FEDERATION OF STATE BEEF COUNCILS

United States Department of Agriculture

FEDERATION HISTORY

• First Beef Checkoff in the U.S.?

1922 – Voluntary 5¢ per carload and the first campaign was “Meat for Health”

• First State Beef Councils? 1954 – California & Montana 1955 – Alabama & Florida

• 1963 - Federation of State Beef Councils

BEEF COUNCIL HISTORYAlabama – 1955Arizona – 1971Arkansas –1983California – 1954Colorado – 1965Delaware – 1989Florida – 1955Georgia – 1976Hawaii – 1988Idaho – 1967Illinois – 1963Indiana – 1976Iowa –1970Kansas – 1973Kentucky – 1978

Louisiana – 1978

Maine – 1988

Maryland – 1986

Michigan – 1972

Minnesota – 1967

Mississippi – 1968

Missouri – 1986

Montana – 1954

Nebraska – 1970

Nevada – 1971

New Jersey – 1996

New Mexico – 1979

New York – 1986

North Carolina – 1986

North Dakota - 1973

Ohio – 1970

Oklahoma – 1975

Oregon – 1959

Pennsylvania – 1976

South Carolina – 1986

South Dakota – 1964

Tennessee – 1986

Texas – 1986

Utah – 1969Vermont – 1986

Virginia – 1965

Washington –1969

West Virginia –1986

Wisconsin – 1986

Wyoming – 1971

NATIONAL REFERENDUMS

First Attempt Failed in 1977

• Complicated• Value Added Assessment• Voting at ASCS offices• Required 2/3 majority• Failed (56.6%)

NATIONAL REFERENDUMS

Second Attempt in 1980• Reduced Assessment• Required simple majority• Targeted 300,000 “joiners”• Failed (34.6%)

NATIONAL REFERENDUMS

Third Time is a Charm in 1988!

• It’s state based -- States keep 50 cents

• It’s fair - Everyone pays $1• It’s producer controlled• It’s cost effective - 5% administrative

cap• It works – Results speak!• Passed (79%)

TODAY’S CHECKOFF

• Established as part of 1985 Farm Bill - $1 per head

• Became mandatory via national referendum vote by producers in 1988

• States retain 50 cents on the dollar; forward 50 cents to Beef Board

• CBB administers program, subject to USDA approval

STATE BEEF COUNCIL BOARD COMPOSITION

664 Board Members (39 of 45 Beef Councils surveyed 2009)

Industry Segments Represented:• LMA/Auction Markets = 37• Farm Bureau = 31• Allied Industry/Multi-industry segment = 39• Packers/small processors = 15• Dairy = 40• CattleWomen = 17• Farmers Union = 12• CBB = 16• Veal = 6• R-Calf/US Cattlemen = 8• State cattlemen’s association = 192• Remainder (approximately 200) are unnamed, or named by

segment (cow-calf, feeder, stocker)

National Organization Time Line

1951-1977

American National

Cattlemen’s Association

1898-1905National Live

Stock Association of

the United States

1906-1950

American National Live

Stock Association

1977-1995

National Cattlemen’s Association

1922-1995National Live Stock

& Meat Board

1986-TodayCattlemen’s Beef Board

Cornbelt Livestock Feeders Assn. (1946-1960)National Livestock Feeders Assn. (1960-1977)

1963Beginning of Federation

Beef Industry CouncilNLSMB

1996-Today

National Cattlemen’s

Beef Association

URGENT NEED FOR GREAT EFFICIENCY

Producer (Beef/Dairy)

Pays $1

45 Qualified

State Beef Council

Dollars

Make Individual Fiscal Program DecisionsPrograms

Cattlemen’s Beef Board

Beef PromotionOperating Committee

Federation of State Beef Councils

(40 States Invest)

National Programs*

StatePrograms

10

Members

from the

Federation

10 Membersfrom CBB

Importers pay $1/head or equivalent as well as

collections from 5 states without Qualified State Beef

Councils

*National contracting organizations include NCBA, ANCW, NLPA and USMEF. CBB contracts to do Producer Communications.

Today’s Checkoff

Producer (Beef/Dairy)

Pays $1

45 Qualified

State Beef Council

50¢

50¢

Producer (Beef/Dairy)

Pays $1

45 Qualified

State Beef Council

Cattlemen’s Beef Board

Beef PromotionOperating Committee

Federation of State Beef Councils

(40 States Invest)

National Programs*

Importers pay $1/head or equivalent as well as

collections from 5 states without Qualified State Beef

Councils

Producer (Beef/Dairy)

Pays $1

45 Qualified

State Beef Council

THE FEDERATION

The “Federation means the Beef Industry Council of the National Live Stock and Meat Board, or any successor organization to the Beef Industry Council, which includes as its State affiliates the Qualified State Beef Councils”.

Beef Promotion and Research Order

FEDERATION VISION

Build beef demand by inspiring, unifying and supporting an effective state and national Checkoff partnership.

(Adopted July 2008)

FEDERATION BELIEFS

• We believe in the success of a strong state and national partnership resulting in increased consumer demand for beef and higher consumer confidence.

• We believe in the Industry Long Range Plan as a guidepost for the beef checkoff and the fundamental principle of “one vision-one plan-one voice.”

• We believe in producer control of checkoff funds

through Qualified State Beef Councils which are the foundation of the beef checkoff.

(Adopted July 2009)

FEDERATION ACCOUNTABILITY TO CBB

Beef Councils Must Provide CBB:

• Compliance Enforcement Plan• Annual Financial Audit

(statement of negative assurance)

• Annual Marketing plan• Annual Budget• Periodic CBB Audits

FEDERATION RESOLUTION

THEREFORE, BE IT RESOLVED, the Federation should operate in a more independent structure while maintaining the synergies and efficiencies of the current relationship with the National Cattlemen’s Beef Association and strongly opposes any effort to sever the relationship.

(Adopted July 2010)

RESOLUTION WORK GROUP

• Scott George – Federation Chair• David Dick – Federation Vice-chair

• Regional Vice Presidents • Beef Council Staff – Federation Advisory Council• Revenue Seats• Auction Market Representative

• Jerry Jacobs – Expert, Organizational Structure for non-profits.

• John Huston – Facilitator, Former CEO, Beef Industry Council

PRINCIPLES OF INCREASED INDEPENDENCE

1. The Federation of State Beef Councils is re- organized so that all of its decision-making with respect to the beef promotion checkoff program is made independent from NCBA decision-making with respect to government and public policy advocacy.

PRINCIPLES OF INCREASED INDEPENDENCE

2. The Federation” consists of state beef councils.

PRINCIPLES OF INCREASED INDEPENDENCE

3. Consistent with the federal Beef Promotion and Research Act and Order, the Federation exclusively nominates and elects the ten Federation members of the BPOC, including the Chair and Vice Chair. The Federation also exclusively nominates and elects eight additional representatives who, together with the Federation Chair and Vice Chair, comprise the Federation’s Executive Committee.

PRINCIPLES OF INCREASED INDEPENDENCE

4. A Federation Charter is adopted, or amended, exclusively by the Federation; the central feature of the Federation’s Charter is independent decision-making by the Federation on all matters related to the beef promotion check-off program and prohibition against the Federation using checkoff funds to influence government or public policy.

PRINCIPLES OF INCREASED INDEPENDENCE

5. All funds generated into, and expended out of, the Federation are subject to singular banking and investment accounts; transactions reflecting the Federation’s name; separate financial reporting; and exclusive control and authority by the Federation.

PRINCIPLES OF INCREASED INDEPENDENCE

6. Annual budgeting for the Federation is subject to the exclusive authority of the Federation.

PRINCIPLES OF INCREASED INDEPENDENCE

7. A senior management executive, reporting to the NCBA CEO, will be responsible for managing the beef promotion check-off program in coordination with the Federation and its Executive Committee.

PRINCIPLES OF INCREASED INDEPENDENCE

8. In all procurement the Federation will comply with requirements of the Act and Order. A long-term renewable Memorandum of Understanding subject to NCBA and Federation adoption or amendment is negotiated on a cost recovery basis for services procured for the Federation from NCBA.

PRINCIPLES OF INCREASED INDEPENDENCE

9. Governing documents of NCBA provide that it will honor the independent decision-making by the Federation and its Executive Committee; at any NCBA governance meetings involving a combination of both representatives of the Federation and others, the Federation representatives will not vote on non-check-off program matters and the others will not vote on check-off program matters.

PRINCIPLES OF INCREASED INDEPENDENCE

10. The Federation achieves efficiency and transparency by participating in the nonprofit corporation status and liability protection, as well as federal income tax exemption, of NCBA; it has public

transparency via NCBA’s Form 990 reporting to the Internal Revenue

Service.

PRINCIPLES OF INCREASED INDEPENDENCE

11. The Federation will implement a compliance function which will have ongoing responsibility for reviewing and approving the checkoff program decision-making independence of the Federation and the accuracy and integrity of all financial transactions and reporting involving checkoff program funds managed under the auspices of the Federation. This compliance official will have a direct line of communication to the Federation and its Executive Committee.

QUESTIONS?

The Federation Division of NCBA prepares an annual budget with the following approvals:

• May – approved by Joint Budget Committee (CBB & NCBA members)

• May – Beef Promotion Operating Committee (BPOC) approval • July – approved by Federation members of the Executive

Committee• July – approved by Federation members of the Board of Directors• September – amended budget which includes BPOC contracts is

approved by the Federation members of the Budget Committee• September – amended budget which includes BPOC contracts is

approved by the Federation members of the Executive Committee

ANNUAL FEDERATION DIVISION BUDGETING

• Monthly Divisional P&L prepared and distributed to Federation Division leadership

• Separate Checkoff Bank account maintained at separate bank for checkoff receipts and disbursements/reimbursements

• Quarterly Divisional Balance Sheet prepared and reviewed by CBB

• Audited financial statements reflect divisional P&L with footnote disclosure of checkoff cash balance

FEDERATION DIVISION FINANCIALS

CBB to ensures compliance with the “firewall”• On a monthly basis, CBB reviews every invoice for

direct checkoff costs• On a monthly basis, CBB reviews all time charged

to checkoff projects• Bi-annually for the preceding two years, CBB

conducts a compliance audit to assess NCBA’s checkoff compliance.

• Beginning with the July 2010 billing, CBB implemented additional review procedures whereby they are reviewing a much larger number of invoices and time and expense charges.

CBB ADMINISTRATIVE OVERSIGHT

• Annually, NCBA prepares an Annual Report for the Federation Division

• Annual Report includes detailed Consolidating Federation Division P&L

• Annual Report includes detailed Investment Summary by SBC

• Annual Report is distributed to Federation members of the NCBA Board of Directors and the various SBC Board of Directors.

FEDERATION DIVISION ANNUAL REPORT