[Federal Register Volume 60, Number 48 (Monday, March 13, 1995)]
[Proposed Rules]
[Pages 13384-13385]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-6096]



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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service

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: Proposed rule and termination order.

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SUMMARY: This proposed document would terminate 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 issue new requirements 
in the regulations to implement the Order provisions. The new 
requirements would raise the minimum annual revenue requiring a 
certified public accountant audit from $10,000 to $30,000. The proposed 
change would facilitate the cost-effective preparation and submission 
of annual financial reports.

DATES: Comments must be received by April 12, 1995.

ADDRESSES: Send two copies of comments to Ralph L. Tapp, Chief, 
Marketing Programs Branch, Livestock and Seed Division, Agricultural 
Marketing Service (AMS), USDA, Room 2624-S, P.O. Box 96456, Washington, 
DC 20090-6456.
    Comments will be available for public inspection during regular 
business hours at the above office in Room 2624, South USDA Building, 
14th and Independence Avenue SW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Ralph L. Tapp, Chief, Marketing 
Programs Branch, 202/720-1115.

SUPPLEMENTARY INFORMATION:

Executive Order 12866 and Regulatory Flexibility Act

    The Department of Agriculture is issuing this rule in conformance 
with Executive Order 12866.
    This proposed action has been reviewed under Executive Order 12778, 
Civil Justice Reform. This proposal 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 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 proposed action would allow 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 would trigger the requirement that a SPPA must submit an audited 
annual financial statement from $10,000 to $30,000, would minimize the 
cost of preparing annual financial reports for smaller SPPAs. The cost 
savings would result in increased funds available for financing 
promotion and research programs.
    For these reasons the Administrator of AMS has determined that this 
proposed 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). 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 
[[Page 13385]] 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 smaller 
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 increases 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 
would remain 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 propose that the provisions of 
Sec. 1230.74(c) of the Order containing the requirements for the SPPA's 
submission of annual financial audits to the Board be terminated.
    Further, we propose that the requirements for submission of annual 
audits be revised based on the Board's recommendations and published in 
the rules and regulations implementing the Order. The revised 
requirements would provide that SPPAs that receive less than $30,000 in 
assessments would be required to submit unaudited financial statements 
to the Board. The other requirements of Sec. 1230.74(c) would remain 
unchanged.

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, it is proposed that 7 
CFR Part 1230 be 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 to read as follows:


Sec. 1230.74  [Amended]

* * * * *
    (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 would be 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: March 8, 1995.
Lon Hatamiya,
Administrator.
[FR Doc. 95-6096 Filed 3-10-95; 8:45 am]
BILLING CODE 3410-02-P