The lines were drawn and the gauntlet cast last week as internal industry conflicts came to a head at the 2010 Cattle Industry Summer Conference. If you missed it last week, the Cattlemen's Beef Board (CBB) sent out a press release about a recent audit, or compliance review, conducted on checkoff dollars spent by the National Cattlemen's Beef Association (NCBA).
The audit revealed that thousands of dollars in checkoff expenditures were inappropriately used, and, of course, this audit was the hot topic at summer conference, where conversations were held not only in meeting rooms, but in whispered conversations in the hallways. I had the opportunity to speak with Robert Fountain, Jr., CBB secretary/treasurer and a Georgia cow-calf producer about this compliance audit and his obligation to correct the misuse of checkoff dollars for the cattle producers who pay that dollar.
Transparency. If you ask me, that's the most important thing the checkoff program should focus on. Because cattlemen entrust their hard-earned dollars to this program, they should be spent according to the by-laws and used to help ensure a profitable, sustainable future for beef producers. Unfortunately, this eruption in industry politics couldn't come at a worse time, especially considering that beef producers now have prime opportunities to grow beef demand, both domestically and overseas. And, my biggest concern is this political battle will harm the one thing that can help accomplish our goals, the beef checkoff program. Here is what Fountain had to say about this topic:
"CBB has some serious concerns about the use of checkoff dollars, and we have a responsibility to our producers to make sure these issues are corrected and dollars that are owed are returned to the program," said Fountain. "An independent accounting firm tested charges from NCBA to the beef checkoff in five areas and found many expenses that were either improperly charged to the checkoff or insufficiently documented. These areas including travel, consulting fees and money-raising efforts used specifically for the policy division and were charged in full or in part to the checkoff.
"The firewall must be protected," asserted Fountain, in reference to the by-laws of the beef checkoff program and working with contractors. "A compliance audit only reviews a sample, and we will need to dig further to properly address these issues. We have contractors all over the country, including NCBA, who do an excellent job using our checkoff dollars for research, education and promotion, but it's our duty to make sure the producers have the very best program they can have. That means making sure the checkoff is functioning properly."
Meanwhile, NCBA says it was blindsided by these revelations; never before had the audit results been made public in such a manner; results of the previous 13 audits were simply identified, discussed, fixed and procedures modified to make sure they didn’t happen again.
In fact, during a news conference last week, NCBA admitted the audit report brought up some items that need to be addressed. NCBA CEO Forrest Roberts promised that the roughly $25,000 in question (or $37,000, depending on who you talk with) would be addressed quickly and appropriately, just as discrepancies in past audits have been addressed. Interestingly, NCBA president Steve Foglesong, an Illinois rancher and feeder, noted that in last year’s audit report, around $360,000 was identified as misappropriated – except these were expenditures coded to the policy side that should have been credited to the checkoff. The discrepancies were found and quietly corrected, as was the custom. That’s why companies and associations do audits, he said.
Fountain said a great deal will have to be accomplished before authorizations are made for programs in September. However, he said it's important to look at the bright side of things and for producers to focus on what the checkoff can and has done for them.
"There are certainly bright spots in the checkoff program," explained Fountain. "We have seen improvement in overseas markets, especially when leveraging our funds with industry funds to help move our products overseas. It's looking positive for beef demand. We have a tremendous opportunity to move our products, and the checkoff will help get the job done."
Of course, transparency from contractors of the beef checkoff program and a distinct differentiation between the roles those contractors play when it comes to checkoff dollars are absolutely necessary. By law, checkoff dollars can only be used for advertising, research and promotion purposes. If used correctly, the beef checkoff program can make a big difference in these all-important, demand-building areas.
To see the CBB media statement that started it all, click here. To see a copy of the CBB’s Executive Summary, click here. To see the full Compliance Review, click here. To see NCBA’s initial response, click here. To read about the ins and outs of the 2010 Cattle Industry Summer Conference, check out the Beef Checkoff Blog.
What are your thoughts on this whole audit controversy (how should future audits be handled?) Do you think the reputation of the beef checkoff has been harmed? And what are your thoughts on the shoving match between these industry organizations?