[Federal Register Volume 60, Number 125 (Thursday, June 29, 1995)]
[Rules and Regulations]
[Pages 33681-33683]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-15948]
-----------------------------------------------------------------------
DEPARTMENT OF AGRICULTURE
7 CFR Part 1230
[No. LS-94-008]
Pork Promotion, Research, and Consumer Information Program--
Change in Requirements for Annual Financial Audits
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule and termination order.
-----------------------------------------------------------------------
SUMMARY: This document terminates the provision of the Pork Promotion,
Research, and Consumer Information Order (Order) containing
requirements for submission of annual financial reports to the National
Pork Board (Board) by organizations that receive less than $10,000 in
annual distributed assessments; and issues new requirements in the
regulations to implement the Order provisions. The new requirements
raise the minimum annual revenue requiring a certified public
accountant audit from $10,000 to $30,000. This change facilitates the
cost-effective preparation and submission of annual financial reports.
EFFECTIVE DATE: July 31, 1995.
ADDRESSES: Ralph L. Tapp, Chief, Marketing Programs Branch, Livestock
and Seed Division, Agricultural Marketing Service (AMS), USDA, Room
2606-S, P.O. Box 96456, Washington, D.C. 20090-6456.
FOR FURTHER INFORMATION CONTACT: Ralph L. Tapp, Chief, Marketing
Programs Branch, 202/720-1115.
SUPPLEMENTARY INFORMATION:
Executive Orders 12866 and 12778 and Regulatory Flexibility Act
The Department of Agriculture is issuing this rule in conformance
with Executive Order 12866.
This action has been reviewed under Executive Order 12778, Civil
Justice Reform. This final rule is not intended to have a retroactive
effect. The Pork Promotion, Research, and Consumer Information Act
(Act) states that the statute is intended to occupy the field of
promotion and consumer education involving pork and pork products and
of obtaining funds thereof from pork producers and that the regulation
of such activity (other than a regulation or requirement relating to a
matter of public health or the provision of State or local funds for
such activity) that is in addition to or different from the Act may not
be imposed by a State.
The Act provides that administrative proceedings must be exhausted
before parties may file suit in court. Under Sec. 1625 of the Act, a
person subject to an
[[Page 33682]]
Order may file a petition with the Secretary stating that the Order, a
provision of the Order, or an obligation imposed in connection with the
Order is not in accordance with law, and requesting a modification of
or an exemption from the Order. Petitioners have an opportunity for a
hearing on the petition. After the hearing, the Secretary will rule on
the petition. The Act provides that the district court of the United
States in the district in which a person resides or does business has
jurisdiction to review the Secretary's decision, if the petitioner
files an appeal not later than 20 days after the date the petitioner
receives notice of that decision.
This action has also been reviewed under the Regulatory Flexibility
Act (RFA) (5 U.S.C. 601 et seq.).
This action allows State Pork Producer Associations (SPPAs) that
receive less than $30,000 in assessments annually to submit unaudited
annual financial statements to the Board.
Most SPPAs would be classified as small businesses under the RFA.
Raising the minimum dollar amount of distributed annual assessments
that triggers the requirement that a SPPA must submit an audited annual
financial statement from $10,000 to $30,000, minimizes the cost of
preparing annual financial reports for smaller SPPAs. The cost savings
will result in increased funds available for financing promotion and
research programs.
For these reasons the Administrator of AMS has determined that this
action will not have a significant economic effect on a substantial
number of small entities.
The Act (7 U.S.C. 4801-4819) approved December 23, 1985, authorized
the establishment of a national pork promotion, research, and consumer
information program. The program was funded by an initial assessment
rate of 0.25 percent of the market value of all porcine animals
marketed in the United States and an equivalent amount of assessments
on import porcine animals, pork, and pork products. That rate was
increased to 0.35 percent effective December 1, 1991 (56 FR 51635) and
to 0.45 percent effective September 3, 1995, (60 FR 29962). The final
Order establishing a pork promotion, research, and consumer information
program was published in the September 5, 1986, issue of the Federal
Register (51 FR 31898; as corrected at 51 FR 36383 and amended at 53 FR
1909, 53 FR 30243, 56 FR 4, and 56 FR 51635) and assessments began on
November 1, 1986. The Order is administered by the 15-member Board
established pursuant to Sec. 1230.50 of the Order.
Section 1230.74(b) of the Order requires that organizations that
receive distributions of funds from the Board shall furnish the Board
with an annual report audited by a certified public accountant (CPA) of
all funds distributed to them.
There are 45 SPPAs as defined in Sec. 1230.25 who receive a
percentage of the annual net assessments collected in their State
pursuant to Sec. 1230.72(a) and (b). However, Sec. 1230.74(c) provides
that SPPAs that receive less than $10,000 in such annual distributions
may submit to the Board annual, unaudited financial statements prepared
by State association staff members or individuals who prepare annual
financial statements, provided that such statements are certified by
two members of the State association. In addition, State associations
that receive less than $10,000 annually must submit to the Board a CPA
audited financial statement at least every 5 years. Financial
statements of SPPAs that receive less than $2,000 annually in
distributed assessments are audited by the Board.
The annual minimum dollar amounts of distributed assessments of
$10,000 and $2,000 referenced above were established effective August
11, 1988 (53 FR 30243). These minimum dollar requirements were
established to enable the smaller SPPAs that receive relatively small
amounts of annual assessments to minimize the cost of CPA audits, which
could represent a significant proportion of their total assessments.
Since then, the annual amount of assessments distributed by the
Board to the SPPAs has increased as a result of an increase in the
assessment rate effective December 1, 1991 (56 FR 51635), and some
annual fluctuations in domestic hog prices and in the number of hogs
marketed. Consequently, it is the Board's view that the minimum dollar
amount now is not high enough to enable a sufficient number of the
smaller SPPAs to minimize the costs of preparing and submitting annual
financial reports and thus have additional funds available to finance
promotion and research projects.
The amount of annual assessments distributed to the 45 SPPAs in
1993 ranged from less than $1,000 to nearly $1.4 million. Seventeen
State associations received less than $30,000, and four of those State
associations received less than $2,000. To minimize the costs of CPA
audits for the 13 State associations whose annual assessments are more
than $2,000, but less than $30,000, the Board has recommended that the
annual minimum dollar amount of distributed assessments that triggers
the requirement of an annual CPA audit be increased from $10,000 to
$30,000. The provision that the Board audits financial statements of
SPPAs that receive less than $2,000 in annual distributed assessments
remains unchanged.
Since the establishment in 1988 of the initial minimum dollar
amount of assessments for which a CPA audit is required, neither the
Board nor the Department has encountered any problems with SPPAs
preparing and submitting financial statements or the safeguarding of
assessments. Accordingly, based on the Board's findings and its
recommendations discussed above, we terminate the provisions of
Sec. 1230.74(c).
Further, we revise the requirements for submission of annual audits
based on the Board's recommendations and will publish the revisions in
the rules and regulations implementing the Order. The revised
requirements provide that SPPAs that receive less than $30,000 in
assessments will be required to submit unaudited financial statements
to the Board.
On March 13, 1995, AMS published in the Federal Register (60 FR
13384) a proposed rule which would terminate the provision of the Order
containing requirements for submission of annual financial reports to
the Board by organizations that receive less than $10,000 in annual
distributed assessments; and issue new requirements in the regulations
to implement the Order provisions. The proposal was published with a
request for comments by April 12, 1995.
The Department received 14 comments after the publication of the
proposed rule. All commenters, including the National Pork Board, the
National Pork Producers Council, and 12 State Pork Producer
Associations supported changing requirements for submission of annual
financial reports to Board stating that the change would allow funds to
be more appropriately used for research, promotion and consumer
information activities.
After consideration of all relevant material presented with regard
to the termination of the provision in the Order as hereinafter set
forth, it is found that this provision no longer tends to effectuate
the declared policy of the Act.
Accordingly, this final rule terminates the provision of the Order
containing requirements for submission of annual financial reports to
the Board by organizations that receive less than $10,000 in annual
distributed assessments and establishes the new
[[Page 33683]]
requirements in rules and regulations as proposed.
List of Subjects in 7 CFR Part 1230
Administrative practice and procedure, Advertising, Agricultural
research, Marketing agreement, Meat and meat products, Pork and pork
products.
For the reasons set forth in the preamble, 7 CFR part 1230 is
amended as set forth below:
PART 1230--PORK PROMOTION, RESEARCH, AND CONSUMER INFORMATION
1. The authority citation for 7 CFR Part 1230 continues to read as
follows:
Authority: 7 U.S.C. 4801-4819.
2. In Sec. 1230.74, paragraph (b) is revised and (c) is removed to
read as follows:
Sec. 1230.74 Prohibited use of distributed assessments.
* * * * *
(b) Organizations receiving distributions of assessments from the
Board shall furnish the Board with annual financial statements audited
by a certified public accountant of all funds distributed to such
organizations pursuant to this subpart and any other reports as may be
required by the Secretary or the Board in order to verify the use of
such funds.
3. A new Sec. 1230.115 is added to Subpart B--Rules and Regulations
to read as follows:
Sec. 1230.115 Submission of annual financial statements.
State Pork Producer Associations, as defined in Sec. 1230.25, that
receive distributions of assessments pursuant to Sec. 1230.72 and that
receive less than $30,000 in assessments annually, may satisfy the
requirements of Sec. 1230.74(b) by providing to the Board unaudited
annual financial statements prepared by State association staff members
or individuals who prepare annual financial statements, provided that
two members of the State association attest to and certify such
financial statements. Notwithstanding any provisions of the Order to
the contrary, State associations that receive less than $30,000 in
distributed assessments annually and submit unaudited annual financial
statements to the Board shall be required to submit an annual financial
statement audited by a certified public accountant at least once every
5 years, or more frequently if deemed necessary by the Board or the
Secretary. The Board may elect to conduct its own audit of the annual
financial statements of State Pork Producer Associations that receive
less than $2,000 in distributed assessments annually, every 5 years in
lieu of the required financial statements.
Dated: June 22, 1995.
David R. Shipman,
Acting Deputy Assistant Secretary, Marketing and Regulatory Programs.
[FR Doc. 95-15948 Filed 6-28-95; 8:45 am]
BILLING CODE 3410-02-P