Pork Promotion Program: Petition Validation Process Needs to Be
Strengthened (Letter Report, 09/28/2000, GAO/RCED-00-274).
Pursuant to a congressional request, GAO reviewed the Agricultural
Marketing Service's (AMS) efforts to validate a petition on whether to
continue the Department of Agriculture's (USDA) Pork Promotion Program,
focusing on: (1) the problems AMS encountered in its process to validate
the pork petition and AMS' plans to improve the validation process; (2)
factors that led to the USDA Secretary's decision to order the
referendum; and (3) whether the USDA Secretary has the authority to
order a referendum and whether USDA can use appropriated funds to pay
its cost.
GAO noted that: (1) AMS' process to validate the pork petition was
flawed in three key areas, according to GAO's analysis; (2) problems in
any one of these areas would have raised questions about the integrity
of the validation process; (3) AMS did not accurately estimate the
population of pork producers; (4) it did not develop a reliable database
of petitioner information as a basis for verifying petitioners'
eligibility to sign a petition; (5) it employed a flawed survey
methodology to verify the eligibility of the petitioners; (6) as a
result, AMS could not determine with certainty whether 15 percent of
eligible pork producers had signed the petition, which would require the
USDA Secretary to hold a referendum on whether to continue the program;
(7) although AMS has recognized that its validation process was flawed,
it has not taken substantial actions to improve its process; (8) two
primary factors led the Secretary of Agriculture to order a referendum;
(9) he concluded that AMS' validation process was flawed; (10)
consequently, the Secretary determined that it was impossible to
ascertain the number of valid petitioners and that efforts to revalidate
the petition would not result in any greater certainty; (11) second, the
Secretary based his decision on his belief that check-off programs,
including pork, should be subject to periodic referendums; (12) he
strongly believed that pork producers should have the opportunity to
vote on whether to continue the check-off program because the program is
a mandatory assessment and the industry has changed dramatically since
the last vote in 1988; (13) in GAO's view, the Secretary has the
authority to order a pork referendum, but referendum expenses must be
reimbursed from pork check-off funds, and appropriated funds may not be
used to pay referendum expenses; (14) the Secretary interprets the Pork
Promotion, Research, and Consumer Information Act of 1985 as granting
him authority to conduct a referendum as a tool in deciding whether to
terminate the pork check-off program; (15) GAO finds this interpretation
to be a reasonable one; and (16) however, the Secretary may not pay for
a referendum with appropriated funds because the act specifically states
that AMS must be reimbursed for referendum expenses from pork check-off
funds.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: RCED-00-274
TITLE: Pork Promotion Program: Petition Validation Process Needs
to Be Strengthened
DATE: 09/28/2000
SUBJECT: Swine
Advertising costs
Surveys
Livestock products
Marketing
IDENTIFIER: USDA Pork Promotion Program
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GAO/RCED-00-274
Appendix I: Chronology of Steps in AMS' Process to Validate
the Pork Check-off Petition
18
Appendix II: The Secretary of Agriculture's Authority to Order a Referendum
and Use Appropriated Funds
23
Appendix III: GAO Contacts and Staff Acknowledgments
31
Table 1: Steps in AMS' Validation Process 6
AMS Agricultural Marketing Service
NPPC National Pork Producers Council
USDA U.S. Department of Agriculture
Resources, Community, and
Economic Development Division
B-286107
September 28, 2000
Congressional Requesters
Since its enactment in 1985, the mandatory pork promotion program has
collected over $500 million from pork producers to fund advertising and
research for strengthening the pork industry's position in the marketplace.1
Under this program, more commonly known as the pork check-off program, the
Secretary of Agriculture is required to hold a national referendum, or vote,
on whether to continue the program when 15 percent of eligible pork
producers sign a petition making such a request. On May 24, 1999, the U.S.
Department of Agriculture (USDA) received a petition with about 19,000
signatures requesting a vote on whether to continue the program.2 After 8
months of reviewing the petition, USDA had not completed its validation
efforts to determine whether the 15-percent requirement had been met. On
February 25, 2000, the Secretary ordered a referendum on his own authority,
which was held on September 19−21, 2000, and USDA plans to use
appropriated funds to pay an estimated $529,000 in referendum expenses.
Concerned about the Secretary's decision to order a referendum in the
absence of a validated request from 15 percent of the eligible pork
producers, you asked us to determine (1) what major problems USDA's
Agricultural Marketing Service (AMS) encountered in its process to validate
the pork petition and AMS' plans to improve the validation process, (2) what
factors led to the Secretary's decision to order the referendum, and (3)
whether the Secretary has the authority to order a referendum and whether
USDA can use appropriated funds to pay its cost.
AMS' process to validate the pork petition was flawed in three key areas,
according to our analysis. Problems in any one of these areas would have
raised questions about the integrity of the validation process. First, AMS
did not accurately estimate the population of pork producers. Second, it did
not develop a reliable database of petitioner information as a basis for
verifying petitioners' eligibility to sign a petition. Third, it employed a
flawed survey methodology to verify the eligibility of the petitioners. As a
result, AMS could not determine with certainty whether 15 percent of
eligible pork producers had signed the petition, which would require the
Secretary to hold a referendum on whether to continue the program. Although
AMS has recognized that its validation process was flawed, it has not taken
substantial actions to improve its process.
Two primary factors led the Secretary of Agriculture to order a referendum.
First, he concluded that AMS' validation process was flawed. Consequently,
the Secretary determined that it was impossible to ascertain the number of
valid petitioners and that efforts to revalidate the petition would not
result in any greater certainty. Second, the Secretary based his decision on
his belief that check-off programs, including pork, should be subject to
periodic referendums. Furthermore, he strongly believed that pork producers
should have the opportunity to vote on whether to continue the check-off
program because the program is a mandatory assessment and the industry has
changed dramatically since the last vote in 1988.
In our view, the Secretary has the authority to order a pork referendum, but
referendum expenses must be reimbursed from pork check-off funds, and
appropriated funds may not be used to pay referendum expenses. The Secretary
interprets the Pork Promotion, Research, and Consumer Information Act of
1985 as granting him authority to conduct a referendum as a tool in deciding
whether to terminate the pork check-off program. We find this interpretation
to be a reasonable one. However, the Secretary may not pay for a referendum
with appropriated funds because the act specifically states that AMS must be
reimbursed for referendum expenses from pork check-off funds.
We are recommending that AMS strengthen its petition validation process and
seek reimbursement from check-off funds to pay all referendum expenses.
AMS is responsible for ensuring that 14 commodity check-off programs, such
as pork, beef, and soybeans, comply with their authorizing legislation. Each
commodity check-off program gives producers an opportunity to petition the
Secretary for a national referendum on whether to continue their program.
Currently, AMS is validating a petition received from beef producers calling
for a referendum on the beef check-off program.
The Pork Promotion, Research, and Consumer Information Act of 1985,3 which
established the pork check-off program, requires U.S. pork producers to pay
an assessment. This assessment is currently 45 cents for every $100 of hog
sales.4 In 1999, pork producers paid $41 million in assessments. The
assessments are managed by the National Pork Board, which is composed of 15
pork producers nominated by producers and appointed by the Secretary of
Agriculture. In addition to distributing some of the assessment funds to
state pork associations, the National Pork Board contracts with the National
Pork Producers Council (NPPC), a nonprofit organization, for conducting
research and generic advertising and promotion to strengthen the pork
industry's position in the domestic and international marketplace. One of
NPPC's more visible advertising campaigns has been "Pork, the Other White
Meat."
The Pork Promotion Act requires that a referendum on continuing the pork
check-off program be held when the Secretary determines that 15 percent of
the eligible U.S. pork producers petition for such a referendum.5 To be
eligible to sign a pork petition, a person must have owned and sold at least
one hog during a defined period. The Pork Promotion Act also requires that
expenses associated with a referendum be paid with check-off funds. Pork
producers have not voted on whether the pork check-off should continue since
1988.
In 1997, the Campaign for Family Farms, a rural advocacy group, began an
effort to collect petition signatures from producers to initiate a
referendum on continuing the pork check-off program. In the opinion of this
group, the program does not benefit independent pork producers. Pork
producers had 13 months to sign the petition, beginning on April 24, 1998.
In May 1999, the Campaign for Family Farms delivered a petition with about
19,000 signatures to AMS, and the agency began its validation process to
ensure that 15 percent of the eligible program participants had signed the
petition.
AMS' validation process consisted of the five major steps listed in table 1.
Because AMS did not have written procedures for validating petitions prior
to receiving the pork petition, it developed them as the process evolved.
AMS discontinued its validation process on February 25, 2000, when the
Secretary ordered a referendum on his own authority. (See app. I for a
detailed chronology of the steps in AMS' validation process.)
Step Validation process
1 Estimate the population of eligible pork producers to determine the
number of petitioners required to trigger a referendum
2 Count petitioners and create a database of petitioner information
Review database and remove invalid petitioners--those with no
3 signature, dates outside the representative period, and
duplicates--to determine remaining potentially valid petitions
4 Verify that the producer named in the petition had actually signed it
Verify that the petitioner was eligible under the Pork Promotion Act
5 to sign by asking the petitioner to provide documentation on pork
sales
In step 1, AMS estimated a population of 99,909 pork producers.6 From this,
it determined that 14,986 signatures (15 percent) would be required to
trigger a referendum. In step 2, AMS determined that it had received 19,043
petitioners from the Campaign for Family Farms. In step 3, AMS determined it
had 17,694 potentially valid signatures. In steps 4 and 5, AMS contracted
with a telephone-polling firm to conduct a survey of a random sample of
2,500 potentially valid petitions to verify signatures and determine
eligibility. Because of the surprisingly large number of petitioners who
said that they had not signed the petition, AMS sent a follow-up letter to
verify the telephone survey results and obtain documentation proving
eligibility.
On January 5, 2000, AMS briefed NPPC, the Campaign for Family Farms, and
others on the status of its validation efforts. Using the results of its
validation efforts as of that date, AMS estimated the number of valid
petitioners, with a 95-percent confidence level, was no more than 12,428, or
2,558 less than required to trigger a referendum. In addition, at this
briefing AMS stated that this estimated number could and probably would
change as it continued its validation efforts.
On January 31, 2000, the Secretary met with both NPPC and the Campaign for
Family Farms to discuss their views on the petition validation process. By
that time, AMS had revised its estimate to no more than 13,696 valid
petitioners. However, the AMS Administrator said that she could not tell the
Secretary with certainty the number of valid pork petitioners because of
problems the agency had encountered in the validation process. On February
25, 2000, the Secretary ordered a referendum without having ascertained that
the 15-percent requirement for a mandatory referendum had been met, and AMS
discontinued its validation process.
Unable to Determine Whether the Petition Should Trigger a Referendum
Because of flaws in three areas, we conclude that AMS was unable to
determine whether the petition presented was signed by 15 percent of
eligible pork producers, which would therefore trigger a referendum. First,
AMS did not accurately estimate the population of pork producers and
therefore could not accurately compute the number of producers required to
meet the 15-percent requirement. Second, AMS did not create a reliable
database of petitioner information, which undermined its efforts to validate
the eligibility of the signatures. Finally, AMS employed a flawed survey
methodology to verify petitioners' eligibility. Although AMS has
acknowledged that its process was faulty, it has not yet developed and
implemented improvements to ensure the successful validation of future
check-off petitions. Any one of these problems calls into question the
integrity of AMS' process to validate the pork producers' petition.
As the first step in validating the pork petition, AMS had to determine what
number of petitioners would meet the threshold of the 15 percent of eligible
producers needed to trigger a referendum. Because information on the
population of eligible producers is not available, AMS could not arrive at a
precise number. Consequently, it attempted to estimate this population from
data on the number of farms that sold hogs. AMS made some adjustments to
this number. For example, it deleted from its estimate farms that raised
hogs owned and sold by another producer who paid the check-off assessment.
Even with such adjustments, however, the estimate was flawed because AMS
counted farms, not the number of producers on those farms who pay check-off
assessments. According to industry experts, it is not uncommon to have more
than one producer on a farm who sells hogs, such as a family farm in which
the father and daughter sell hogs individually and each pays separate
check-off assessments. Consequently, AMS may have understated the eligible
population and thus understated the number of petitioners required to
trigger a referendum.
After counting the number of petitions--19,043--AMS hired a contractor to
keypunch the petition information into a database to facilitate the review
of petitioner information. AMS did not follow generally accepted practice in
providing instructions to the keypunch contractor. Normally, the party
providing the data is responsible for reviewing and editing this information
before giving it to the keypunch contractor. However, AMS instead required
its keypunch contractor to make decisions about the information that should
be entered into the petitioner database. Such exercise of judgment in this
type of operation allows the least knowledgeable people to decide how to
handle illegible data, incomplete information, and information in incorrect
locations on petition cards. For example:
� The petitioner had to enter a date between April 24, 1998, and May 24,
1999, in a designated location on the petition to be considered valid. If no
date was evident in this location, AMS asked the keypunch operator to
examine the petition for other evidence of the date, such as a postmark,
which the operator was to enter. This process is likely to result in
inconsistent data entry, which makes the database information unreliable.
According to AMS, these problems were compounded by the fact that the
contractor apparently did not follow AMS' requirement to reenter the data
and resolve differences between the two sets of entries, which is a practice
in a data entry operation to ensure quality and was required by the purchase
order between AMS and the contractor.
After receiving the completed database from the contractor, AMS' internal
auditors found a high rate of data entry errors--about 13 percent. Because
the errors exceeded AMS' acceptable level of 5 percent, the auditors were
unable to confirm the reliability of the information in the database. In
addition, after AMS performed an initial analysis on the database, the
auditors found that the agency had failed to follow its written guidelines
on eliminating duplicate petitions and verifying the eligibility of more
than one petitioner at the same address and failed to document its reasons
for eliminating, or not eliminating, potential duplicates. Consequently, AMS
may have inappropriately excluded or included some petitioners.
To verify that the producer named in the petition actually signed it and was
eligible to sign, AMS conducted a telephone survey of a random sample of the
petitioners. However, we found that AMS did not follow professional
practices for designing and administering its telephone survey. This
contributed to the lack of reliability of AMS' entire validation process.
Specifically, AMS did not (1) pretest the telephone survey, (2) employ
practices to encourage high response rates from surveyed petitioners, (3)
consider the burden on the petitioner when choosing the method for obtaining
documentation proving eligibility, and (4) conduct an analysis of
petitioners who did not respond to the survey. AMS did not follow these
practices principally because of inadequate planning and pressure to
complete the entire validation process quickly.
AMS Did Not Pretest the Telephone Survey
AMS' failure to pretest the telephone survey meant that the agency had no
assurance that the information gathered, when aggregated across all
producers contacted, could be relied upon by decisionmakers. Professional
practices for administering a telephone survey advocate that it be pretested
on typical members of the population to determine that respondents are able
to provide reliable and consistent information. If it had pretested the
telephone survey, AMS could have assessed whether it was asking the right
questions in the right way and whether producers were willing and able to
give AMS the information it needed. Moreover, if the results of the pretest
indicated a low likelihood of AMS' obtaining the data it needed, AMS could
have explored other means of obtaining the data, such as a mail survey.
AMS' Survey Practices Did Not Encourage High Response Rates
Although the telephone pollsters introduced themselves as representing USDA,
it was likely that some petitioners were reluctant to discuss their actions
with an unannounced telephone caller because of controversy surrounding the
pork petition. For example, according to the sponsor of the petition,
producers were concerned that if the meatpacking companies learned that they
had signed the petition, the companies might no longer buy their hogs. To
increase the participation rate in a telephone survey, professional
practices advocate sending a letter preceding the telephone call to ensure
that the person surveyed knows the caller is from a legitimate research
organization. In addition, the telephone survey was conducted during the
harvest season for farmers, which could have reduced participation in the
survey because producers may have been unavailable to answer the telephone.
AMS Did Not Consider the Burden on Surveyed Petitioners
AMS' telephone survey required producers to send in proof that they sold at
least one hog between January 1, 1997, and June 1, 1999. This approach
created an unnecessary burden on producers by requiring them to write down a
dictated address and provide an envelope, stamp, and copy of pertinent sales
records. Instead, professional practices are to avoid asking questions that
require significant effort or cost on the part of those surveyed. If
documentation is required, professional practices advocate the use of a mail
survey with the inclusion of a stamped, self-addressed envelope for
returning the requested documentation. AMS' failure to consider the burden
it was imposing on petitioners may have discouraged eligible producers from
sending in documentation and ultimately could have led to incorrect
conclusions about petitioners' eligibility.
AMS Did Not Determine the Characteristics of Nonresponding Petitioners
AMS did not attempt to learn more about the 42 percent of producers who
could not be reached by the telephone polling contractor; nor did AMS
attempt to reach these nonresponders by an alternative means, such as a
letter. Professional practices suggest that lack of information on
nonresponders calls into question the results of a survey because these
nonresponders may differ disproportionately from those who did respond.
Consequently, AMS' conclusions about the number of eligible pork producers
who signed the petition could be unreliable. Because AMS did not initiate
efforts to contact these petitioners, it is not possible to know how their
responses would have influenced the results.
Although AMS has recognized that its validation process was flawed, it has
not taken substantial actions to improve the process. On December 15, 1999,
a USDA task force led by the Under Secretary for Marketing and Regulatory
Programs recommended, among other improvements, that AMS develop uniform
petition procedures for all check-off programs and publish those procedures
for public comment. The task force was established in 1998 out of concerns
about how some of the check-off programs were spending producers'
assessments. The task force's report stated that there are several areas in
which policies and procedures could be adopted to provide consistency across
check-off programs, including establishing (1) deadlines for petitions, (2)
the basis for determining the number of signatures required, (3) methods for
how AMS should handle petitions and verify signatures, (4) a time
requirement for the collection of signatures, and (5) public notification
guidelines. According to USDA officials, the Department has not yet decided
if it will implement these recommended procedures because it is still in the
process of analyzing public comments on the proposed changes to AMS'
oversight of the check-off programs.
Periodic Referendums Led to His Decision to Order a Referendum
Two principal reasons led the Secretary of Agriculture to order a
referendum. First, as we also found, the Secretary believed that AMS'
validation process was flawed, making it impossible to state precisely the
final number of petitioners. The Secretary concluded that AMS did not
develop a reliable database of petitioner information to verify petitioners'
eligibility to sign a petition and thus was vulnerable to criticism in a
number of respects. The development of the database of petitions was open to
criticism: The data entry process was flawed, valid petitioners were
deleted, duplicate entries were not removed, and AMS' judgments about
individual petitioners when the form was not completed perfectly or legibly
were open to challenge. In addition, regarding the telephone survey, the
Secretary believed that the unannounced telephone calls by non-USDA
employees to petitioners resulted in many petitioners responding that they
had not signed the petition, when he believed that, in fact, they had
actually signed. Thus, the Secretary concluded that any decision he made
regarding the actual number of valid petitioners was likely to have little
or no credibility.
At this point the Secretary considered other options and concluded that
further efforts to validate the pork petition would not result in any
greater certainty concerning the number of eligible pork petitioners.
Therefore, completing the validation of the petition was not necessary and
would have wasted check-off funds. Furthermore, starting over was not a
practical solution because the process had already taken a great deal of
time, and many of the signatures were nearly 2 years old. AMS had already
spent 8 months working to validate the petition without success. In
addition, both those in favor and those against a referendum wanted the
issue to be resolved.
Second, the Secretary's decision was grounded in his belief that check-off
programs, including pork, should be subject to periodic referendums. In his
February 25, 2000, memorandum ordering a referendum, the Secretary stated
that he strongly believed pork producers should have the opportunity to vote
on the check-off program because it is a mandatory assessment and producers
have not voted on its continuation since 1988. The Secretary also stated he
believed the check-off program derives its legitimacy from the support of
producers, and they have endured dramatic changes in their industry in
recent years, including the trend toward fewer and larger pork producers.
Furthermore, he believed the substantial number of petition signatures,
whether or not they represented 15 percent of the eligible pork producers,
indicated that the program might not have the support of those producers who
are paying for it. Thus, the Secretary stated that it was appropriate and
necessary to determine through a referendum whether a majority of current
pork producers do, in fact, continue to support the check-off program.
but Must Use Pork Check-off Funds, Not Appropriated Funds
The Secretary of Agriculture has the authority to call for a pork
referendum, but referendum expenses must be reimbursed from pork check-off
funds. The Secretary interprets the Pork Promotion Act (7 U.S.C. section
4812(a)) as granting him the authority to conduct a discretionary referendum
to be used as a tool in deciding whether to terminate or suspend the pork
check-off program. We find this interpretation to be a reasonable one.
However, the Secretary does not have the authority to pay for a referendum
with appropriated funds because the Pork Promotion Act specifically states
that referendum expenses must be reimbursed with funds collected by the
National Pork Board from pork assessments. (7 U.S.C. section 4809.) (See
app. II for a more detailed discussion of these issues.)
Referendum
The Pork Promotion Act requires the Secretary to conduct an initial
referendum7 and to conduct a subsequent referendum at the request of 15
percent of the pork producers. However, the act, as well as the legislative
history, is silent on the Secretary's authority to conduct a referendum at
his own discretion (a discretionary referendum). For some agricultural
check-off programs, the Secretary has explicit authority stating that he
"may conduct a referendum at any time." 8
While the Secretary does not have this explicit authority to conduct a
discretionary referendum in the pork check-off program, he does have implied
authority under a provision in the Pork Promotion Act--section 4812(a)--that
allows him to terminate the pork check-off program if he determines it is no
longer meeting its policy goals.9 The Pork Promotion Act does not explicitly
set out the declared policy, and the Secretary has discretion in determining
whether the program is effectuating the policy. Under the Department's
interpretation of the termination provision, the Secretary's authority to
conduct a referendum can be inferred because a referendum may help inform
his decision on whether to terminate the pork check-off program.
The Supreme Court has held that in cases where the Congress has not
explicitly addressed an issue, an agency's interpretation of a statute
prevails so long as it is reasonable.10 We find that the Department's
interpretation of the Pork Promotion Act is reasonable. A referendum is
potentially valuable as input to a decision on whether to terminate a
commodity promotion program.11 Moreover, the pork check-off program is
funded by participant assessments, and it is reasonable that participants
have a voice in determining the effectiveness of the program. The referendum
may help the Secretary determine whether the pork check-off program is
meeting its policy goals. Thus, in our view, the Secretary has the authority
to conduct this discretionary referendum.
Expenses
The Secretary stated he will use AMS-appropriated funds to pay for
referendum expenses, which AMS estimates to be $529,000. USDA broadly
interprets the permissible use of these appropriated funds to include
anything that promotes farm income and farm marketing, including, in this
case, the referendum expenses. However, the Pork Promotion Act specifies
that referendum expenses must be reimbursed from check-off funds.
USDA stated that it is conducting the referendum on the basis of the
Secretary's authority to terminate the check-off program under section
4812(a). Expenses for a referendum conducted under this section, however,
are explicitly provided for in the act under another provision. (7 U.S.C.
section 4811(c).) Section 4811(c) specifically requires that a referendum
conducted under section 4812 be reimbursed from assessments collected by the
National Pork Board. While an agency has reasonable discretion in carrying
out an appropriation, and it is not necessary to specify every expenditure
in an appropriation, the expenditure must not be an item that falls within
the scope of some other appropriation or statutory funding scheme.12
Moreover, the Congress only authorized the appropriation of the funds
necessary for the Secretary to carry out the pork check-off program, subject
to reimbursement from pork assessments. (7 U.S.C. section 4819.)
These statutory provisions cannot be overcome by the more general
appropriation to AMS.13 Accordingly, the Secretary must not use appropriated
funds but must follow the provisions of the Pork Promotion Act and be
reimbursed from pork assessments to pay referendum expenses.
Because commodity check-off programs require mandatory assessments, one of
the key provisions of every program is that producers have the right to
petition to vote on whether to continue the program. In the Pork Promotion
Act, it is clear that a referendum must be held when 15 percent of the
eligible producers request a vote. AMS has known about this requirement
since 1985 but did little to prepare for the challenging task it presents.
Furthermore, the procedures the agency developed in response to the petition
were not based on professional standards. Therefore, the validation process
it employed was not defensible. As a result, AMS was not able to
successfully fulfill its responsibilities for determining if the 15-percent
requirement had been met. Nonetheless, in deciding to go ahead with a
referendum, the Secretary acted under legal authority. However, when the
Secretary decided to use appropriated funds to pay referendum expenses, he
was not following the Pork Promotion Act. The act requires that referendum
expenses be reimbursed from pork check-off funds.
As recommended by the Secretary's task force, a uniform petition and
validation process that is based on professional standards would increase
AMS' ability to successfully validate future petitions. AMS will need to
obtain technical advice from experienced methodologists when developing a
validation process to ensure that it is sound. Furthermore, a publicized
uniform process will improve interested parties' understanding of AMS'
petition process. These actions will enhance AMS' credibility in validating
future petitions. Without improvements to its validation process, AMS will
likely experience similar problems as it validates the beef petition and
other future petitions.
To strengthen AMS' petition validation process, we recommend that the
Secretary of Agriculture direct the Administrator of AMS to develop a
uniform petition validation process for pork and all other check-off
programs that is based on standard professional practices.
Furthermore, to ensure compliance with the Pork Promotion Act, we recommend
that the Secretary direct the Administrator of AMS to obtain reimbursement
from pork check-off funds to pay all referendum expenses.
We provided a draft of this report to USDA officials for their review and
comment. We met with the AMS Administrator and Associate Administrator.
These officials agreed with the report's findings and provided us with
technical comments, which we incorporated as appropriate. The officials also
agreed with the conclusions and recommendations.
To identify and assess the major problems AMS encountered in validating the
pork petition and corrective actions, we reviewed AMS' approach for
validating the petition and compared this approach with professional
practices. We also interviewed officials from USDA's Office of the Secretary
and AMS and reviewed relevant documents.
To determine the key factors leading to the Secretary's decision to order a
referendum, we submitted questions and obtained a written response from the
Secretary of Agriculture on the basis for his decision. We also interviewed
officials with USDA's Office of the Secretary, Office of General Counsel,
and AMS, as well as leaders of NPPC and the Campaign for Family Farms.
To examine the authority of the Secretary of Agriculture to order a
referendum on the pork check-off program and to use appropriated funds to
pay its costs, we conducted a statutory review and legal analysis of
relevant laws, including the (1) Pork Promotion Act and related legislative
history, (2) appropriations law and principles, and (3) other relevant laws
and cases. In addition, as part of our legal analysis, we interviewed
officials from USDA's Office of the Secretary, Office of General Counsel,
and AMS. We also collected and analyzed relevant documentation.
We conducted our review from June through August 2000 in accordance with
generally accepted government auditing standards.
We are sending copies of this report to the Honorable Richard G. Lugar,
Chairman, and the Honorable Tom Harkin, Ranking Minority Member, Senate
Committee on Agriculture, Nutrition, and Forestry; the Honorable Larry
Combest, Chairman, and the Honorable Charles W. Stenholm, Ranking Minority
Member, House Committee on Agriculture; the Honorable Dan Glickman,
Secretary of Agriculture; the Honorable Jacob J. Lew, Director of Office of
Management and Budget; and other interested parties. We will also make
copies available to others upon request.
Please contact me at (202) 512-5138 if you or your staff have any questions
about this report. Key contributors to this report are listed in appendix
III.
Lawrence J. Dyckman
Director, Food and
Agriculture Issues
List of Congressional Requesters
The Honorable Thomas W. Ewing
The Honorable James A. Barcia
The Honorable J. Dennis Hastert
The Honorable Roy Blunt
The Honorable Bill Barrett
The Honorable John A. Boehner
The Honorable Leonard L. Boswell
The Honorable Steve Buyer
The Honorable Ken Calvert
The Honorable Dave Camp
The Honorable Ernie Fletcher
The Honorable Greg Ganske
The Honorable Gil Gutknecht
The Honorable David L. Hobson
The Honorable Peter Hoekstra
The Honorable John N. Hostettler
The Honorable Asa Hutchinson
The Honorable Marcy Kaptur
The Honorable Ray LaHood
The Honorable Steve Largent
The Honorable James A. Leach
The Honorable Ron Lewis
The Honorable Donald A. Manzullo
The Honorable Jim Nussle
The Honorable Michael G. Oxley
The Honorable Bob Schaffer
The Honorable John Shimkus
The Honorable Debbie Stabenow
The Honorable Lee Terry
The Honorable Fred Upton
The Honorable Ed Whitfield
House of Representatives
Chronology of Steps in AMS' Process to Validate the Pork Check-off Petition
aThe Agricultural Marketing Service (AMS) based its estimate of the number
of eligible pork producers and importers on the U.S. Department of
Agriculture's (USDA) National Agricultural Statistical Service's 1998
estimate of farms with hogs or pigs, adjusted to remove farms that did not
sell hogs or pigs, as well as Customs Service information on hog, pig, and
pork importers.
bAMS' internal auditors subsequently found much higher data entry error
rates in samples examined in October 1999 (8 errors in a sample of 60
petitions) and November 1999 (119 errors in a sample of 400 petitions).
cIn November 1999, internal auditors found that LSP--in conducting its
database review--had not followed written guidelines and not documented why
it had eliminated, or not eliminated, potential duplicates or other invalid
petitions.
dThe internal auditors reviewed the polling firm's calling methods and found
them adequate. They also found no pattern of fraud among the 428 "no"
respondents.
eAMS did not contact the 1,039 individuals who did not respond to the
telephone survey.
The Secretary of Agriculture's Authority to Order a Referendum and Use
Appropriated Funds
The Pork Promotion, Research, and Consumer Information Act of 198514 (the
Pork Promotion Act), which authorizes the pork check-off program, requires
the Secretary of Agriculture to conduct a referendum when requested by 15
percent of program participants, but it does not address whether the
Secretary has the authority to conduct a referendum at his own discretion (a
discretionary referendum). Program participants requested a referendum, but
USDA could not be certain that those requesting the referendum represented
15 percent of program participants. However, in February 2000, the Secretary
called for a discretionary referendum to determine whether program
participants favor the continuation of the pork check-off program. This
referendum was held on September 19-21, 2000. USDA plans to use appropriated
funds to pay the referendum costs.
Members of the House of Representatives requested us to examine: (1) whether
the Secretary has the legal authority to call for a discretionary referendum
to determine whether a majority of participants wish to continue the program
and (2) whether USDA can use taxpayer funds to pay the referendum costs.
In our view, the Secretary has implied authority, based on his authority to
terminate the pork check-off program, to conduct a discretionary referendum
under the Pork Promotion Act. We also find that the Secretary must use
assessments collected by the National Pork Board under the Pork Promotion
Act for referendum expenses.
The Pork Promotion Act authorizes the Secretary to issue and amend, as well
as suspend or terminate, orders implementing a pork promotion and research
program. This program, commonly referred to as the pork check-off program,
is financed by an assessment paid by the pork producers and importers who
are participants in the program. The order implementing the pork check-off
program was effective September 5, 1986, and assessments were collected
beginning November 1, 1986. The Secretary conducted the required initial
referendum15 on September 7-8, 1988. At that time, 77.5 percent of voting
producers and importers favored continuing the program. This initial
referendum is the only pork referendum USDA has conducted to date.
In May 1999, USDA's Agricultural Marketing Service (AMS) received a request
for a referendum with 19,043 signatures on it. Under the Pork Promotion Act,
the Secretary is required to conduct a referendum if he receives a request
from at least 15 percent of eligible participants. 7 U.S.C. section 4812(b).
USDA later concluded that it could not be certain of the exact number of
valid signatures. In late February 2000, the Secretary called for a
referendum at the Department's expense "in the interest of fairness,"
because "many thousands of valid signatures were received."16
The first issue for consideration is whether the Secretary has the legal
authority to call for a discretionary referendum. The Pork Promotion Act
requires the Secretary to conduct certain referendums, including the initial
referendum, to determine if participants wish to continue the program and
subsequent referendums when 15 percent of program participants request it.17
However, the act is silent regarding the Secretary's authority to conduct a
discretionary referendum. The legislative history of the Pork Promotion Act
is also silent and provides no insight on this matter.
According to USDA, the Secretary's legal authority to conduct a
discretionary referendum stems from 7 U.S.C. section 4812(a). This section
of the Pork Promotion Act provides that if "the Secretary determines that an
order, or a provision of the order, obstructs or does not tend to effectuate
the declared policy of this chapter, the Secretary shall terminate or
suspend the operation of such order or provision." 7 U.S.C. section 4812(a).
USDA believes this provision gives the Secretary implied authority to call
for a discretionary referendum, since it may help inform his decision
whether to terminate the program.
There is no indication that the Congress either granted or denied authority
to conduct a discretionary referendum in the pork check-off program. The
Congress passed the Pork Promotion Act as part of the Food Security Act of
1985,18 which also included the Watermelon Research and Promotion Act of
198519 and the Beef Promotion and Research Act of 1985.20 The Watermelon Act
contains explicit language authorizing the Secretary to conduct
discretionary referendums: "[t]he Secretary may conduct a referendum at any
time." 7 U.S.C. section 4913. The Beef Promotion and Research Act amended
the Beef Research and Information Act, eliminating language that explicitly
granted the Secretary authority to conduct discretionary referendums as well
as a termination provision similar to that in the pork check-off program.
The Congress enacted these varying referendum provisions in the same public
law, which could arguably indicate a congressional intent to deny the
Secretary this authority in the pork check-off program.
However, the agricultural promotion programs enacted by the Congress are
distinct programs with many varying provisions, making it difficult to
analogize from one program to another. Some agricultural promotion acts
provide explicit authority to conduct discretionary referendums, while
others do not.21 Neither the acts nor legislative history provide
information or a basis for distinguishing why referendums are explicitly
provided for in some promotion programs and not in others. None of the
statutes authorizing agricultural promotion programs prohibit the Secretary
from conducting a discretionary referendum, nor do they clarify the precise
topic at hand--whether the Secretary's termination authority in the pork
check-off program provides the Secretary with the authority to conduct a
discretionary referendum.
Focusing on the statutory provision at issue, we note that the Secretary has
explicit authority to suspend or terminate the pork check-off program when
he determines that it is not effectuating declared policy. 7 U.S.C. section
4812(a). The Secretary's ultimate power to terminate necessitates the
authority to inform his decision. To make such a decision, the Secretary has
the authority to gather the information he needs. The Pork Promotion Act,
however, does not explicitly state how the Secretary should determine
whether the program is effectuating the underlying policy, nor does it have
a declared policy section.
Although the Pork Promotion Act lacks a statement of declared policy, it
does have a section outlining the purpose of the act.22 Section 4801(b)
states that the purpose of the pork check-off program is
"to authorize the establishment of an orderly procedure for financing,
through adequate assessments, and carrying out an effective and coordinated
program of promotion, research, and consumer information designed to--
(A) strengthen the position of the pork industry in the marketplace; and (B)
maintain, develop, and expand markets for pork and pork products."
7 U.S.C. section 4801(b)(1). This purpose section addresses the
effectiveness of the program. It is reasonable for the Secretary to consider
the program participants' view of whether the program is effective in
attaining the goals, for example, of strengthening the position of the pork
industry and maintaining markets. From a statutory analysis perspective,
there is little difference between the Secretary's obtaining this
information by referendum or another method, such as sending letters to
participants requesting their input.
The support of program participants could also be considered one of the
policy goals of the pork check-off program. Participant support is
fundamental to agricultural promotion programs. Participants' assessments
pay for the program, not federal funds. Participants nominate and elect the
delegate body, which, in turn, nominates the National Pork Board.
Participants first show their support via an initial referendum and show
their continued support through subsequent referendums. Moreover, the
concept that participant support is essential to an agricultural promotion
program's effectiveness has been cited before. In the final rule terminating
the Tokay grapes promotion program, USDA stated, "The Secretary of
Agriculture has determined that the marketing order no longer tends to
effectuate the declared policy of the Act because continuance of the program
is no longer supported by growers." 60 Fed. Reg. 33679, 33679 (June 29,
1995). A referendum is a reasonable method to use in determining participant
support. Thus, a referendum is one way the Secretary could determine if the
pork check-off program effectuates the policy of the act.
The Congress gave the Secretary broad discretion in how to determine whether
the pork check-off program is effectuating its declared policy. The Congress
did not specify when the program would not be effectuating the declared
policy, nor did it state what constituted the declared policy. Moreover, the
decision is not of such great economic magnitude that the Congress would be
unlikely to delegate it to the Secretary.23 The annual impact of the entire
pork check-off program is less than $100 million.24 According to the final
rule ordering the pork referendum, the economic costs were not major.25
USDA's interpretation of the Secretary's termination authority as including
the authority to conduct a discretionary referendum is not new. The 1986
rule establishing the pork check-off program states, "The Secretary is also
authorized to conduct periodic referenda to determine whether a termination
or suspension of the order is warranted."26 The Secretary called for this
referendum "in the interest of fairness," because "many thousands of valid
signatures were received" from pork producers and importers requesting a
referendum.27 The final rule for the pork referendum states that "[s]upport
of the program by a majority of persons who pay assessments is essential to
both the establishment and the continuation of this program."28 The
referendum outcome provides a way for the Secretary to determine if the pork
check-off program is meeting its policy goals. If a majority of the
referendum voters favor termination, the Secretary stated that the pork
assessment collections would end no later than 30 days after that
determination and the check-off program would be terminated as soon as
practical.29
The Supreme Court has established that when the Congress has not
specifically addressed an issue, then the implementing agency's
interpretation should prevail so long as it is reasonable.30 The Congress
did not address discretionary referendums. Nor did it specify how the
Secretary should determine whether the pork check-off program was
effectuating its declared policy or even what constitutes that declared
policy. However, the Congress recognized the importance of having the
support of program participants by requiring an initial referendum. 7 U.S.C.
section 4811(a). The pork check-off program is supported by participant
assessments, so it is reasonable that participants have a voice in
determining the program's effectiveness. The program may not be effective,
and may not be effectuating its policy, if it does not have the support of a
majority of participants. The Secretary's decision to conduct a referendum
to inform his decision on whether to terminate the pork check-off program is
a reasonable one. Thus the Secretary, in our view, has implied authority to
conduct this referendum.
USDA has stated that it will use its section 32 appropriation to cover
referendum expenses. Section 32 of the Act of August 24, 1935 (7 U.S.C.
section 612c) appropriates funds to encourage exportation and domestic
consumption of agricultural products.31 Under AMS' annual appropriation,
"Funds for Strengthening Markets, Income and Supply," AMS may use the
section 32 appropriation "for commodity program expenses as authorized
therein, and other related operating expenses." Pub. L. No. 106-78, 113
Stat. 1135, 1144 (1999). USDA broadly interprets the permissible use of
these funds for "other related operating expenses" to include anything that
promotes farm income and farm marketing, including, in this case, the
referendum expenses.
While an agency has reasonable discretion in carrying out an appropriation,
the expenditure must not fall within the scope of some other appropriation
or statutory funding scheme. See 63 Comp. Gen. 422, 427-28 (1984); B-230304,
March 18, 1988. Under this principle, the Secretary may not use the section
32 appropriation for referendum expenses. USDA states that it is conducting
the referendum based on its authority to terminate the program in section
4812(a). Expenses for a referendum conducted under section 4812, however,
are explicitly provided for in another statutory funding scheme. The Pork
Promotion Act specifically requires that a referendum conducted by the
National Pork Board. 7 U.S.C. section 4811(c).
Moreover, all pork check-off program expenses are to be paid from
assessments. The Pork Promotion Act states that the pork check-off program
"shall be conducted, at no cost to the Federal Government." 7 U.S.C. section
4801(b)(2). When the Congress authorized the appropriation of funds for the
Secretary to carry out the pork check-off program, it made the appropriation
"subject to reimbursement from the National Pork Board under section
4809(c)(3)(B)(iv)." 7 U.S.C. section 4819. Section 4809(c)(3)(B)(iv)
requires that the National Pork Board use assessment funds for
"administrative costs incurred by the Secretary to carry out [the Pork
Promotion Act], including any expenses incurred for the conduct of a
referendum." Thus, not only does the Pork Promotion Act require all program
expenses to be paid from pork check-off funds, but it also specifically
mentions in two separate sections that referendum expenses should be paid
from pork check-off funds.
These specific statutory provisions cannot be overcome by the more general
section 32 appropriation. See, e.g., 62 Comp. Gen. 617, 617 (1983).
Referendum expenses are not explicitly mentioned in the general
appropriation but are provided for under the provisions of the Pork
Promotion Act. Accordingly, the Secretary must not use the section 32
appropriation, but must follow the statutory funding scheme and be
reimbursed from pork assessments to pay referendum expenses.
GAO Contacts and Staff Acknowledgments
Lawrence J. Dyckman, (202) 512-5138
Andrea Brown, (202) 512-5138
Susan Poling, (202) 512- 5400
In addition to those named above, Gary Brown, Thomas Cook, Ruth Anne Decker,
Arthur L. James, Jr., Mitch Karpman, Carol Herrnstadt Shulman, and Amy
Webbink made key contributions to this report.
(150189)
Table 1: Steps in AMS' Validation Process 6
1. The check-off program also applies to pork importers. For purposes of
this report, we refer to both producers and importers as producers.
2. USDA estimates that in 1998 there were about 100,000 producers.
3. Pub. L. No. 99-198, sections 1611-1631, 99 Stat. 1354, 1606-22 (1985),
codified at 7 U.S.C. sections 4801-4819.
4. Importers also pay an assessment on imports of hogs, pork, and pork
products.
5. 7 U.S.C. section 4812(b).
6. AMS estimated the number of importers to be 1,017.
7. The Secretary of Agriculture conducted an initial referendum on September
7-8, 1988. At that time, 77.5 percent of the pork producers and importers
favored continuing the program.
8. For example, the promotion programs for cotton, eggs, and potatoes have
statutory provisions with this explicit authority. However, the programs for
mushrooms, popcorn, and honey have no such authority.
9. Specifically, the section states, "If, after the initial
referendum…the Secretary determines that an order, or a provision of
the order, obstructs or does not tend to effectuate the declared policy of
[the Pork Promotion Act], the Secretary shall terminate or suspend the
operation of such order or provision." 7 U.S.C. section 4812(a).
10. FDA v. Brown & Williamson Tobacco Corp., __U.S.__, 120 S. Ct. 1291
(2000); Chevron, U.S.A., Inc. v. Natural Resources Defense, Inc., 467 U.S.
837 (1984).
11. The Secretary has stated that he will terminate the pork check-off
program if the majority of voters do not favor its continuation.
12. 63 Comp. Gen. 422, 427-28 (1984); B-230304, March 18, 1988.
13. See, e.g., 62 Comp. Gen. 617 (1983).
14. Pub. L. No. 99-198, sections 1611-1631, 99 Stat. 1354, 1606-22 (1985),
codified at 7 U.S.C. sections 4801-4819.
15. See 7 U.S.C. section 4811(a).
16. Pork Promotion, Research, and Consumer Information Program: Procedures
for the Conduct of Referendum, 65 Fed. Reg. 43,498, 43,501 (2000) (to be
codified at 7 C.F.R. pt. 1230).
17. 7 U.S.C. sections 4811(a), 4812(b).
18. Pub. L. No. 99-198, sections 1611-1631, 99 Stat. 1354, 1606-22 (1985).
19. Id., sections 1641-1657, 99 Stat. at 1622-30.
20. Id., section 1601, 99 Stat. at 1597-1606.
21. For example, the Secretary "may conduct a referendum at any time" under
the cotton (7 U.S.C. section 2108(b)), eggs (7 U.S.C. section 2709), and
potatoes (7 U.S.C. section 2624) promotion programs. Other programs,
including mushrooms (7 U.S.C. sections 7481-7491), popcorn (7 U.S.C.
sections 6301-6311), and honey (7 U.S.C. sections 6101-6112) do not have
this language.
22. The "purposes" section appears in the same place as did the declared
policy in the dairy promotion act. See 7 U.S.C. section 602. The pork
check-off program was crafted using the language of the dairy promotion
program. H.R. Rep. No. 271, 99th Cong., 1st Sess., pt.1, at 1561-62 (1985).
Arguably then, what the Congress intended as the "declared policy" of the
Pork Promotion Act is reflected in the stated purpose of the pork check-off
program.
23. In determining whether the Congress has addressed an issue, e.g.,
discretionary referendums, one of the considerations is the economic and
political magnitude of the decision and the manner in which the Congress
would likely delegate such a decision. According to the Supreme Court,
"Congress is more likely to have focused upon, and answered, major
questions, while leaving interstitial matters to answer themselves in the
course of the statute's daily administration." FDA v. Brown & Williamson
Tobacco Corp., __U.S.__, 120 S. Ct. 1291, 1314 (2000).
24. Pork Promotion, Research, and Consumer Information Order, 51 Fed. Reg.
31898, 31898 (1986) (codified at 7 C.F.R. pt. 1230).
25. 65 Fed. Reg. 43498, 43499 (2000).
26. 51 Fed. Reg. 31898, 31898 (1986).
27. 65 Fed. Reg. 43,498, 43,501 (2000).
28. Id.
29. Id.
30. FDA v. Brown & Williamson Tobacco Corp., __U.S.__, 120 S. Ct. 1291
(2000); Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc.,
467 U.S. 837 (1984).
31. The Secretary may use these funds to "(1) encourage the exportation of
agricultural commodities and products thereof by the payment of benefits in
connection with the exportation thereof or of indemnities for losses
incurred in connection with such exportation or by payments to producers in
connection with the production of that part of any agricultural commodity
required for domestic consumption; (2) encourage the domestic consumption of
such commodities or products by diverting them, by the payment of benefits
or indemnities or by other means, from the normal channels of trade and
commerce or by increasing their utilization through benefits, indemnities,
donations or by other means, among persons in low income groups as
determined by the Secretary of Agriculture; and (3) reestablish farmers'
purchasing power by making payments in connection with the normal production
of any agricultural commodity for domestic consumption. Determinations by
the Secretary as to what constitutes diversion and what constitutes normal
channels of trade and commerce and what constitutes normal production for
domestic consumption shall be final." 7 U.S.C. section 612c.
*** End of document. ***