Audit Finds Problems in Cattlemen's Spending
By WILLIAM NEUMAN
Published: August 2, 2010
The New York Times
An influential cattle industry group misused money raised from ranchers and farmers for promoting beef sales and violated federal rules by spending some of it to support lobbying activities, according to an outside financial review.
Accountants examined a sampling of the financial records of the National Cattlemen's Beef Association, the largest recipient of beef industry marketing money under a federally sanctioned program. This year, the association is expected to receive $51 million of the $77 million collected under the program, mainly from ranchers, for marketing purposes.
The spot review found, over a two-and-a-half year period ending in February, tens of thousands of dollars of expenditures that were either improperly charged to the marketing fund or lacked adequate documentation. The results were deemed serious enough that a second, more comprehensive review of the association has been ordered.
In some cases, marketing money paid for the activities of the cattlemen group's lobbying arm, in violation of federal rules created by Congress, the review found.
In other instances, money went toward the travel expenses of the wife of the association's chief executive, Forrest L. Roberts, who accompanied her husband to industry meetings in New Zealand and Texas. The couple also took their 3-year-old daughter on the Texas trip, and marketing funds helped cover her expenses as well.
The financial review, released last week, was commissioned by a separate industry group, the Cattlemen's Beef Board, which is appointed by the secretary of agriculture and oversees the federal marketing effort, known as the beef check-off program.
The board concluded in an executive summary accompanying the review that the cattlemen's association had "breached the financial firewall" between marketing and lobbying.
In a statement, the board called the audit results "extremely troubling" and said it would proceed with the more comprehensive review.
"I'm disappointed that there's been a difference of perception about the appropriateness of some of the expenditures," said Dan Dierschke, the chairman of the beef board. He said that for the first time in recent years, the review was done by an outside accounting firm, Clifton Gunderson, rather than the board's staff.
Officials of the National Cattlemen's Beef Association acknowledged that some mistakes had been made, but they also disputed several of the findings. They said guidelines on how the marketing money should be spent were often unclear.
In a written response that challenged some of the report's conclusions, the association said it expected the review would result in less than $20,000 in reimbursements. The report did not give a total dollar amount for its findings, but it listed at least $90,000 in questionable or poorly documented transactions.
"We spend an awful lot of time trying to make sure that firewall is maintained," said Steve Foglesong, an Illinois rancher and feedlot operator who is president of the cattlemen's association. "As a producer I want my dollars to be spent exactly as they're supposed to be spent."
The review looked at a sampling of financial records, including expense reports and time sheets, from October 2007 through February 2010. It listed dozens of cases in which auditors determined that expenditures or worker hours were either charged inappropriately to the marketing fund or lacked adequate documentation.
The money did not go directly to lobby lawmakers, but in many cases, covered administrative costs of the association's lobbying division, according to the report.
The beef check-off was created by the 1985 Farm Bill. It assesses a mandatory $1-a-head fee on the sale of cattle. The beef board gets about half the money, which it uses to promote beef sales and conduct research into areas like product development and food safety. The board hires groups like the cattlemen's association to carry out these activities. By law, however, the money cannot be used to influence government policy through lobbying.
The most recognizable use of the money is probably the advertising campaign that uses the slogan "Beef. It's what's for dinner." The association manages the campaign.
Because the money comes from farmers and ranchers, beef industry leaders are sensitive to charges of abuse.
Mr. Roberts and his wife, Janet, were not named in the audit but the association identified him as the senior staff member mentioned in the report as having $3,592 of his family's travel expenses paid with the ranchers' money.
Association officials said it was customary to pay the expenses for the wife of the chief executive to attend industry gatherings.
The association said that it had been using the money to pay the travel expenses of its chief executives' wives for years.
"We always felt it was important for them to bring their wives along," Mr. Foglesong said.
"It's always good to have your wife along to help you get centered. That's not anything different than what's been going on for a long, long time."
The audit report said, however, that federal guidelines bar check-off money from being spent on a spouse's travel. Mr. Foglesong said that the association would reimburse the money and pay for spouses' travel using other financing in the future.
Mr. Roberts said that ranchers' money had been used by mistake to pay for his child's travel expenses and that he had personally paid that back.
"I take responsibility and accountability very seriously," Mr. Roberts said.
Mr. Foglesong said it was highly unusual for the audit to be released to the public. In past years, he said, when reviews found discrepancies, the beef board and the association worked out their differences in private.
The financial review was released last week just before the beef industry's annual summer conference in Denver, and it highlighted divisions within the industry.
The association's membership includes many beef industry interests like multinational packers such as Cargill, and small ranchers with a few dozen cattle. But some cattle producers think its views are skewed in favor of the packers and other economically powerful parts of the industry.
For instance, the association has raised objections to an agriculture department proposal to strengthen antitrust rules within the livestock industry. The federal proposal is supported by some groups representing small-scale ranchers.
Ted Greidanus, a beef board member, said that unease over abuse of check-off money was keenest among such groups.
"There is distrust and that distrust has grown greater," Mr. Greidanus said.
The Agriculture Department oversees the beef check-off program. The department said in a written statement that it was reviewing the audit and would determine if additional steps were necessary.
