Checkoff audit offers closure

Apr 8, 2013

While National Cattlemen’s Beef Association (NCBA) and the Cattlemen’s Beef Board (CBB) breathed a sigh of relief over the Office of Inspector General’s (OIG) audit, opponents of the longstanding relationship were no doubt sorely disappointed with the findings. Despite three key complaints, the 29-page audit document concluded that the two organizations are working within the USDA regulations, in the best interest of the $52 million Beef Checkoff Program.

The three key complaints:

1. NCBA allegedly charged prohibited expenses to the checkoff fund 2. The board allegedly used checkoff funds to become affiliated with a private industry association 3. Alleged unauthorized use of the beef checkoff logo While the rift that led up to the audit began between the two organizations several years ago, critics have been quick to jump on the wagon, condemning and nitpicking the groups’ management practices.

The United States Cattlemen’s Association (USCA) and R-Calf were the two most outspoken, pointing out what they believed were flaws in the system.

USCA sent a letter to Agriculture Secretary Tom Vilsack requesting a full investigation after one of CBB’s board of directors resigned, requesting an audit of “emerging checkoff contractor compliance and funding management issues.”

USCA claimed that at least $305,000 of checkoff dollars were misspent. Other complaints from the organization centered around the cost and change in location of a CBB and NCBA meeting.

Prior to the 2011 meetings, USCA’s president wrote a scathing editorial in 2011 about the relationship between NCBA and CBB. “USCA has weighed carefully all the facts and evidence at its disposal. A buttress of the checkoff has always been producer confidence and trust. That confidence and trust is now compromised. The problems must be addressed before the entire program has been gutted. USCA believes that the circumstances are so serious and the magnitude of the problems so great that the Secretary of Agriculture must step in and investigate the issues and outline the remedies,” John Wooster wrote.

R-Calf has also been busy over the last couple of years cheering on the audit team, pointing out what they considered a possible “outrageous conflict of interest” relating to a CBB board member. “If our information is correct and Weldon Wynn serves both to decide who is to receive Beef Checkoff Program funds (in his official capacity as a CBB officer) as well as to benefit directly from his own decisions (by directly representing the interests of checkoff funds recipient U.S. Farmers & Ranchers Alliance), then this is further evidence of the ongoing, insidious and systemic corruption within the Beef Checkoff Program that USDA has chosen not to address,” Bill Bullard, R- Calf CEO wrote in a letter to Vilsack last November.

Prior to that scathing letter, Bullard sent a letter to Vilsack requesting a private meeting to discuss the audit and checkoff. But in the letter, Bullard complains of organizations banding together and holding meetings that excluded R-CALF.

R-CALF Checkoff Committee Chair Joel Gill also sent a letter last October directly to the National Livestock Producers Association, again calling out the organizations for not playing fair.

Despite organizations’ complaints, USDA’s review will hopefully put an end to the long-standing arguments, and the industry can begin working together. The Beef Board sent out comments, sharing their relief in finally getting validation on what they already new.

“We are gratified that the Office of Inspector General audit of the Beef Checkoff Program for the years 2008- 2010 identified no audit issues and reported full compliance by the Beef Board and its contractors,” said Weldon Wynn, CBB chairman and cattle producer from Star City, AR.

According to the report, “The relationships between the Cattlemen’s Beef Promotion and Research Board and other industry-related organizations including … the National Cattlemen’s Beef Association, complied with the (Act and Order)…. Funds were collected, distributed and expended in accordance with the legislation.”

Even though the report confirms what the Beef Board already new, Wynn points out that the organization is constantly striving to improve.

“Even with OIG’s confirmation that the Beef Board’s systems of oversight of funds are robust and effective and that its relationships with checkoff contractors are in compliance, the Beef Board maintains a mission toward continual improvement in our responsibility to producers. Since 2010, for example, CBB has operated under an intensified review and verification process, along with expanded and specific guidelines for contractors. In addition, CBB now requires contractors to provide additional information about implementation costs as they prepare funding requests, thus providing decision-makers with a more detailed understanding of project costs before approving them,” Wynn said.

“The bottom line: Producers and importers can be assured by the OIG report and the Beef Board’s mission of continual improvement that our checkoff dollars are being invested appropriately and effectively,” Wynn added.

While the report did give approval on the management of checkoff funds, it did have some advice for USDA’s Agricultural Marketing Service (AMS), a point that could be used by critics in the future, squelching any hope for peace on battle field. According to the report, AMS needs to develop a better review process for the Beef Board, pointing out that the agency had not conducted periodic management reviews.

“For example, AMS had not identified weaknesses in the beef board’s internal controls over project implementation costs,” the report said.

Pointing out that sensitivity was key, the report continued, “Without AMS’ independent oversight, it may not be clear to beef producers, importers, and the public that beef checkoff funds are collected, dispersed, and expended in accordance with legislation.”

The Beef Checkoff Program was established as part of the 1985 Farm Bill. The checkoff assesses $1 per head on the sale of live domestic and imported cattle, in addition to a comparable assessment on imported beef and beef products. States retain up to 50 cents on the dollar and forward the other 50 cents per head to the Cattlemen’s Beef Promotion and Research Board, which administers the national checkoff program, subject to USDA approval. — Traci Eatherton, WLJ Editor