POLITICO | Missing USDA dairy checkoff reports renew calls for transparency



Missing USDA dairy checkoff reports renew calls for transparency

By Catherine Boudreau

09/14/2017 05:01 AM EDT

The Agriculture Department hasn’t published legally required annual financial reports on a $400 million dairy research and promotional fund for the past four years, lending ammunition to farmers and other groups pushing for more transparency in checkoff programs.

A USDA spokeswoman told POLITICO the reports on the dairy checkoff are in the final clearance stage and should be posted within the month. The 2016 report is still in the works, she added. But the agency declined to explain the yearslong delay. In July, USDA turned down a Freedom of Information Act request for the documents from a Tufts University professor, saying that it had no records to send because the reports hadn’t been published.

The missing reports are adding to the controversy surrounding federal checkoff programs, which raise money via taxes on farmers’ commodities. For years, checkoffs for industries including raisins, pork, beef and eggs have been embroiled in lawsuits over whether mandatory participation violates farmers’ constitutional rights or whether funds were used for purposes that are prohibited under the programs, like lobbying, along with attempts to have documents turned over to the public.

Groups including the Organization for Competitive Markets and the Humane Society of the U.S., which back legislative efforts to overhaul federal commodity checkoffs, say the missing dairy financial reports are another example of a broader problem with the programs: a lack of transparency and accountability, as well as little oversight by USDA.

“The checkoff is an example of how farmers lost their voice,” said Mike Eby, chair of the National Dairy Producers Organization. Eby said he is disappointed that USDA and Congress appear to have little regard for the millions in farmers’ dollars that are being used for purposes that are not being made public.

A spokesman for USDA’s Agricultural Marketing Service, which oversees the checkoffs, said the agency emphasizes transparency by requiring checkoff boards to disclose on their websites annual reports, bylaws, independent evaluations and budgets.

Leaders of the House and Senate Agriculture committees declined to comment when asked if they had inquired about the delayed reports.

AMS oversees 22 checkoff programs authorized by Congress for agricultural products ranging from dairy and soybeans to watermelons and popcorn. Boards composed of industry representatives manage the money and spend it mainly on research and advertising to increase product demand. AMS is required to review and approve checkoffs’ budgets and evaluate any contract signed with an outside entity, and ensure they comply with the law.

Only the dairy program’s evaluations must be sent to Congress, because of the way its authorizing statute was written. Other federal checkoffs, each established by individual statute, must commission independent audits each year, and AMS is required to obtain an independent evaluation of the effectiveness of promotional activities every five years. These reports may or may not be available on checkoff board websites.

The agency has come under fire from the USDA Office of the Inspector General on several occasions, including in a 2012 report that recommended AMS improve its oversight, mainly concerning its ability to detect when checkoff boards are misusing funds. The report mentioned excessive employee bonuses and travel expenses, and the agency agreed with the OIG’s recommendations. In 2014, the watchdog agency told AMS it needed to conduct more oversight of the beef board.

The agency has improved its oversight in response, the AMS spokesman said, including by strengthening internal controls related to monitoring checkoff board activity and by implementing guidance to ensure internal reviews are consistent.

Until 2012, the dairy checkoff program was one of the most transparent. AMS was publishing each year a report that often exceeded 100 pages on the dairy checkoff’s financial activity, including a third-party analysis of how effective its promotional efforts were. The reports were then sent to Congress.

“I read annual reports for other checkoffs, but they’re not filtered through USDA, so they are not as thorough or independent,” said Parke Wilde, the Tufts University professor who originally requested the dairy checkoff evaluations from AMS.

Wilde, who teaches and researches food and nutrition policy, said he uses the reports to see how effective the programs’ efforts are for farmers, the effect on consumer behavior and to identify partnerships that promote unhealthy foods.

The National Dairy Promotion and Research Program, or DMI, and the National Fluid Milk Processor Promotion Program, or MilkPEP, along with more than 60 state and regional organizations, collectively make up the dairy checkoff. DMI funding comes from a 15-cent assessment and a 7.5-cent assessment on every 100 pounds of domestic milk and imports, respectively, while MilkPEP collects 20 cents per 100 pounds of processed milk products.

The dairy checkoff reports are supposed to contain a detailed list of DMI and MilkPEP’s income and expenses, which include advertising campaigns like “Refuel with Chocolate Milk” and a multi-year partnership with Domino’s Pizza to increase the chain’s use of cheese. AMS also contracts with a university — most recently Texas A&M — to determine the effectiveness and return on investment of promotional activities.

The first analysis completed by Texas A&M reflected checkoff activities in 2011, and was included in the last report published by AMS in 2012.

DMI, MilkPEP and Texas A&M told POLITICO they’ve given the agency the information necessary to complete the reports and that they don’t know why it’s taking so long to publish them.

“I don’t think there is anything nefarious about this,” said Wayne Watkinson, a partner at the law firm McLeod, Watkinson & Miller and legal counsel for the dairy checkoffs.

“I don’t think the intent is not to publish the reports; the agency just wants them to be accurate,” Watkinson added, noting the organizations are also frustrated.

Watkinson said one explanation for the delay could be an issue that arose in 2013 and 2014 when Texas A&M analyzed the impact of the dairy checkoff’s proprietary partnerships for the first time, including one with the McDonald’s McCafe subsidiary. The economic analysis misstated how much money was spent, so AMS sent it back to Texas A&M for review.

But the university economist who led the analysis team disputed that account.

Dr. Oral Capps, a professor and co-director of the Agribusiness, Food and Consumer Economics Research Center at Texas A&M, said that after the team originally received incorrect data on the proprietary partnership, they were able to run another analysis using the correct figures and address AMS’s concerns.

“That wouldn’t have held up getting the report to Congress,” Capps said. “That was part of the agency’s standard review process before finalizing and sending it.”

Capps said his team submitted its analysis to AMS each year by a June 30 deadline. When AMS responded with comments and questions, all were addressed by Texas A&M, Capps said, usually by the fall of each year. He added that the team has now fulfilled its five-year contract and been paid for its work by the agency.

“We delivered on our end,” Capps said, noting he doesn’t know why there has been a four-year holdup. “I’m sure AMS wants to make sure everyone is satisfied because there are a lot of players in this process. It takes some time to meld this together.”

In the meantime, groups like the Organization for Competitive Markets and the National Dairy Producers Organization are pressuring Congress to pass a bill, S. 741 (115), which Sens. Mike Lee (R-Utah) and Cory Booker (D-N.J.) reintroduced this year, that would require checkoff programs to publish annual budgets and be subject to periodic audits by USDA’s Office of the Inspector General and the GAO. Reps. Dave Brat (R-Va.) and Dina Titus (D-Nev.) introduced its counterpart in the House.

“It’s time for Congress to hold USDA and its checkoff programs accountable for family farmers’ tax dollars,” OCM President Mike Weaver said. “Since checkoff programs have been determined by the federal courts to be activities and speech of the federal government, those funds should be audited and transparent.”

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