OMAHA (DTN) -- Responding to an independent audit criticizing the group's expenses, the National Cattlemen's Beef Association acknowledged Tuesday that "mistakes were made" and pledged to correct them.
Independent cattle producers and other livestock organizations have long questioned the National Cattlemen's Beef Association's "firewall" segregating policy work from checkoff work. (Logo courtesy of the NCBA)
"We are committed to achieving accuracy in this report," stated Steve Foglesong, president of NCBA and a cattle producer from Illinois. "Responsible use of the producer dollars and ensuring the financial firewall are critical. Where mistakes were made, we will correct them."
The Cattlemen's Beef Board stated Monday the group is launching a "more comprehensive compliance review" of how NCBA spends checkoff dollars after an independent accounting firm found problems with travel and staff expenses paid by the checkoff.
The CBB released a report from the CPA firm Clifton Gunderson that pointed out several discrepancies in NCBA's documentation and expenses charged to the checkoff. The questionable expenses become controversial because independent cattle producers and other livestock organizations have long questioned NCBA's "firewall" segregating policy work from checkoff work.
The number of instances cited over the past two years "clearly indicates that NCBA has breached the financial firewall during the periods tested," the report states.
"These findings are extremely troubling for the CBB Executive Committee," stated Robert Fountain, a Georgia cow-calf producer and the CBB's secretary-treasurer.
Foglesong stated that NCBA agrees that checkoff contractors should have specific guidelines and detailed reports to track spending. In looking at the audit, however, Foglesong added, "The accountant’s inability to determine compliance on select items does not mean non-compliance. Rather, it is an indication that written guidelines are needed to achieve compliance."
Fountain stated that CBB will now begin a more detailed review of NCBA spending for the past two years. Further, CBB will be demanding more monthly reviews of NCBA's expenses and issue more detailed guidelines to all checkoff contractors.
Despite the criticism of a breakdown in the firewall, Foglesong also stated, "NCBA understands the importance of compliance with the financial firewall and accepts this responsibility without question. It’s for this reason we keep separate bank accounts and our accounting and time keeping procedures are in accordance with and even exceed most industries’ standards."
Foglesong added that NCBA has more than 8,000 different coding options for assigning employee time and expenses.
Texas cattlefeeder Chuck Kiker, a vice president for the U.S. Cattlemen's Association, a former Cattlemen's Beef Board member, said the audit shows there is no firewall and NCBA has relied more heavily on checkoff dollars to prop up the policy division.
"People need to stay focused on the facts that they are spending money out of compliance," Kiker said. "They are spending checkoff money on the policy side."
Just last month, the Cattlemen's Beef Board challenged NCBA's role operating the Federation of State Beef Councils, which works to oversee spending of checkoff dollars managed by NCBA. The CBB recommended splitting the federation from NCBA's policy division. That rebuke, along with criticism from several other agricultural and livestock organizations, prompted NCBA to shelve plans to create a new governance structure for NCBA and the Federation of State Beef Councils.
Clifton Gunderson found that expenses were improperly charged to checkoff funds or not documented properly. For example, Fountain stated, the report showed international and domestic travel expenses by spouses of staff or volunteers were charged to the checkoff.
The audit firm examined 45 expenses related to overhead by NCBA reimbursed by the CBB due to checkoff contract costs. Five of the 45 items were not eligible for such expenses, Clifton Gunderson reported. Those included consulting fees for research into a certified beef program, travel for a NCBA insurance issue and time spent in meetings related to non-checkoff issues.
The audit found that, with another nine of the 45 items Clifton Gunderson examined, it could not be determined if those expenses qualified as overhead for managing checkoff projects.
The audit also looked at how NCBA credited time for staff split between checkoff-funded activities and policy issues. Some time sheets were coded as time used for checkoff projects when the person worked almost exclusively on policy issues.
"In 25 instances (Clifton Gunderson) could not determine if the employee's time was recorded correctly," the report stated. "For example, three employees attended meetings in FY 2008 related to the issue of County of Origin Labeling for beef products (COOL) and charged their time to checkoff projects. (Clifton Gunderson) was unable to determine how this activity supports the objectives of the checkoff."
The audit findings come just as NCBA and CBB get ready for their summer meetings starting Wednesday in Denver, during which NCBA's Federation staff typically submit funding requests for checkoff projects in the coming year.
Addressing the meeting this week, Foglesong stated, "A complete response to the accountant’s report will be addressed with CBB, participants from state beef councils and state cattlemen associations and NCBA directors at this week’s Cattle Industry Summer Conference."
The beef checkoff operates on several levels. Authorized in the 1985 farm bill, the checkoff became effective in 1986. Producers pay a mandatory assessment of $1 per head of cattle they sell. Of the approximately $76 million collected annually, state beef councils receive about $35 million.
The check-off program is administered by the 106-member Cattlemen's Beef Board, which approves budgets and elects 10 members to a Beef Promotion Operating Committee. The other 10 members are elected by the state beef councils. This committee of 20 members is responsible for developing budgets, awarding contracts and approving projects for beef promotion and research activities that are funded by the Beef Board.
The Federation of State Beef Councils is largely made up of beef producers from the 45 state beef councils. The councils collect the $1 beef checkoff and send 50 cents of each dollar to the Beef Board. The councils invest in national check-off programs by purchasing seats on the federation board. The federation uses those investments to further fund additional programs at the national level through NCBA.
More information on the Cattlemen's Beef Board statement can be found at http://www.beefboard.org/…
Chris Clayton can be reached at chris.clayton@telventdtn.com
(AG/KM)
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