The Other Shoe Drops


The second “final” report on the USDA OIG Audit of the Beef Checkoff was released the end of January. An earlier seventeen page report was released in March of 2013 but was shortly withdrawn for “additional audit work” under withering charges of whitewash and cover-up.

It was generally accepted that the audit was prompted by the disturbing findings in an Audit in 2010, ordered by the Cattlemen’s Beef Board (CBB). You may recall that the CBB ordered audit by Clifton Gunderson precipitated a firestorm when it uncovered scandalous abuses of check-off funds by NCBA. However, influential checkoff addicts such as Kansas Livestock Association and Texas Cattle Feeders were livid! They were major factors in forcing the CBB President and Chief Executive to be removed from office. There was the pretext of vague and questionable charges but it was clear enough that their removal was a reprisal for causing this embarrassing (revealing) audit.

In the first OIG Final Audit Report, NCBA, essentially the exclusive contractor for the program for the past 26 years, was effectively exonerated of any wrongdoing. Many checkoff-paying producers were stunned and incensed.

The OIG audit of the Beef Checkoff which had begun in February of 2011, with the investigative phase completed in December of that year, finally was released in final form three years later. Unlike the first report, this latest one does not absolve NCBA of misappropriating checkoff funds, but neither does it indict them. OIG finds AMS deficient in its oversight responsibilities but is mostly silent concerning NCBA’s handling of checkoff funds.

When the initial audit of the Beef Checkoff began there was already an ongoing audit of “Agricultural Marketing Service’s Oversight of Federally Authorized Research & Promotion Board Activities”, which included beef and seventeen other programs. This audit’s more comprehensive report was released in March of 2012, finding AMS grossly lacking in its oversight responsibilities. It is puzzling that the focus of the beef checkoff audit was again on AMS’ oversight rather than the more than $200,000 in misspent checkoff funds uncovered in the Clifton Gunderson Audit, based on their very small sampling.

Nevertheless, there is now some reason to be hopeful that USDA OIG will not be the getaway driver for this heist;

  • The OIG waived all fees for compiling the many thousands of pages of request- ed material based on OCM’s position that disclosing these records served an important public interest. Costs for processing such a request could other-wise have been prohibitively expensive.
  • The Inspector General personally signed a letter granting our appeal of the agency’s initial decision to withhold information requested under the Free- dom of Information Act (FOIA).
  • The new final report of the Beef Check-off audit did not specifically exonerate NCBA of misdeeds as did the former one.

It will be most interesting to review the records generated over the 49 months of preparation by the writers of this report.

We in OCM still have confidence in the integrity of the USDA Inspector General and believe that she will ultimately see that her staff does the right thing in this matter. We want to work in harmony with all who want to see the specter of scandal removed from the compulsory checkoff and transparency and confidence restored.

But, there remains the need for an audit of the beef checkoff program and the fund itself. The program has been in effect since 1985 and has collected and spent more than 2 billion dollars. There are lingering questions regarding the program’s effectiveness and proper accounting of these funds.

  • During that period, annual per capita consumption of beef has declined drastically and consumption of poultry has doubled.
  • More than 40% of our beef cattle producers have gone out of business.
  • We now have the smallest beef cattle herd in 60 years.

Hardly the measure of a successful promotion program!

NCBA has managed to gain absolute control of the contracting process for the beef checkoff. It holds 10 of the 20 seats on the CBB committee which awards contracts and has additional influence/control over other seats on the committee held by state affiliates. They have consistently used this lock to award themselves contracts and for 26 years now have been essentially the exclusive contractor. The best estimate is that they have received a total of more than a billion dollars in checkoff funds. This blatant conflict of interest needs to be appropriately addressed.

Many of us believe the beef checkoff fund has become a mere NCBA slush fund, used for such things as a $150,000 loan to their chief executive, spousal travel and to advance themselves two million dollars, interest free for two years for ser- vices to be rendered at some later time. These clear abuses remain unaddressed.

While it may be said that checkoff funds per se have not been used for lobbying, checkoff funds are in effect the lifeblood of NCBA (comprising more than 80% of total revenue) which lobbies heavily against COOL and other policies favored by most checkoff-paying producers. This gives credence to those who say cattle producers are being compelled to fund their opposition.

AMS, stung by strong criticism from the USDA OIG and others, recently conducted a review of the commodity promotions programs it is supposed to be providing oversight for. This rather silly self-examination quite predictably found that everything was fine. The relationship between AMS and NCBA is highly suspect and needs to be examined.

OCM is determined to do everything possible to cause a thorough and complete examination of the beef checkoff program, the role of NCBA and AMS in its operation and an accounting of funds.

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