The Office of the Inspector General (OIG) of the U.S. Department of Agriculture (USDA) recently released the results of an audit of controls over U.S. pork checkoff funds.
The audit did not discover misuse or loss of checkoff funds. However, the OIG did make several recommendations for additional oversight of the checkoff program. According to leaders from both the National Pork Board (NPB) and National Pork Producers Council (NPPC), the OIG recommendations would add unnecessary bureaucracy and expense to administration of promotion, research and consumer information programs.
The audit was requested by the NPB on April 2, 1997, in response to concerns from some groups about use of checkoff dollars. Auditors spent four months on-site at NPPC and NPB offices, in addition to taking a close look at a state producer organization. OIG findings confirmed the checkoff money was being spent on the intended pork promotion, research and consumer information projects which benefited the entire pork industry, including small and disadvantaged producers.
"We at the NPB feel this OIG audit is very significant and we are committed to an open and transparent process," says Arnie Stuthman, Platte Center, NE, president of the NPB. "The purpose of these audits is to report areas that need to be addressed in some fashion."
Greg Boerboom, Marshall, MN, is chairman of the NPB's budget committee. He says the NPB wants producers to fully understand what the OIG recommendations are and what they mean to the effectiveness and efficient use of checkoff dollars. Boerboom says the NPB has formulated official responses to each of the OIG's recommendations.
The OIG stated the NPB's delegation of authority weakened its accountability, implying that the NPB/NPPC working relationship may be too close.
The NPB does not agree that the Board should be physically or functionally separated from NPPC. Boerboom says NPPC's resources of staff and systems are valuable to, and paid by the Pork Board and represent producer interests and program opportunities.
The NPB has its own independent processes to measure NPPC, assures Boerboom.
The OIG suggested the cost accounting requirements needed strengthening, saying there were not enough accounting line items in NPPC's budget. The NPB is working with NPPC to document adequate budget account detail.
The OIG also said state pork producer associations need to be audited for compliance and use of checkoff funds. Boerboom explains states are accountable to NPB about how funds are used in forming and revising annual plans and budgets, and for year-end financial and performance reporting.
The NPB requires annual audits, conducted by certified public accountants or financial reports prepared by two officers of associations. Periodic reviews of management, administration and financial processes on a sample of state associations, varying in size from large to small, have been performed to improve systems. The NPB will review cost-effective oversight and additional compliance reviews that might improve or enhance state association accountability.
Checkoff collection site reviews need better controls, says the OIG. According to the NPB, improved procedures, manuals, required documentation and a new contract reviewer are now in place.
The OIG said pork producers don't have enough opportunities to vote in delegate elections. The OIG stated having elections at one site, on one day with no absentee ballots presented a problem. Producers who are not technically eligible may be voting. Since less than 3% of producers participate, the process is vulnerable to manipulation by ineligible producers. The OIG pointed out producers self-certify but do not provide proof of residency or pork production.
The NPB responded that participation levels in any election are a function of the issues and controversy. State pork producer meetings are commonly held at one site in a state and producers are familiar with the practice, according to the NPB.
Certification of producer eligibility is the same procedure used at the initial election of delegates and during the voting process in the USDA checkoff referendum. NPB officials said they, too, would like to see greater participation, and suggested better communication programs and notices might help make producers more aware of the opportunity to participate in the grassroots process.
"We have had over 1,000 pork producers serve on committees during the past 12 years of the (mandatory) checkoff program and that's real grassroots involvement," says John Kellogg, NPB member from Yorkville, IL.
NPPC President John McNutt, Iowa City, IA, says ultimately, the OIG recommendations will add bureaucracy and take control away from pork producers.
"Complying with the recommendations in this report would only hurt those who it was intended to benefit," he says. "What really stands out about this report is that it shows we did nothing wrong, yet OIG wants to dramatically change a well-established and well-functioning organization. Preliminary estimates alone show administrative costs to the whole system, including the NPB, NPPC and all the state associations could increase as much as $2-3 million. The increased additional burden imposed by those recommendations would simply take checkoff dollars away from critical programming areas."
According to McNutt the current system of checkoff collection and program administration is one of checks and balances. Producer delegates from 44 state associations define the policy direction and elect NPPC's board of directors. All the checkoff-funded activities are under the continual oversight of the 15 producer members of the NPB, which are appointed by the secretary of agriculture.
Both Stuthman and Boerboom say the NPB is going to look very closely at the OIG recommendations to try to come up with compromises.
As Boerboom states, "We will be required to follow the recommendations in the OIG report but there is some room for negotiation. While we are going through that process, we will be working for what is in the best interest of the pork producers in the country."
Addressing the topic of how an upcoming checkoff referendum may play into the picture, Kellogg responds, "If someone is concerned about a referendum, I think it is really good news that there was no loss or misuse of the checkoff funds and that the programs help all producers."
