[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]



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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.

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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