense attorney is putting on the trial but it actually seems to me to be a real theoretical difference that has implications far beyond this case. what mr. russell has suggested is two ways of showing the defendant knew a fact. the fact that he was distributing an analog, and you might know it because you know the chemical structure and all its properties or you might know it because you know somebody has given you a box and said this is an analog prohinted under inanalog act, so you know it's an analog. those are two ways of knowing a fact. but you're saying that in addition to knowing a fact, they're satisfied if you can

just show that the defendant knew he was acting culpably in violation of some law. that it seems to me is a theory that could be put onto any law, that in addition to knowing all the facts that a statute says you have to know, the government has an alternative way of proving its case which is just to say oh, look. you were acting culpably. you knee you were doing something wrong. >> we would embrace a narrower arcticulation of what your knowledge of illegality has to be. >> suppose he thought that there was a labeling law and he was violating the labeling law. he's wrong, there is no labeling law. but a violation of analog. guilty? >> under our view, that would be sufficient. we don't think the court needs to reach that in this case because there's no suggestion that his belief in illegality was anything that he was

distributing a illegal drug. >> you are saying it's not just any illegality. it has to be a drug law that's a qualification. >> we're saying at least for the purposes of this case that is sufficient. >> what do you mean by the purposes of this case? what is the law generally? could be a drug law or any law? >> give it up ms. harrington. >> let me try one more time. it would be consistent with the way this court has treated other mens raya issues such as willful standard. >> not the willful, i don't think the problem is the articulation. i think the problem is we're sitting here thinks of examples like, you know, antibird hunting statute, and it says you cannot hunt green-eyed turkeys, and the guy has never heard of that. you say, okay, i don't know there's a green-eyed turkey and i don't know if it violates the statue, but maybe it violates

something. that seems like an odd principle even if you limited it to all birds. you see the problem? because i suddenly worry the government is going to start skulking around in the bushes. >> i think that is a real world problem, and i understand the court's concern and i'm not trying to blow it off or avoid answering it. the willful context, if the defendant correctly believes what he's doing is illegal he doesn't have to have any sense of what law he's violating. willfulness is generally thought to be a much higher standard than knowing or intentional and although this court has never addressed this precise question the penal code and the brown report have embraced the idea when you satisfy a higher standard, you satisfy all the lower ones. so we are embracing narrower articulation. >> you say you're embracing the narrower articulation, but it seems to be it's hard to see how

it would make a difference there, but it could make a world of difference when you expand it to the other cases involving mens raya, and when you get to that point, it is sort of an ignorance of the law question. in all the cases, we do not ask whether you have any idea whether it violates the law or not. and your position makes it much easier to convict people because you don't have to show that they even knew the facts that made their conduct illegal. all you have to do is say that under the illegal under the law they're being charged all you have to do is say they did something that makes it look like they knew. they did something that makes it look they were sufficientspicious. if we can find any law in the code that makes that illegal, we can prosecute them for what we want to prosecute them for, even though they didn't know the facts fell under the provision. >> you don't have to prosecute

them for the actions they took that broke the law. >> yes, and part of that prosecution is you must show that they had the requisite mens raya. you're saying we can do that by showing the jury they were acting sufficientsly. >> we have to convince the jury that the defendant in any case believed what he was doing, the relevant conduct in this case, distributing the drug, was illegal. you have to prove that beyond a reasonable doubt. suggesting that the defendant was acting suspiciously is not going to get the job done in most cases, and it's easier to prove that the defendant knows the fact than it is easy to prove that he knew it was illegal. >> if the defendant didn't know that the shell casings belonged to the government and he was exonerated because he had to have an intent. suppose that he didn't know they

belonged to the government, but he thought that it was an illegal casing because it was dangerous. and he was wrong about that, but could he be prosecuted then? >> we think he could be. i think all of the cases in that line, all those cases involve defendants who claimed that they genuinely believed what they were doing was innocent. the problem for this court is to figure out a way to construe the statutes so it didn't sweep in people who really were innocent. >> is there a case you have? >> so, the the defendant truly believed what he was doing was illegal, those cases tend not to come to this court. there are statements in the opinion in brian. that was a case about the willful standard, but there was also a discussion of the knowledge standard and the court said the government doesn't necessarily have to prove that a defendant knew what he was doing was illegal. that leaves open the possibility if the government did prove that, it would be sufficient.

the court also said in brian that the government needed to prove knowledge of the fact that the conduct was illegal, suggesting that's an easier standard to meet. >> just to follow up quickly on justice and these hypotheticals. what if he knew he was trespassing, but he went on to the government property and took the casings? you have to show he knew what highhe was doing was illegal. he was trespassing. he can convict him for taking the shell casings. >> we would tie it more directly to the conduct that actually violates the law. so if he needs to know that the taking of the shell casings is illegal, not just some ancillary conduct brought him to the shell casings are illegal. the defendant needs to know that the distribution of the drug is what's illegal. we think here, if you look at -- i think we're on the same page with the petitioner in suggesting the same standards should govern csa cases and analog cases. we just disagree --

>> let me try this out. a drug on the list the defendant knows the chemical composition of the drug that's on the list. the defendant has no idea that this is on the list. there's nothing about the federal drug laws, person dwints it intentionally knowingly that person has violated the law. the person's ignorance of the fact this is a controlled substance is irrelevant. am i right so far? >> if he knows the identity of the drug. >> he knows what it is he knows the chemical composition, the name, now let's assume we have a list of analog. it's the same thing. if the defendant knows the thing is on the list, knows the chemical composition of it and it turns out that this is an analog, that is sufficient. that's not going to be the proof in most cases. i think maybe the confusion is that the -- a defendant's knowledge of the illegality of what he or she is doing is not

something that has to be proven. it is circumstantial evidence that the person knows that the thing that is being distributed is something that is on the list. >> right now, again, there is no list in the analog context. >> i understand that, but it makes it easier to understand if we imagine there is. >> we agree. our position is that if we can prove that a defendant knew what he was doing was illegal, that's a way of proving he knew he was distributing a controlled substance analog. >> it's gnaw something you have to prove. you don't have to prove he knew it was illegal under federal law or under state law or any other law. you have to prove he knew it was a substance that constitutes that in fact constitutes an analog. but the fact that he knows that it's illegal under federal law is circumstantial evidence that he knew that it was something that fell within that definition. >> and it might help if i could give you a real world example of

how it has worked under the court of appeals. there's a number of cases in the courtf appeals doing with a substance, khat. it's grown in the horn of africa, generally. if you pick the leafs of the plant and chew them it gives a stimulant effect. it contains a substance which is a schedule one substance, illegal under the csa sort of producing amphetamine effects. it is legal in many places in the world. it's illegal to distribute it in this country because when fresh freshly picked, it contains a schedule i substance. people who are guilty of distributing khat defendants have said, i didn't know it had that. i was distributing khat. it's legal where i come from. i don't know what's in the plant. the court of appeals have generally upheld the convictions when there was proof that they

knew distributing it was illegal -- >> where the light is dawning don't say i'm stating your argument correctly, because i'm not. >> okay. >> you're saying first, he doesn't know the chemistry. so he doesn't -- he has to know it's an analog. he doesn't know the chemistry. you're saying, of course if he knows that it is illegal under the analog act, that's good enough because he knows it's an analog. >> yes. >> now you're saying if he knows it's illegal generally under the drug laws, that should be evidence of the fact that he knows it's an analog because let's ask him, why do you think it's illegal under the analog? why do you think it's illegal under the drug laws? i'm going to tell you, it's not a listed substance. he would sort of be stuck there because he doesn't want to say, because it's a lot like cocaine. >> right. >> because it's a lot like cocaine, he knows it's an analog.

if you say using far out examples, it's not because he thinks it's an veterinarian law. if i follow your argument you could say the fact he knows it's illegal under the drug laws is itself evidence that he knows it's an analog, but he's free to come up, if he wants, with some kind of basis for saying that even though he thought it was illegal under the drug law, he thought it was illegal under some other law that had to bedo with postage stamps or something, the jury believes he should get off is that right? >> if we can prove that the defendant believed what he was doing violated some drug law, that's enough to prove that he knowingly distributed an analog. >> what was some drug law be other than the csa and the analog act? >> in the federal context there wouldn't be, but our point is really that the defendant generally does not have a specific law in mind. he just knows what he's doing is breaking the law. when the petitioner says we have

to prove he knew he was violating the statute of conviction, that's much too high of a burden. the only time you do that is when you have a local standard in the tax aversion context. just general knowledge of illegality -- >> illegality must relate to drugs? >> pardon me? >> the illegality must relate to drugs? >> that's certainly sufficient when the government proves that the illegality relates to drugs. >> and sufficient is not just evidence that he knew it was an analog. it's inclusive evidence. >> we think that's correct. petitioner suggests -- >> even if he comes back and says, yes, i thought what i was doing was wrong, but it wasn't because i think it was an analog. it was for some other reason. >> we think if he came back for example, and said i thought it violated virginia controlled substances act because some states control more drugs than the federal schedules include but i didn't know it violated a

federal drug law we think that would not be a defense. some knowledge that you're violating a drug law is sufficient. we think in this case there is actually -- >> you say sufficient. how about necessary? necessary is the drug, the law he thinks he's violating. a drug law is that necessary? >> again, we think that a broader view would be correct, but we're perfectly happy with the willingness in this case that it would be sufficient. we don't think there's a basis for limiting the knowledge of illegality to drug laws. i think that's enough, but we think it's definitely sufficient for this case to hold that when the government proves a belief that he's violating a drug law, that's enough. >> the conduct is related to the genus of illegality? >> right. >> i think there are areas where criminal defendants try to tailor their conduct to fall

within, if they're captured and caught, particular laws but not others. i recall cases where that's true. hypothetically, let's say they know this much marijuana or cocaine is a misdemeanor, if they get up to this much, it's 15 years mandatory minimum so they structure their activities to fall in the lower level. you would be able to prosecutor them, according to your theory, with a big 15-year mandatory whatever if they happen to go beyond the misdemeanor amount. >> certainly yes. if the defendant believed he was distributing one pound of cocaine and it turned -- i don't know what the right numbers are but say he believed he was distributing one pound and turned out to be distributing five pounds of cocaine and there's a different sentence that applies for five pounds, if tlez -- >> what does that do to the theory what they have to know is it's illegal under the drug laws? what was illegal, what they knew was, the misdemeanor amount, and you say, well, it doesn't matter

that they -- doesn't matter that they didn't know. they were dwinting a larger amount. >> i took your hypothetical to know he knew what he was doing was illegal. >> it was a misdemeanor. because of the amount. he didn't know it was going to be a felony because he didn't know he had that much of the drug. >> in the argument if he kneew what he was doing violated a drug law, that's sufficient. if he thought what he was distributing was oregano and it was marijuana, that wouldn't be sufficient because he wouldn't have know the facts that made his conduct illegal. in this case, there are plenty of facts to show that the petitioner really believed what he was doing was illegal and it turned out he was correct. he sold his product in little baggies and vials instead of having more commercial packaging. he charged $450 an ounce for these products which sort of undercuts his belief he thought they were aromatherapy products or things you would pour into a bath

bathtub. >> you can only charge what the market will bear. if it has the same effect, if it has the same effect as cocaine even if it's perfectly legal you should charge $400, don't you believe in the free market? >> not in the illegal -- the free market works in the illegal drug market the same as anywhere else, but it was evidence that he knew what he was selling was a drug, and an illicit drug. >> all he knows is that it would give you a high and he was charging what people were willing to pay. >> he sort of hid his product on his website. he wouldn't answer district questions from his customers about the high for the controls substances. we think there's sufficient evidence to show the petitioner in this case -- >> the petitioner's counsel agrees there's sufficient evidence to convict. >> i think he has a different view of what a proper instruction is. i understand the court remaundz

for harmless error. i think that would be appropriate in this case because the government didn't act for this instruction, and then it was defending a harsher instruction it was given in the case. >> how do we -- when the jury is told that human injection is enough enough, he has to intend that these bath salts are not put in the bathtub but to ingest, that's all that -- that was the only mention that was charged. >> it -- that was the instruction that the government requested because that's what they said was enough, but the instruction that was given to the jury to find he knowingly lyly distributed a substance that had the same farm collagical effects of a controlled substance. >> let me start with the instruction. justice ginsburg under the government's interpretation of jury instructions as requiring

the jury to find that the defendant knew about the similarity, the government acknowledges it didn't require any knowledge about the similarity in structure. the government has acknowledged that this instruction here was inadequate, even under the government's new view of the law. and so the question here is simply, whether or not they're entitled to take advantage of that and make a harmless error argument based on a theory that they only developed in this court. with respect to the general legal questions, let me start with directing the broad any law will do position. as i understand them, it is premised on their thought all it requires is culpable state of mind. it doesn't say distribute an analog culpably. it says knowingly. thas have repeatedly said, it requires knowledge of the facts and there may be an exception we have discussed that you can meet by showing there's knowledge thd the law of conviction itself, but there is no precedent from this court that gives the court,

gives the prosecutors the option of proving the facts, the defendant knew the facts that made the conduct unlawful or he acted culpably, or knew that the conduct was unlawful under some law. with respect to their fallback position that it has to be illegal under a drug law, we're getting closer. we would agree if they were to say, as some courts have said, including a case that they featured prominently in the brief, it has to be a federal antiabuse law, now, the truth of the matter is there's only one of those but the value in that articulation is that it makes clear that the defendant doesn't have to know the name of the statute. but if the government's intuition is it's enough that it's under state analog acts, and there's lots of states that have been ahead of the government in putting on their schedules things that are analog, including some of the substances in this case that's clearly not what this court has ever had in mind in interpreting the word noingly, and it's up to

congress to decide what is culpable enough. when it uses the word knowingly it's going to get the same interpretation it has in the past. the government points to cases like bryant where the court has said in in addition to knowing the fact you must also know something about the law, and it says that, you know, willfulness is enough to establish knowing distribution, and in those cases, it's not simply that they have general knowledge of knowingness, they also have faths. facts. >> if the defendant knows it's heroin, doesn't have any idea it's illegal, nevertheless has violated the law i don't see why the rules should be different with respect to an analog. >> i don't say that it is. i think that -- >> the defendant doesn't have to know the legal status of the drug. >> again we're talking about the government's altern tav. the government always has the option. >> state law calls it an analog and he know he's violating state

law, he knows this is an analog. >> well if he knew he was violating a state analog act that had the same definition under federal law, you could then ask the skraer to infer that he knew that he was violating the federal law, but most of the time, as my colleague said the government's evidence is simply going to be that the defendant knew the conduct was unlawful somehow. >> i'm not sure that you answered justice scalia's question fully. >> i'm sorry. >> go ahead. >> so justice alito, the government never has to prove the defendant's knowledge about the law if it proves he knows the facts that makes it unlawful. what we're objecting to is the alternative route to showing mens raya. we agree to the point it's enough to show the defendant knew it was violating from the state law or perhaps some provision of the fda, which regulates substances independent of the controlled substances act. as a practical matter in most cases, what the government -- the proof is going to be what

the government described, which is simply that the defendant engaged in furtive conduct that suggests he knows the substance is illegal, and unless the defendant comes forward with some reason for the jury to think that in fact he had in mind that it violated some other law, or in fact he looked and came to the conclusion it doesn't violate the controlled substances act, the jury is likely to find mens rhey establishes and we don't have problem with that. and just to finally address the fact of this case. the fact my client was distributing things in baggies rather than vials shows he's doing it from his home business. the fact he's charges large prices shows he found a loophole. there's no reason in the world why he wood have flushed his product down the toilet when he discovered it contained a substance on the schedule physical in fact he knew that the other product were illegal and didn't care. >> thank you, counsel, the case is submitted.

>> with former congressman tom davis and marc methot, as well as former senior adviser to president obama david axelrod and close out in new york city, where the publishing industry showcases their upcoming books, then in the first week of jooub june we're live for the printers row lit fest including our three-hour live in depth program with authors and your phone calls. the polls in the united kingdom are closed. voters in britain are elected all 650 members of the house of commons. our live coverage of the results under way now on c-span, courtesy of itv, with interviews in more than 60 locations in the uk. again, that's happening right now on c-span.

imf managing director christine luguard susan rice, and commerce secretary penny pritzker were among the speakers at this year's bank conference. right now, we'll watch susan rice's remarks, and you can see more of c-span's coverage of the conference at c-span.org. i'm going to be very brief because we one i know a few people would like to get right in, and we have our national security adviser who is here, and there are a lot more pressing things in the world. i want to make sure we don't create any crisis. let me just give you a little more information which leads into the speaker. we took a look at our authorizations and last year 70%, a full 70% of the work we

did, the financing, insurance we did, is in the developing world. in fact, it only reminds me the first time i had dinner with susan rice and said we're not a development agency we're an export agency. she said you're actually a development agency. you're right, i was wrong. 70 70% is in the developing world, and 7 of the 10 fastest growing economies are in subsaharan africa. nis summer president obama had a conference with business leaders, government officials, a two-day event this summer and at the close of that the president singled out one exporter who he felt represented the best of american entrepreneurship and the african export market. lets just see what he has to say. >> he was born in kenya. family was originally from india. eventually, she immigrated to the united states and along

with her husband started a small business in california. it started off as a small engineering firm. then it started manufacturing small power generators. with the help of export/import bank, including seminars and a lot of credit and risk insurance, they started exporting power generators to west africa. consumers here, i had a chance to meet her backstage. where is she? right there. stand up. she's doing great work. thank you so much. but she's an example of what's possible. so let's follow her lead. >> so how many people get to be introduced by the president of the united states? so that's something we all aspire to, and i only know one woman who has that. let me bring what she has to say.

>> thank you so much, chairman. it's an honor and a privilege for me to be here this afternoon and to welcome you all to our this year's keynote speech. that was an amazing moment that was made possible last year through the help of the u.s. import/export bank. my entrepreneurial journey began in 1989 when my husband and i decided to start our business combustion associations inc. in corona, california. today, we are an engineering and manufacturing company that specializes in power generation systems and epc work.

with the help of the export/import bank, we have been able to grow our business create jobs, and support global projects. in fact, today, we have also brought our customers louis and agosi of nigeria to be first-time attendees to the annual conference. we are completing an 80 megawatt -- we have recently completed an 80 megawatt gas turbine power generation system. it's a power plant project in west africa, along with other power plants in the subsaharan africa and central american region. africa is very very important to our strategy. it is important because we know that growth lies there and most importantly, both my husband and i were born in africa.

again, it's an honor for me to introduce this year's esteemed keynote speaker, white house national security adviser susan rice. ambassador rice previously served for the u.s. to the united nations and was a member of president obama's cabinet. her experience in foreign policy allowed her to bring a global perspective to our discussions about u.s. exporting and i'm just so thrilled and excited to have this opportunity to please help me welcome join in welcoming ambassador susan rice. [ applause ] good afternoon, everyone. great to be with you and obviously, i want to begin by

thanking kasum. i can't replicate the wonderful introduction of president obama, but i can thank you for being kind enough to introduce me. your story is truly a powerful testament to the drive and ingenuity of american small business owners. and to how the export-import bank facilitates connections and commerce that lift up our world. and i want to thank my friend not only for his invitation today but for his outstanding leadership of exim. you held the reins through a challenging time, and throughout it all, you have provided critical support to help get the global economy back on track. and indeed, to help spur global development. so thank you very much.

president obama has made promoting prosperity his top domestic priority, and a key pillar of our national security strategy. even as we're dealing with pressing global challenges from countering terrorist threats to preventing the spret of nuclear weapons, to combatting climate change, we're advancing an affirmative agenda that promotes prosperity around the world. of course, president obama is by no means the first american leader to emphasize the connection between a strong economy and a strong foreign policy. during the depression president roosevelt proclaimed that america's quote full and permanent domestic recovery depends in part on a revived and strengthened international

trade. and after world war ii president truman noted that, quote, peace freedom, and world trade are inseparable. so today once again confronted with a changing world, i'd like to lay out how the obama administration draws on america's economic strength to bolster our national security and prepare for the challenges of the future. first, we're expanding economic opportunity, starting with american workers. we're now in the midst of the longest streak of private sector job growth on record. businesses have added more than 12 million new jobs. we've brought unemployment from a high of 10% in 2009 to 5.5% today. [ applause ]

and critically, wages are finally on the rise again. fdr was right that america's recovery is linked to robust international commerce. that's why president obama launched the national export initiative in 2010 to help american companies reach overseas markets and create new jobs. and it's working. since 2009, exports have made up almost one third of our growth. all told, experts support more than 11 million american jobs, and those jobs pay up to 18% more than nonexport related jobs. we're also encouraging foreign direct investment into the united states. business leaders already recognize that the united states is the best place to locate,

invest, and hire. so we're making it easier for them with our select usa initiative we've cut red tape striemlined government processes, and helped generate more than $20 billion in job creating investments. that's good progress but there are more markets waiting to be tapped. that's why the export-import bank of the united states is so essential. last year, financing from the bank helped thousands of american entrepreneurs reach new markets and grow their small businesses. it supported 164,000 private sector american jobs. and it didn't cost the american taxpayer one cent not one. in fact, it returned $675 million to the american treasury.

now, that's the very definition of win-win. and i can tell you when president obama meets with foreign leaders exim is a very important part of our diplomacy. so i join the president, members of congress from both parties the american chamber of commerce the national association of manufacturers and small business owners across the country in calling on congress to reauthorize the exim bank with a long-term mandate to continue its vital work. today, we're pursuing the most ambitious trade agenda in history. we're working with congress to secure support for a critical piece of legislation. you may have heard a little bit

about it this week. the bipartisan congressional trade priority and accountability act. this bill will help us finalize the transpacific partnership and the trans-atlantic trade and investment partnership and ultimately to create a free trade zone that encompasses two thirds of the global economy, with the united states at its very center. with this legislation, congress doesn't cede any power to have the final word on trade agreements. rather, it sets the parameters for deals up front. a deal that protects the interests of american workers, sets high environmental standards, protects intellectual property, and includes robust enforcement provision. in short it gives us the leverage to bring home the best possible agreements.

and that brings me to a second way we promote prosperity. increased trade and investment is good for the global economy. but to realize its full potential, everyone has to play by the same rules. by 2030, two thirds of the world's middle class, more than 3 billion people, will live and work and buy in asia. to sustain america's growth we need to be part of those markets. so we're working hard to finalize the transpacific partnership and break down trade barriers across the dynamic asia pacific region. at the same time through tpp, we'll insure that american businesses can compete on a level playing field. we will protect access to shared spaces like the internet, the

seas, and the skies so the good people and ideas can move more freely across the region. and we will raise the bar on global trade enshrining the high standards and enforceable protections that americans expect. our economic relationship with europe is already the largest in the world. we conduct $1 trillion in annual two-way trade invest $4 trillion in each other's economies, and support jobs for millions of americans and european workers. the trans-atlantic trade and investment partnership will boost all of those numbers. and if we align the rules that govern commerce on both sides of the atlantic we will effectively set the standard for commerce around the world. these agreements will secure

real economic benefits for the american middle class and advance american global leadership. our security and our ability to shape global events are closely tied to our sustained economic strength. if the global economy is not going to wait for us. so the choice is not between moving forward with these agreements or maintaining the status quo. the choice is between leading the world in a direction that supports american values and interests, thus enhancing the safety of american citizens or being left behind. these trade agreements are an integral part of our vision for a future where all countries follow the same rules of the road and all countries benefit. a future where growing

prosperity supports are shared security. at a time of shiftlinging power in asia, tpp reaffirmed america's commitment to the region and the allyiances that have underwritten security and growing prosperity throughout the asia pacific for decades. as asia continues to grow and drive the global economy, our strategic interest in the region will become even more important, preserving peace and preventing maritime or territorial disputes but also strengthening the rule of law, advancing human rights, and promoting inclusive development. we're committed to shaping the development of this region that will only grow more important in the future. meanwhile, ttip will strengthen our trans-atlantic bond and put

us innoon an even stronger position to take on shared challenges with our closest allies. we seek to build an economic relationship to match the scope and further strengthen our security partnership with europe. let me be clear. growing the global economy is not a zero sum contest between established and emerging powers. if we work together to grow the whole pie, we will all be better off. that's why president obama elevated the g-20 to be the premiere forum for global economic cooperation, to make sure the world's fastest growing economies were also part of the world's most important economic discussion. and that's why we will encourage new institutions like the asian infrastructure investment bank to uphold the standards that underpin sustainable, inclusive

economic growth. we're also committed to modernizing the established institutions of global finance like the international monetary fund. in the 1980s the imf coordinated the response to an international debt crisis brought on by oil shock. in the '90s, it helped former soviet bloc countries transform into market driven economies. today, the imf is a first responder to global crises. helping ukraine stand up against russian aggression. securing our allies in the middle east against extremists providing economic relief to countries fighting ebola in west africa. proposed quota and governance reforms to the imf would better integrate rising powers like china, india indonesia and brazil, while preserving american leadership and our veto

power. congress should pass imf reform so that we can join our g-20 partners to strengthen this washing of economic security. [ applause ] >> third we're expanding prosperity by promoting inclusive growth. developing economies provide new narkts, growing middle classes and customers that are essential to sustaining american economic strength. so under president obama we're forming partnerships that help countries lift themselves up and we're harnessing the resources and expertise of the private sector to amplify our efforts. so is take, for instance, the new alliance for food security. thanks to more than $10 billion in private sector commitments we're strengthening agriculture

and helping farmers across africa raise their incomes. or take power africa with $7 billion from the u.s. government including support from xm, we've brought in for than $20 billion from the private sector. all focused on increasing access to electricity for 60 million households and businesses across africa. american firms are eager to expand into african markets and african countries want to do more business with the united states. and that's why the after a can growth and opportunity act and our doing business in africa campaign are such effective tools for spurring broad-based development. the african growth and opportunity act known as agoa makes it easier for african businesses to sell their goods

in the united states. that helps grow africa's middle class, who in turn buy high quality american products. under agoa both africa's nonoil exports to the united states and american exports to africa have more than tripled. so president obama strongly supports the bipartisan legislation introduced last week in the house and the senate to update and renew agoa for the next ten years. [ applause ] >> with more than half the world's population under the age of 30 we're investing in job training entrepreneurship and educational opportunities for young people. through our young leaders initiatives in africa southeast

asia and most recently in the americas we're empowering the next generation with skills and the experience to help them succeed succeed. with the president's spark global entrepreneurship initiative we'll generate more than a billion dollars to help young people launch and expand new enterprises. this summer president obama will participate in the 2015 global entrepreneurship summit in kenya. by spurring trade, setting 21st century standards and building the capacity off our partners we strengthen our ability to take on global challenges, like climate change. the united states is leading the charge to achieve a strong international climate agreement this december in paris. we've set and a ambitious clooimt target for ourselves and announced joint actions with

other major emitters, including china, india and mexico. at the same time we're developing clean energy solutions that will fuel our continued economic growth, working with partners to set emissions targets that will mitigate the worst effects of climate change and helping vulnerable countries improve their resilience to climate change. our economic tools also defend america's national security interest. consider, for example, our engagement with iran. with our p5+1 partners we've successfully reached an initial framework agreement for a long-term deal to prevent iran from gaining a nuclear weapon but that deal would not have even been in the realm of the possible had it not been for strong rigorous enforced

sanctions that brought iran to the negotiating table. when we employ sanctions we target those who flout international norms while minimizing the impact to the broader global economy. we rely on sanctions and other financial tools to cut off terrorist financing and disrupt transnational criminal organizations. coordinated sanctions with our european partners are imposing costs on russia for its aggression against ukraine and as online commerce continues to grow we're developing dynamic approaches to enhancing cybersecurity, including a recently issued executive order authorizing sanctions to deter the worst cyberactors. this brings me to my final point. we rely on the private sector to

advance america's values and economic leadership. as a government we are open to accessing foreign markets. we protect our sea lanes and our sky ways. since 2010 our commercial advocacy has helped american firms to sign contracts totaling for than $200 billion in new exports. at the same time, america's businesses are the foundation of our economic strength upon which so much of our security and prosperity depend. so both the government and the private sector have responsibilities to fulfill. for example, corruption costs the global economy about $2.6 trillion each year. so we've made anti-corruption efforts a centerpiece of our torn assistance strategy.

if countries want development exacts from the mill people challenge corporation, they must embrace good governance through the open government partnership we're working with more than 65 nations to improve economic transparency and the department of justice has been doged in prosecuting those who pay or seek briebs in international commerce. we also count on american companies to meet the highest standards of responsible business practices. we hold an advantage in the global marketplace because our companies are known as accountable transparent partners. so we're developing in partnership with industry a national action plan to promote responsible business conduct and to ensure that the american brand in business reflects american values.

leading in the 21st century isn't just about the might of our military, it's about using every element of american power, including our economic power, to promote universal values and expand opportunity for all people. it means using diplomacy to rally partners to meet global challenges. it means implementing development policies that don't just put a band-aid on poverty, they help eradicate it. and it means fostering a vibrant domestic economy and policies that ex he panned our shared prosperity. when president obama spoke at this conference five years ago he issued a call to quote, make it century another american century. as a nation we've come a long

way since then. it's taken hard work and characteristic american grit to climb out of a deep hole and we're not done yet. but with our resurge ent economy, our unmatched network of partners and allies and our firm commitment to expand prosperity, we will continue to pursue a future of shared prosperity that benefits all people. we will ensure that america continues to lead the global economy throughout this century, just as we did in the last. thank you all very much. [ applause ] tonight on c-span 3 a senate hearing on the child nutrition act, followed by a hearing on providing healthcare to rural communities. later, fed chair janet yellen

and christine laguard talk about the 2008 financial crisis. every five years congress reauthorizes the child nutrition act, a law governing school meals and child nutrition programs, the current law is set to expire at the end of september. the senate agriculture nutrition and forestry committee held a hearing on the law with witnesses representing school administrators, food banks and pediatricians. senator pat roberts chairs this two and a half hour hearing. good morning. i call this meeting of the senate committee on agriculture to order. welcome to our first hearing on child nutrition, child nutrition reauthorization this this congress. i commend my colleagues stab now

for her on this issue. the richard bp russell national school lunch act and the child nutrition act of 1966 authorized critical programs of great importance for kansas, our nation, our farmers, our ranchers, our growers our vulnerable populations, including of course, hungry children. the school lunch program was originally created as a major of national security to safeguard the health and well being of the nation's children and to encourage the domestic consumption of nutritious agricultural commodities. coming out of world war ii congress saw the need to establish the school lunch program and in no part to ensure our military had a sufficient supply of eligible individuals to defend our nation from global threats. additionally, the current research is regarding the need for adequate nutrition during a

person's developmental stages provides further support for what congress knew even back then. hungry children do not learn. with threats to our national security and increasing economic competition it is imperative that our nation's youth are physically fit for military service and are not malnourished at key times in brain development. furthermore, the original twofold intent of the program still holds true -- still holds true today. fir, the programs provide a safety net for our post vulnerable populations, mainly children, that are at times without sufficient food. secondly, the law requires a portion of the assistance for the school meal programs to be in the form of agriculture commodities produced here in america, by our nation's farmers, ranchers and growers. as we begin the reauthorization

process, it is important to remember the purpose of these programs. these programs are not about anyone's legacy, they are about ensuring our nation's securities ensuring that our children are well-educated and productive contributors to a competitive economy. and about helping the vulnerable among us who cannot help themselves. i plan to conduct this reauthorization with full cooperation with our distinguished ranking member in the same way in which i am seeking to conduct all of our business here at the agriculture committee. first, with the perspective of our constituents in mind, we are here for farmers ranchers, small businesses, rural communities and program participants and stakeholders. we are here to right their interests and their which will into law not to impose the government's will and interest on them.

second this reauthorization will include rigorous and thorough oversight of these programs. periodic exploration and reauthorization of legislation does provide congress with the opportunity to review and evaluate programs, and this opportunity should not be taken for granted. it is our responsibility to closely examine each program. not every program needs a major overhaul, but every federal program could benefit from increased efficiency, improved integrity and reduction of waste. our committee will conduct this reauthorization in an open and transparent manner that gives members an opportunity to pass good legislation for their constituents. i would like for this to be a bipartisan bill and i'm pleased that senator stabenow feels the same way. with the entire committee working together we can develop a well-rounded bill that will improve the operation of these important programs.

it is also my intention to complete this reauthorization on time before the programs expire at the end of september. i understand there are some that may prefer that we not succeed in this endeavor. i caution those individuals that these programs are too important not to reauthorize. gambling, fortune telling or using a crystal ball to predict a better reauthorization in the future is foolish and short sided. it is time for folks to come together and be part of crafting legislation, not to stand outside the process hoping it fails. we have been in a listening mode in preparation for this reauthorization and that cull minute ats in today's hearing. i have traveled throughout kansas visiting school food directors, talking with parents, students, school administrators and others involved in these programs. we have had hearings last year and we have our experts here

today. as we seek to put what we have learned into legislative form several priorities have become clear. first, reauthorization provides an opportunity to review programs and improve their efficiency and effectiveness. in the school meal programs there are significant error rates and improper payment levels. these have recently been highlighted approximate in reports from the department of agriculture's office of inspector general and the government accountability office. we will need to improve the administration of these programs to reduce errors but do so in a way that does not layer additional medical bureaucracy and overreach on those who are seeking to feed hungry school children. second, it is evident that evolving programs encounter different challenges as they try to adopt a changing times. each new challenge is met with additional modifications,

guidance or regulation and these can unintentionally evolve into very complicated systems that are often outdated or needlessly cumbersome. we need to identify areas in which we can simplify make things easier for those implementing and participating in the programs. third, my travels in kansas, and i am sure that this opinion is sard by many on this committee have also indicated that we need some -- some flexibility. many folks are worried about what flexibility means but to me flexibility means we will still protect the tremendous gains already achieved by many and provide assistance to others so they, too, may achieve success. these programs can't help anyone if they aren't workable. department of agriculture and others have worked very hard to help those who are not meeting

the current standards and have promoted statistics citing high rates of compliance yet we have schools that are currently struggling and i understand that at least 46 states applied for the recent whole grain waiver and we have additional sodium restrictions that are still on the way. lines in the sand and uncompromising positions will benefit nobody, and especially not the hungry the hungry children that these programs serve. working together i am confident we can find a way to preserve the nutritional quality of school meals without a one size fits all approach that prevents some local flexibility. these programs have historically had strong bipartisan support. amazingly in 2004 and 2010 reauthorizations passed by unanimous consent but debate leading up to those bills also

included significant controversy, similar to the issues we face today yet republicans and democrats worked through the process together and came up with legislation that everybody could support. finally, it is vital that this legislation does not contain additional spending without an offset. that's just where we are. we have received many bipartisan suggestions for ways to improve these programs but many of those have considerable price tags. our budgetary constraints are real, our responsibility to our constituents includes not spending money that we don't have. i look forward to working with senator stabenow and each member of the committee throughout this reauthorization process. i am also appreciative of the witnesses here today a special thanks to ms. cindy jones who has been our shotgun writer if that's the proper term who has traveled from kansas to be on our second panel. i look forward to hearing from

our witnesses regarding their experiences with these programs and i thank them so much for their testimony before the committee and taking their valuable time to come here. i no you turn to my colleague, the chairperson emeritus of the committee, senator stabenow for any opening remarks she may have. >> thank you very much, mr. chairman. i look forward to be working with you on this important issue. we have been talking and looking for ways that we can move forward together and i look forward to working with you on this, as well as the entire committee as we continue the work we began last year to strengthen child nutrition programs. i want to thank the witnesses as well for testifying today. you bring very important perspectives from all sides of the issue, there are a lot of important pieces to this legislation and it's important we hear from you and work together to move forward.

as we all know, our children's health and well being really are at a crossroads. obesity rates in children have tripled in the last 30 years. today one in three american children and teens are overweight or obese. we are now seeing health problems typically unseen until adulthood adulthood, high blood pressure to type two diabetes are in young people who should be focused on little league or going to the prom. this obesity epidemic requires a serious commitment on our part to continue moving forward with the nutrition policies we put in place in order to give our children a fair shot to be healthy and successful. last year this committee heard from retired military leaders desperate to help improve the health conditions of our soldiers and young recruits and as the chairman said the school

lunch program actually started as a result of our military leaders in the department of defense. in his testimony retired four-star air force general richard holly said that obesity is one of three main reasons why an estimated 70% of all young people who walk through the recruiter's door at the age of 17 through 24 one of three reasons why they don't qualify for military service. and they indicated that was the largest reason. their concerns are echoed by more than 450 retired generals and add mirls who are trying to raise awareness about the impact that poor childhood nutrition has on our national security and its cost to taxpayers. this recruitment crisis also requires us to continue moving

forward with the nutrition policies we put in place five years ago. in addition to childhood obesity issues we also have the second challenge of childhood hunger. as we approach the end of the school year, more than 20 million young people -- 20 million students who eat at school because they qualify for free and reduced priced meals will struggle to eat any meal, let alone a healthy meal in the summer. this hunger crisis for our children requires us as well to continue moving forward to strengthen our summer meals programs and other supports for children. we also have millions of pregnant moms and children in our communities who are nutrition nael at risk, which can lead to low birth weights increased childhood disease and

impaired brain damage. and that's why continuing to protect and strengthen the wic program is so important. it's for all of these reasons and many many more that we need today. and it's the reason we must take this process of reauthorizing our child nutrition program seriously and i appreciate that the chairman does. the good news is for the first time in years it looks as though we're beginning to make some progress on these issues. obesity rates have begun to stabilize in some areas, more children are eating healthy breakfasts and lunches than ever before children are eating 16% more vegetables 23% more fruits according to the harvard school of public health, and as i have said many many times it seems to me that our children are worth continuing the requirement

of school meals for a half a cup, that's not very big there's not a whole lot that goes in this, actually, a half a cup of fruit or vegetable as part of our commitment it's not the whole commitment but a very important part of our commitment to our children's health and success. but we know there's much more to do. nutrition at its core is preventive medicine and child nutrition is about leveling the playing field so that any baby, any child any teen, whether they are in detroit or rural kansas or a suburb of atlanta or a farm in iowa has every opportunity to be healthy and successful. that's why it's crucial that this committee work together in a bipartisan way to ensure these nutrition programs continue to operate efficiently and effectively and that we continue to move forward for our

children. our children and our families are counting on us to do just that. thank you, mr. chairman. >> thank you, senator stabenow for an excellent statement. all members should be advised we have a vote at 10:30. well, that just changed that, the vote has been postponed until 2:00 this afternoon so we can finish -- >> magic you have such power mr. chairman. >> just amazing what you can do with the new congress, senator. sorry about that. >> i object. >> let the record show an objection was heard. let me introduce our first panel. steven m. lord managing director general accounting office, forensic audits and investigative service. mr. lord currently serving as the managing director of the

forensic audits and investigative services at the gao, he oversees a highly trained staff charged with conducting special audits and investigations on major federal programs prone to fraud waste and abuse. mr. lord has received many awards over his 30-year -- 30-year career including awards for meritorious and distinguished gao service. mr. lord welcome and i look forward to your testimony and please go ahead and then i will introduce ms. neuberger for her statement. >> thank you, chairman roberts. ranking member stabenow, members of the committee, thanks for inviting me here today to discuss the findings and recommendations of our 2014 report on the school meals program. as you know and as you mentioned in your opening remarks, the school lunch and breakfast program play a very important role in providing for the

nutritional needs of school children across the nation. at the same time the national school lunch program is on omb's list of higher record prone programs due to its large estimated improper payments rate. this underscores to me to ensure sound controls are in place to ensure that $15 billion in federal funds are spent wisely. today i'd like to discuss two things, first some positive actions, usda has taken to strengthen oversight of the program, as well as additional opportunities the gao has identified to enhance controls. first, in terms of usda actions, the department has worked closely with congress to develop legislation that requires school districts to directly certify students if the snap program. according to usda officials direct certification of these students reduces the administrative burden on school

districts, it also reduces certification errors and helps without adversely impacting access to the program. another positive development is state agencies now conduct administrative reviews of school districts every three years as opposed to every five years as it was done formally. we think that's a really important part of the oversight process and the effort to help ensure correct eligibility determinations. despite these positive actions we did identify some additional areas where they could enhance verification without compromising legitimate access to to the program. first, we believe the school district reviews of questionable applications could be strengthened. of the 25 school districts we examined, 11 did conduct these so-called for cause verifications, but unfortunately nine school districts did not conduct any for cause

verifications of questionable applications and the remaining five districts said they would do it on an occasional basis when prompted to do so by outside stakeholders. that's why we recommended that usda study this for cause verification process, figure out why the school districts were reluctant to do it and consider issuing additional guidance, if needed. excuse me. we also recommended the usda consider using computer matching to help identify households whose income exceeded eligibility thresholds. under the current standard verification process it's difficult to detent all households that misreport income because the so-called standard verification process is focused on a small slice of beneficiaries, those are annual income within $1200 of the eligible threshold. for example, in our work we

found that 9 of 19 household applications were not eligible for free or reduced benefits yet only two of these households would have been subject to the standard verification process because of the way they defined error prone applications. thus we think verifying a broader window of applications as well as using computer matching techniques, we think that could potentially significantly strengthen the verification process and, again, without adversely impacting access to the program by those truly in need. and finally our report also recommended that usda explore ex anding the verification process to include those who are deemed categorically eligible for the program by virtue of their participation in other public assistance programs such as snap, tanif et cetera. we found that those applications are generally not subject to

verification. just a few examples in our report we found one household that was certified through this process because they stipulated they had a foster child, yet when we interviewed the household occupants we found they did not have any foster children. another application -- another applicant reported they were enrolled in snap, therefore they were automatically eligible, yet when we contacted the state officials they said this individual was not enrolled in the snap program. so we found some example -- again, you know, these examples are not generalizeable to the entire population, but we found enough examples suggested that usda needed to take another look at that. so the good news is usda agreed with all of our report recommendations and we think the collective impact of all the recommendations when implemented will help strengthen the verification and oversight process to again to ensure only those truly deserving of the

benefits receive them. chairman roberts other members of the committee, this concludes my prepared remarks and i look forward to any questions you may have. >> mr. lord, thank you very kindly. our second witness ms. zoe neuberger, ms. newburgher joins us from the center on budget and policy priorities where she is a senior policy analyst. she works on the school meal programs and wic and has been with the center since 2001. obviously a veteran and knows what she's talking about. previously i didn't lien to insinuate you didn't. previously she was a budget analyst for these programs at the office of management and budget. welcome, madam and i look forward to your testimony and insight. >> hugh very much for the invitation to testify today on improving accuracy in the school meal programs. as you said i'm a senior policy analyst at the center on budget and policy priorities a

nonprofit policy institute that conducts research and analysis on budget and tax policy as well as poverty and social programs. out of our roughly 50 million school children about 30 million eat a school lunch on a typical school day, that's extraordinary reach, and that figure includes more than 21 million low income children for whom school meals may be the healthiest and most reliable meals they get. there are also nearly 100,000 schools that operate the meal programs and they do a remarkable job they process applications provide healthy meals and keep track of the eligibility of each student so they can claim the appropriate federal reimbursement. their work means that we have fewer hungry children and that our students are better prepared to learn. as you can see the school meal programs play a vital role in children's health and well being. they must continue to play this role while also administering the programs accurately. the department of agriculture just submitted that the net annual cost of lunches that did not meet nutrition standard was

$444 million. that's not acceptable. the programs must make sure that federal funds are used for meals that meet federal criteria. several we've got powerful tools to address the issues, there's a verification process also in place, there's a new rigorous review process, usda has instituted new oversight person measures and just completed a detailed nationally representative study that not only measures errors in their costs but also identifies a great deal of information about the causes for errors which allows for specific and effective policy solutions. but there are also challenges to improving accuracy in a vast and complex system whose main focus is to educate children, not administer the meal programs. as i mentioned, the school meal programs operate in nearly 100,000 schools nationwide and there's wide variation among them. their staffing resources and technological capacity vary wildly, there's also a lot of variation in the way children get meals in the lunchroom or classroom and how the school

checks who is in which category. small rural schools have different operational and environmentals capacity than large trikts. meal tracking and accounting systems can range from paper systems to state of the art software. schools are not currently set up to do the kind of eligibility determinations that other public benefit programs do. the snap program or medicaid, for example, have teams of professional eligibility workers who spend all day, every day, sorting out the details of applicants' income and household circumstances. in schools there might be a cafeteria worker or secretary who handles meal applications for a few weeks at the start of the year. so the question is given the tools of the program's disposal and the system we are feeling with how can congress improve accuracy in the meal programs? an example can help show the way. beginning with the 2004 reauthorization and building on that in 2010 congress set a clear expectation for school districts and states to improve their use of the rigorous eligibility determinations made by other programs primarily

snap, to approve children for free meals automatically. that's the direct certification process. because the school meal programs are relying on a more rigorous income assessment this approach saves time and reduces errors. in the past decade there have been striking improvements. nearly half of all children approved for free or reduced priced meals are now approved without having to complete an application. that's an enormous simplification and congress played an important role by setting an expectation and then providing tools and support to meet it. my written testimony describes many other steps congress and usda have taken but there's room to do more. it's important to strengthen management and oversight across the board provide ex tep sieve help to districts that persistently struggle with errors and pursue invasions that could open up new ways to improve accuracy for example, gao recommended he can plorg the use of data matching to identify applications that might have incorrect information. that's worth trying.

usda plans to develop a model electronic application for the first time. that's another promising invasion. as you consider ways to improve accuracy in the school meal programs i surge urge you to consider these four questions first, does the proposal have a proven record of reducing errors? some ideas that sound promising like requiring households to submit pay stubs with their application have not been effective when tested. second, will it maintain program access for the most vulnerable children? we certainly don't want to worsen that problem. third, is is it administratively feasible? adopting a time consuming documentation or verification system might prevent errors but could cause others by adding a step to the process and would force school staff to determine more time. fourth is it cost peck testify? high quality information management systems can be very effective but might cost too much for a small school district. as i noted it's critical that

error reduction strategies not reduce access to school meals. the best way to improve integrity is not through punitive policies but to continue sending a clear message to school nutrition officials that program accuracy is important, that it will be measured and that federal officials will support them in implementing needed improvements. thank you very much. >> thank you very much. thank you. mr. lord do you think that a shift from the current verification process that emphasizes for cause verification would enhance the program integrity and a secondly would it have a negative effect on access for eligible participants? >> no i think again senator there is a way to do it without adversely impacting people who truly deserve t what we pound in our work is the for cause, again, that's a the review of questionable applications, some school districts were not doing

any for cause verifications of questionable applications. so there's definitely potential there to do that more consistently across school districts. and i should -- i should add that's a us is da requirement. school districts are required to conduct these type of reviews. so anytime we see that type of inconsistentn kon sisconsistency that gives us some concern. >> ms. neuberger, i would like to know more about the point of service when the child and the cafeteria worker do interact and determine how the meal will be paid, you have cited this in your statement as a step at which many errors do occur. can you walk us through what happens exactly at the point of service? i'm not an expert, but cindy jones is we were at a lot of points of error. if you could point that out for me, please. >> absolutely. and it sounds like you have had a chance to visit school meal programs which is great. i hope if the rest of you

haven't had an opportunity that you will take that soon. there's nothing like seeing it firsthand. >> you can lose a little weight there, too. >> but let me describe a typical scenario, there's a lot of variation. you might have a cafeteria with a 30 minute lunch period dozens if not hundreds of students coming through a line, sometimes there's kois about what they take, not always and when they have their meal on their tray they go to a cashier at the end of the line. that cashier needs to check the meal to make sure it's meeting nutrition standards and figure out who the child is to make sure that that meal is marked down in the right meal category free reduced or paid. now, that's a process that has to happen very quickly when you've got lots of students waiting in line and it's only when they get through that process that they finally get to eat. this is not a sophisticated interaction, maybe seven or eight-year-old and a cashier and it has to happen really fast. that does create opportunities for errors. there are also more innovative models that are being tried now

that can make it easier for kids to get meals. for example, for older students there might be a cart in the hallway where you can pick up a breakfast and take it with you to class, that makes it much easier for students to eat and also reduces errors related to what's in the meal because they're taking prepackaged meal but that's a fast transaction where you have to have a process for knowing who is taking the meal and keeping track of that. meals are sometimes served in the classroom. the process is decentralized and there are some times opportunities for error and you immediate to react accordingly. >> thank you for that application. a question for you both. is electronic data matching the method of additional verification that would be least burdensome to school food service providers and which of the other methods of improving program integrity that you recommend will cause the least additional burden? >> sure. i will go ahead had. so data matching is used at two different steps in the process,

first at the certification that's the approval point where you can use data from snap everywhere and in certainly states they are allowed to use medicaid data to automatically enroll kids. the application process has been a source of error and so the fewer families have to go through that process the more that can be automatically enrolled the more you reduce opportunities for error. the program has been moving in that direction over the last five years or so many more students are directly certified. as a result even though there are more children in the free or reduced price category now than there were because of the recession, schools have to process applications for 2.5 million fewer families so that's much less paperwork for schools. that's a great step forward. the other place where data can be used is at the verification at the same time, checking applications. that's where i think there's room to look at more data sources at gao recommended. >> i would caution against just expanding the number of kids that get verified because many

families don't respond to that request and if they don't they lose benefits whether or not they are eligible but data could be a good way of inn pointing applications -- >> i'm not worried about the rife's issue. >> yes. >> i'm more than a little worried, but at any rate let me just say that i have a concern about holding states accountable to a different standard ie three years and then we just got a report from the inspector general of the food and nutrition service indicating -- and i think my figures are accurate here quoting from this study which is just out -- errors 1.9 billion school lunch errors, 770 million school breakfasts. we're not the pentagon, but -- or for that matter any other agency, but that's a considerable amount of money and i don't know if either one of you have had access to that information or if you would like to make a comment on that but

this should be of concern to the committee -- is the concern of the committee. >> i agree with you, mr. chairman. the proper payments rate overall for the program is about 15.25%, the good news is it has declined slightly from last year, assuming the data is reliable. at the same time close to a billion dollars of the improper payments were in the certification area errors. >> let me just -- i apologize for interrupting but i'm already over time and we have gone on a considerable amount of time, we have a lot of people waiting, but basically 1.9 billion school lunch, 750 million. it's my understanding that states are asked to audit every three years, but this last report -- or the last report that we could come up with was clear back in 2005. that's been ten years. so i think we're holding you

know, the fns and federal component of this which of course is playing a much stronger role to a different standard than that of the states and that's of concern to me. why ten years? >> so the reviews of districts do happen now every three years the kind of report that you're talking about -- >> right. >> -- is the nationally representative study that usda does it's a very in-depth report where they go out and interview households stand in cafeterias and watch what's on the tray. that kind of report is important it is relatively costly and takes a long time to do. it provides the kind of information that can be very helpful to developing proposals for how to improve errors. you get to the bottom of what's causing errors and what kind of errors are most prevalent and that allows you to design tail erred solutions. >> senator stabenow. >> thank you very much, mr. chairman. in this area we juggle of

course, the desire and the need to make sure that we are accurate, that children who need and qualify for lunch and breakfasts are getting it as opposed to those who should not be. on the other hand, we have situations that we don't want to add additional cost to the local schools who are juggling between administrative costs and actually providing quality meals and so we -- we have a number of issues to swrugel. i know in the last bill that we did having community eligibility put into place has made a huge difference in michigan in schools being able to be more efficient and have more dollars going actually to feeding you think had ri children. mr. lord, first it sounded like you were saying that the usda has accepted your recommendations and are moving forward to make changes. is that my understanding? >> yeah absolutely. they agreed with all of our report recommendations and recently provided an update of steps they're taking to implement them, which is frankly

good news for the program. >> that's great. that's wonderful. and, again, when we talk about program integrity measures which are very important, they can have unintended consequences of removing children who actually should be getting food. could you give us an example when this happens and what approaches we can take to actually improve improper payments, at the same time pro ekting access for children. what's the best way to do that? >> well, as we highlighted in our report we think you can attack this from various angels. obviously the verification process we think could be strengthened, again, you can do it in a way that's not going to adversely impact children truly in need. i get the sense the school districts are reluctant to do this though because of the lack of training expertise -- >> is it extra cost for them in the kinds of things that you're talking about? >> i believe it would impose some additional costs but in the end the net result would be

you're potentially freeing up some additional funds you could deaf vote to the program to those that are truly deserving. from a cost benefit standpoint i think it would be effective but that's usda's call they would have to do more additional studies in that. >> i think that's always the juggling. and ms. neuberger talking about the verification steps and the additional administrative costs and how we balance that, obviously we want integrity in these programs and we want every penny to go to children who need it. but even automated tools can be cost prohibitive for some schools that are on tight budgets. do you believe additional investments in error reduction could come at the expense of improving meals and when you look at the per meal reimbursement what pounding do they get to cover administrative costs associated with meal programs versus investments in technology, because i think we really need to understand this

so that we can do this right. >> that's a really important question. at the school district level schools get a per meal reimbursement, that's for free meals just about $3 right now and that has to cover all the costs associated with running the program so it's buying the food, it's the staff to serve it and prepare the food and it's all of the administrative processes. there isn't a separate funding stream to cover buying a software system or putting more staff in place to do these kinds of checks. so it's really important to balance the goals here because if too much of those funds have to go toward administrative processes they are not available -- they are not available for food. at the federal level there have been grants to states to improve their technology systems and those seem to have been contributing to a reduction in that kind of error. so that's been a great investment that's paying off. >> the chairman and i have been talking about the fact that particularly for very small schools, i went to a school in one of those in northern

michigan it can become particularly difficult. so we're interested in working with you on recommendations as it relates to very small schools as well. >> would the senator yield on that with point? >> yes, i would be happy to. >> i haven't visited muff schools yet, but we're getting there. and there's a tremendous difference in the school that cindy represents and other schools that are doing this. they're doing a pretty darn good job and then you go to rural small town america and i mean real rural small town america. they simply cannot keep pace with the regs, paperwork, et cetera, et cetera, and the training, mr. lord, obviously says would certainly help out. they're doing the best they can. so this isn't a one size fits all. i know that's obvious to everybody here. but i wanted to underscore what senator stabenow has said. i mean we've got some real challenges out there. thank you. >> i'm going to reclaim my time

and take one more -- ask for one more question. ms. neuberger for you as well. we know that simple errors on applications, and this goes to how we -- the bureaucracy and how we do all of this for families, it's not only the school, but we need to care from the family's end of things in terms of what we are adding in bureaucracy. simple errors on applications are often the cause of improper payments. so it's not just intentional lack of reporting, it's somebody makes a mistake, they don't fill in a box, they do something, you know, that's simple, but it creates that error that mr. lord is talking about. in some cases errors result in children ending up having to pay for meals or they may not be paying for meals because of some -- some simple error. so to help make the system more efficient and ensure all children receive meals what are, again some of the ways applications can be improved the actual application?

i know that direct certification has been very successful. how can we better utilize the data matching to reduce errors so that we again from the family's end are not penalizing a child because somebody didn't check a box? >> that's a great question. so the first step is to make sure as you're relying on data from other programs as on as possible so as few children as possible go through the application process. that improves accuracy right there, but then there will always be children going through the application process so you need to have it be a simple understand stanley form. the process needs -- can't be like other programs where you're sitting in an office with a professional eligibility worker who can provide a lot of information and ask a lot of follow-up questions. typically the application goes home, families fill it out on their own without assistance and they may not know that you need to multiply weekly income by 4.3 to get your monthly income they may not know who they are supposed to list in the household. it's very clear that people have trouble understanding the application and one indicator of

that is that in usda's study they found that out of the children who didn't get meals that they actually legitimately were eligible for three quarts of the time that was because of the family had understated their income on the application. so these are families that bothered to apply they qualified for the peels but they didn't get them because they misunderstood what was expected. usda has just issued a brand new revamped application that's much simple letter than the older version and should be helpful in terms of eliciting correct information and are just embarking on an electronic application which is again very promising for making it easier for families and schools to get the right information. >> thank you. thank you mr. chairman. >> senator bowls den. >> thank you, mr. chairman. i guess the question i would have would be do we have

districts that -- mr. lord, do we have districts that you have knowledge of that are doing a much better job than the average, you know, in regard to the problem? are there districts that we can learn from that we can then take mare knowledge and push to the -- you know to other districts? >> sure. i'm sure there are, senator but unfortunately our scope was confined to the 25 school districts we examined in detail. there's thousands of school districts across the nation, we didn't have the time or resources to visit all of those, but we did get some important insights just from visiting the few we did, examine in great detail. >> very good. >> i can add to that. with regard to direct certification, the use of data from other programs, usda does rank state performance, there are states that are doing a fabulous job west virginia and kansas are examples of those and you will have peoplen o the next panel who can speak to that, michigan is another great example where they've taken advantage of resources and made

continuous improvements and got a performance bonus and are directly serg 100% of the kids they should be. there are great examples at the state and district level and usda is working on sharing those best practices so others can learn. >> i'd like to just also acknowledge the importance of simplifying the application processes. i was on the school board for seven years, you know, the -- the paperwork on these type of things, our poor special ed teachers that work so hard, the paperwork that they endure and the list goes on and on again i would just like to throw my two cents in that that's something that -- you know that doesn't cost any money that ultimately saves a lot of money. and there's just something about government, and impart of government, that, you know, we just add to that burden. whether it's the irs or this or

anything else. so again, i think that's very, very important and hopefully we can work to remedy that. thank you mr. chairman. >> thank you senator and we have senator hildebrand. >> thank you mr. chairman. thank you ranking member stabenow for holding this hearing. this is an issue that i care deeply about. i brought apples today this is the half cup of apples that i'm hoping we can get in every school lunch program across new york. lots of states have lots of produce, but this is a half cup, for parents in the room we mow this is not -- you brought your half cup, i'm going to put these in the anti-room, staff can have them. i had a pack they're really good. since we're talking about this issue of school meals, the one issue that i want this committee to remember because i think it's so important that we shouldn't cut the standards. the chairman said that 40 -- what did he say 46 states applied for whole grain waivers,

those were individual schools within 46 states, but 90% of schools are complying. we're actually doing quite well in meeting the nutrition standards that we set aside in the last bipartisan bill on this topic. so i really want to make sure we don't cut the requirements specifically for the half cup of fruits and vegetables. as senator stabenow mentioned about obesity what are we doing? i mean, we need to make sure these kids understand they should be eating fruits and vegetables daily, they are a important part of how they grow learn, how they're healthy and the rate of obese owe dults in this country is, again, and your statement about our military and being -- having access to the men and women they need to be fit is a real concern. so i think it's important for us to look at the dine picks of the fruit and vegetable requirement. if we're can you get the standards for school meals i think the kids get the biggest hit. the who suffers most financially, who loses the most

business, it's actually farmers and i want to talk about the farmers in my state and the farmers in other states on this committee. so in kansas they produce honey due mellon which i know my kids love and that's a great school snack to have access to real mellon. in mississippi blue berries, kids love blue berries kentucky blackberrys arkansas, edamame one of the most easy fun vegetables to kids to eat, sweet potatoes, we prefer them fried but they are very good too. cherry farmers in nebraska, field greens in north dakota watermelon in south dakota peach growers in georgia and apple growers in new york. all of those farmers across the state represented by this committee would be harmed if we reduce the standards for that half cup. if we cut fruits and vegetables from school meals not only do the farmers suffer but i believe the kids suffer. my children benefit so much from having access to frech fruits and vegetables every day and

every meal and they love them as a consequence. this they know how good it is to eat fresh fruits and vegetables during their meals. so i am hoping that as we debate these issues going we can focus specifically on how we keep these standards. now, i know both of you are testifying specifically about how we can affect and changer or ares so i want to talk specifically about that for a question. mr. neuberger -- ms. neuberger in your testimony you mentioned counting and claiming errors often result from busy lunchrooms where students have little time to select, pay for, and eat their meals. many of these operational errors occur at point of sale. should we consider making more resources available for point of sale systems to reduce errors and improve program integrity? >> thank you. certainly automated systems can make the process much easier. they taken a up front investment. so you need to balance the costs involved with the simplifications and the error

reduction. but places that are using them generally report they simplify the process tremendously for students and the school nutrition staff who clearly have a lot of things they're juggling in the lunchroom. so making that process simpler and more accurate is a great way to go. >> you mentioned a bit about the community eligibility and that we need to eliminate the need for meal applications completely and eliminate much of the potential error. how -- what can we do to lower the barriers to cep participation by eligible districts and schools? what are your top recommendations to do that? >> so it's actually a new option that's working very, very well right now. it just -- this is the first year that it's available nationwide. it builds on options that have been available for a long time that essentially are available to high-poverty schools so that they don't have to go through the standard application process where essentially they would be finding the few children who don't qualify for free or reduced-priced meals. in essence, the whole school qualifies to serve meals at no

charge. with community eligibility, they rely exclusively, they don't take applications they rely exclusively on data from other programs so that reduces errors and opportunities for error and in usda's report they found, as expected, that there were fewer errors in those schools. so that school districts are realizing what an advantage that can be and what they see is because they don't have to spend time on paperwork, the savings they get on the administrative side can be reinvested in meal quality and in serving all students at no charge. >> thank you, mr. chairman. thank you. >> senator casey? >> mr. chairman, thank you very much and i want to thank the ranking member stabenow for having this hearing as well. you're both good to have us gather on these issues. we're grateful. i wanted to say first that we have two major concerns when we talk about these programs and about food insecurity. one, of course, and we should

start with the children, in pennsylvania, we have not only a lot of children participating in both school lunch and school breakfast, fiscal year '14 over a million children in the school lunch program and about a little more than 346,000 in the school breakfast program. but at the same time we have almost a half million children in poverty in our state. so this is of great urgency and concern that we get this right. >> i've always been a believer that these programs, just like a number of other programs or strategy cans help us not only ensure that more children are -- have measure of food security and get the nutrition they need but it can also help them learn, of course. and i've always believed that kids if they learn more now they're going to earn more later and it's not just a rhyme, it's backed up by all the evidence. and the second major concern we

have of course, is not only making sure these programs work for kids but making sure they're administered in a way that's consistent with the expectations of taxpayers and use taxpayer dollars efficiently. so i appreciate the fact that you're bringing to us not only kind of a diagnosis of where the problems are, but also remedies for improving both programs. ms. neuberger, i'll get to you in a moment on kind of a broader question but i want to ask you a specific question about the wic program, the women, infants and children's program. your firm center of budget policy and priorities, just released a report with regard to new research linking prenatal and early childhood participation in wic with improved cognitive development as well as academic achievement. so kids whose moms are

participating in the wic program while pregnant scored higher on assessment of medical development at age two than similar children whose mothers did not participate. so in light of this link between the program like that and the wic program and the cognitive development of the child and my learn means earn connection can you walk through some of the benefits of wic and why we should focus on that as well? >> absolutely. i mean wic provides nutrition assistance for pregnant women and very young children and those are critical times for brain development, as we heard earlier. there's a large body of research that shows that wic is successful in bringing participants very important improvements, improvements in health, up proouchlts in their nutrition, what they're eating, eating healthier foods, improvement in breast-feeding rates, better connections to preventative care, higher

immunization rates and new findings on the link to cognitive development. so that's a panoply of ways in which participating in the program can help low-income families and at this critical time so that they're off to a better start. >> i appreciate that. and i think it bears repeating. speaking of things we should repeat, could you walk through the four questions again that you had in your -- questions we should consider when we're analyzing these programs? i think they're very important to have that guidance, i just want to have you repeat it because around here it helps to repeat things. >> okay. absolutely. so does the proposal have a proven track record of reducing errors? and that's where all the research on this subject can be very helpful. will it maintain program access for the most vulnerable children? so, of course, when you're reducing error rates you don't want to have the unintended consequence of making it harder for kids who qualify for the meals and ned them to get them: and is it administratively feasible. so there isn't a one size fits all solution.

you need to think about what works. fourth, is it cost effective? so does -- will the error reduction be worth the cost involved in setting up the system? you know and not make it such a cumbersome process that it's more difficult for schools to administer. >> we may put those on a chart so we have them in front of us. in the very limited time i have i just want to ask you one question and i may submit more to both of you for written questions. on the question of direct certification, do you think increasing participation in community eligibility and the -- and direct certification would help reduce improper payments? >> i believe it could if applied properly. we looked at the direct certification for 23 households. we found errors in a couple but in our discussions with usda officials and as miss neuberger pointed out, that would greatly relieve the administrative burden at the school district level and has the potential for

streamlining the entire process. i just want to make sure the initial certifications at the snap level and other program levels are being done correctly. but it is -- i should point out the improper payment rate in the snap program is much smaller than the improper payment rate in the school lunch program. so that suggests that's a good way to go based on just that comparison alone. >> thank you. mr. chairman, thank you for the 45 extra seconds. >> any time the gentleman requests additional -- well, maybe not any time. [ laughter ] thank you, senator casey. i want to thank the first panel. thank you so much. the first panel has now concluded -- i'm sorry? oh, i'm sorry. senator thune i apologize to you, sir. >> well thank you, mr. chairman. i know that i'm down here a long ways at this end of the table

so -- [ laughter ] i appreciate you and ranking member stabenow holding this hearing today. as we do prepare to reauthorize the child nutrition legislation this coming year we need to i think taken a objective and bipartisan critical assessment of the programs and make sure that they're working in an efficient, effective, and accountable manner. for the people that they're intended to help and i have serious concerns about the error rates in the national school lunch and breakfast programs which for 2013 and 2014 school year were 15.8% and 23.1% respectively. improper payments for these programs total almost $2.7 billion for the 2013/2014 school year which is a staggering amount and obviously no one in this room wants any child to go hungry, we all know there are

legitimate needs for food assistance. but when we have programs with error rates that are $2.7 billion just for one school year, we simply have got to figure out how to put this money to better use. and there's another area that i think needs attention of this committee and that's eligibility standards for these programs. do the current standards result in child nutrition assistance being distributed wisely to the people who really need it the most? and so just a couple of questions if i might for this panel. i'd love to hear from the second panel, too, about the rigidity in the programs in the people who are actually out there on the front lines. i'd love to get a sense for the standards and just the lack of flexibility that exists today and doing a better job of balancing nutritional offerings. so anyway, i'd love to hear from the second panel about that subject. but i guess the question i have for you is