Beef Checkoff under scrutiny as industry leaders demand repeal and reform
April 14, 2017
Since 1988 when it was approved by 79 percent of beef producers in a national referendum vote, the Beef Checkoff Program has collected a $1-per-head of beef cattle assessment to be used for promotion, education and research for the beef cattle industry.
Of the program and its effectiveness, John Robinson, National Cattlemen's Beef Association executive director of organizational communications, said, "From my perspective, without the checkoff, American beef would be at a disadvantage on the global stage where we compete against nations whose producers are looking for any edge they can find to push our product out of the market. In the U.S., consumers continue to choose beef because they know that they're buying a safe, wholesome, high-quality product that they can rely on, thanks to the work done by the checkoff. Whether that consumer is choosing a flat iron steak that's only in the meat case because of checkoff research investments, or a filet that's labeled lean because of nutrition work conducted by the checkoff, it's all demand that supports beef prices."
Despite the checkoff's list of achievements, it's long been contested by some industry leaders that beef producers' dollar investments are being misused by contractors of the checkoff.
"Our members have voted and decided that the checkoff program is unsalvageable," said Bill Bullard, R-CALF USA CEO. "We fully support a repeal and reform of the checkoff because we feel NCBA has abused the program, and we have evidence that shows NCBA is working against cattle producers' interest."
“Our members have voted and decided that the checkoff program is unsalvageable. We fully support a repeal and reform of the checkoff because we feel NCBA has abused the program, and we have evidence that shows NCBA is working against cattle producers’ interest.”Bill BullardR-CALF USA CEO
Bullard said of the $80 million checkoff assessment, NCBA receives half of the dollars beef producers have invested, and he believes evidence within the 12,000-plus pages of financial records from a 2011 audit might prove just that.
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March 31, 2017, marked the U.S. Department of Agriculture's court-ordered deadline to release documents from the 2011 audit of the federal Beef Checkoff Program. The information is being sought in a lawsuit by the Organization of Competitive Markets through the Freedom of Information Act. Of the total 12,341 pages of financial records, USDA released less than 175 pages, most of which were already public tax forms, using confidentiality as the reason behind the lack of transparency.
"In 2010, an independent accounting firm did an audit of NCBA's beef checkoff expenditures, and within just nine days of spending by the NCBA, the audit found nearly $200,000 in wrongdoing by the organization," said Angela Huffman, OCM director of communications and research. "That's when we got involved and requested USDA do a full audit. That audit started in 2011 and wrapped up in 2013 with USDA concluding that there was no wrong-doing committed by the NCBA."
Following that announcement, OCM, along with several farm groups such as R-CALF USA, protested USDA's conclusion, arguing that the agency white-washed the facts. In January 2014, the USDA issued a corrected report that removed the claim that there was no wrong-doing by NCBA. In November 2014, OCM filed its FOIA Complaint, demanding the information of the audit conducted by the Office of the Inspector General to be released by the USDA. Upon receiving word about this information request, NCBA got involved to attempt to protect its private business records.
"As the court records show, the original FOIA request involved in this litigation was made by OCM in 2013, and litigation was filed by OCM against the USDA Inspector General a year later," Robinson said. "NCBA did not become aware until August 2016, that our documents were among those requested by OCM's FOIA request, and NCBA only became aware the following month that there had been litigation about the FOIA request for two years. NCBA moved to intervene in the litigation because, like most businesses, NCBA normally does not disclose its confidential business information to the public and, as the court determined, NCBA has a substantial interest in not disclosing such information to its competitors."
"When USDA was finally court-ordered to release the documents, 98.5 percent of them were completely blacked out," Huffman said. "We will go back to court to challenge that decision and continue to demand to see the actual documents. We have very strong concerns about NCBA receiving 80 percent of its funding from the checkoff program. They have been able to build their brand and organization and are now seen as a group that represents cattle producers even though their membership only represents 4 percent of cattle producers. They lobby against laws that would help family farmers such as COOL and the new GIPSA rules, and we believe it's a conflict of interest that they are receiving these funds in the first place."
"There seems to be a general misunderstanding about how NCBA is structured and how we conduct our work," Robinson said. "We're composed of two divisions, with one being the Federation division which serves as a contractor to the beef checkoff. NCBA's Federation division work is reviewed daily by an in-house compliance officer and an accounting department which ensures that regulations and guidelines are being followed by staff throughout each individual project. The compliance officer and accounting departments review all expenditures, time coding, contracts and any other aspects of the projects to ensure NCBA is in full compliance with the Act and Order."
Robinson added, "The other division is the policy division which is our member-driven side which conducts the work of our members. The work conducted by the policy division, which includes the representation of our member interests and policies in Washington, D.C., is directed by volunteer cattlemen and women who spend a significant amount of time and their own personal resources to represent their operations and those of their fellow producers. The points of view we promote are those of our members and they are agreed upon by a majority vote."
In addition to the ongoing OCM lawsuit, R-CALF is battling the checkoff in the legal system in Montana, arguing that the use of checkoff dollars on the state level is unconstitutional.
"We have a pending lawsuit in the district court in Montana," Bullard said. "In May 2016, we alleged that it is unconstitutional for the checkoff to allow the state beef councils to siphon off half the money to spend. These state beef councils are not an arm of the USDA; they are a private entity, so we argue it's illegal to force beef producers to fund private speech with federal tax dollars."
Bullard said a decision from the judge will be forthcoming soon, and that part of the lawsuit stems from the Montana Beef Council promoting an advertisement by Wendy's which promotes North American Beef.
"Producers have been told that the checkoff is not allowed to market any country's particular beef product, so we believe that this was an exception to that rule without authority. We think the entire checkoff program is being mishandled and producers are not receiving the benefit they should from their investment."
If Bullard could construct his ideal beef checkoff program, it would be voluntary and would promote only U.S. beef.
"If producers realize a benefit, they will support a voluntary program," Bullard said. "The argument that some producers will benefit from it but won't pay, well, that's part of our capitalistic free enterprise system. It makes us work harder. That's why we need an accountable and responsive checkoff program, and the best way to do it is to make it a voluntary program. Producers can then vote in real-time with their pocket books, and money that is collected from domestic producers should be used to promote domestic beef producers. It's counterproductive for producers to be forced to promote competitors' products."
In Washington, checkoff reform is in the works with Sens. Cory Booker, D-N.J., and Mike Lee R-Utah introducing legislation in late March that calls for further transparency and accountability to all checkoff programs. The Opportunities for Fairness and Farming Act of 2017 (OFF ACT) and the Voluntary Checkoff Act would do two things — make the checkoff voluntary and prohibit lobbying groups like NCBA from contracting checkoff dollars.
"We are in full support of these bills," Bullard said. "We need to repeal and start new. The 100-plus member CBB should decide where the funds should go and contract directly with advertisers or universities to conduct their projects. This would stop NCBA from siphoning off administration costs with checkoff dollars."
OCM favors the two pieces of legislation (HR1752 and S741), which they say would promote transparency and accountability, and R-CALF USA fully supports the checkoff reform, as well. NCBA, however, has its concerns.
"We're concerned to see this legislation for several reasons, for starters because HSUS (Humane Society of the United States) seems to be so excited about this. We know that HSUS ultimately wants to see meat off the table, and they know if they can make it harder for folks on the production side then meat gets too expensive for consumers to afford. If they can hurt the checkoff, we would have to scale back on research and promotion," said Colin Woodall, NCBA vice president of government affairs.
"Second, we are supportive of the checkoff process, so we don't believe there needs to be reform. These aren't tax dollars; the checkoff is made up of producer dollars, so they need to be the ones who need to make decisions regarding the checkoff. The voluntary bill counters the original intent of the checkoff, and the second would prevent any organization that has a lobbying arm from being a contractor of the checkoff.
"Additionally, the work that I do in D.C., is paid for by our members, and we don't use checkoff dollars. The firewall that exists is one that has been there from the get-go and is audited by ourselves internally, USDA AMS (Agricultural Marketing Service) and the Inspector General. On the plus side, this has been a great opportunity for NCBA to explain the checkoffs to the new administration. Some have the impression that this is an unfair tax, but the checkoff was voted on by beef producers." ❖