Cattlemen’s Beef Board report charges NCBA with 'improper' use of checkoff funds

By Agri-Pulse Staff

© Copyright Agri-Pulse Communications, Inc.

Washington, July 26 – A spot check of National Cattlemen’s Beef Association (NCBA) expenses charged as beef checkoff activities from Jan. 2008 to Feb. 2010 indicates a pattern of insufficient documentation and noncompliance. That's according to a summary report issued Monday by the Cattlemen’s Beef Board (CBB) based on auditing work done by Clifton Gunderson (CG), a CPA firm.

The CG audit was part of a routine compliance review of the NCBA billings. The review covered NCBA’s compliance with its agreements with the Beef Promotion Operating Committee (BPOC); agreements which allow NCBA to conduct checkoff-funded programs in the areas of beef promotion, research, consumer information and industry information; and compliance of checkoff expenditures of the Federation of State Beef Councils Division of NCBA (Federation).

Agri-Pulse's Stewart Doan reports that CBB is “extremely” troubled by the audit of NCBA checkoff charges and that stakeholder groups are concerned too. To listen to Stewart's audio, go to: 

NCBA staff and elected leaders received the independent auditor's final report, CBB's executive summary and media statement on Monday. Stating that it is reviewing the information CBB publicly released, NCBA says it will provide a response during the day Tuesday. 

The review covering FY 2008, FY 2009 and the first five months of FY 2010 through Feb. 28 focused on NCBA’s supporting documentation for checkoff expenses, including compensation, to ensure the expenses were appropriate for reimbursement with checkoff funds. The CBB report notes that “Maintaining complete and accurate documentation of expenses which supports the eligibility for checkoff reimbursement is the responsibility of NCBA and failure to do so is considered by CBB to be noncompliance.”

The report included looking at overhead cost allocation, time reported by NCBA staff as the basis for charging salaries and benefits, travel expenses, Federation costs and selection of subcontractors. CBB notes that its conclusions “relate only to the samples tested by CG.”

The report's findings based on a sampling of NCBA expenditures show that:

In the case of overhead allocation, “CG reported that five of the 45 items tested (three in FY 2009 and two in FY 2010) were not eligible overhead expenses, so these expenses should not have been allocated to checkoff programs by NCBA . . . For nine of the 45 items tested (six in FY 2009 and three in FY 2010), CG was unable to determine eligibility of the expenses for overhead due to inadequate documentation of the expenses.”

In the case of time reporting and allocation of salaries and benefits, “Clifton Gunderson tested a sample of time reports for 25 employees for the months of January 2008, September 2008, April 2009, June 2009 and February 2010. . . Clifton Gunderson reported numerous instances of improper time coding or improper documentation for time worked for these 25 employees during the five months tested. . . In one instance, an employee’s job description contained revenue development responsibilities (i.e., membership) for NCBA’s Policy Division; however, the employee coded all of his/her time to checkoff projects . . . In 25 instances, CG could not determine if the employee’s time was recorded correctly.”

In the case of travel costs, “For 18 of the 25 items in the sample, CG reported that additional inquiry was required because the supporting documentation provided was inadequate and did not contain a clear, detailed business purpose.”

In selection of subcontractors, “CG noted that NCBA did not comply with its policy for two of the subcontractors. NCBA’s files did not contain evidence of a competitive bidding process for subcontractor selection, as required by the policy, and these subcontractors were not listed on the approved NCBA Unique Service Provider List which exempts subcontractors from the competitive bidding process.”

The CBB report concludes that “the nature of several of the exceptions and undetermined items reported by CG clearly indicates that NCBA breached the financial firewall during the periods tested and that NCBA did not maintain sufficient documentation in many instances to adequately support the separation of expenditures between the policy side of NCBA and the checkoff side of NCBA. Although not reported as such by CG, CBB considers this lack of sufficient documentation to be noncompliance.”

To read the complete four-page “Cattlemen’s Beef Board Executive Summary of Report of Agreed-Upon Procedures For the National Cattlemen’s Beef Association Contract Compliance FY 2008, FY 2009 and the Five Months Ended February 28, 2010,” go to:

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