The Livestock Mandatory Reporting Act of 1999 amended the Agricultural Marketing Act of 1946. The act established a livestock marketing information program to (1) provide producers, packers and other industry participants with market information that can be readily understood; (2) improve USDA price and supply reporting services; and (3) encourage more competition in these markets. Under the act, packers were required to report livestock market information that had previously been voluntarily reported and new information not previously reported to the public—such as information about contract livestock purchases. Under the voluntary program, USDA employees, referred to as reporters, gathered information daily by talking directly with producers, packers, feedlot operators, retailers, and other industry participants; by attending public livestock auctions, visiting feedlots and packing plants; and taking other actions. Under the Livestock Mandatory Reporting Act, packers were instead required to report on their cattle and hog purchases, and their sales of beef. The act also authorized USDA to require that packers report on lambs. USDA implemented the Livestock Mandatory Reporting Act by establishing a livestock mandatory reporting program to collect packers’ marketing information and disseminate it to the public through daily, weekly, monthly, and annual reports. Packers were required to electronically report hog purchases three times each day, cattle purchases twice each day, lamb purchases once daily, domestic and export sales of beef cuts twice daily, and sales of lamb carcasses and lamb cuts once daily. As of June 2005, 116 packers and importers were required to provide information under the Livestock Mandatory Reporting Act. Two branches of USDA’s AMS administered the livestock mandatory reporting program—Market News and the Audit, Review, and Compliance Branch (ARC). Market News was responsible for collecting and generating market news reports from information supplied by packers. Market News reporters gathered and reviewed this data, contacted packers to resolve any questions they had, and prepared reports. Reporters were required to ensure that they did not breach the confidentiality of packers by providing information that would allow the public to identify an individual packer. In addition to preparing reports, Market News personnel interacted with any packers that AMS believed needed to make changes in reporting to comply with the Livestock Mandatory Reporting Act. To identify compliance problems, ARC personnel audited the transaction data of packing plants three times a year. When ARC found packers that were reporting incorrectly, ARC notified the Market News reporters, who were responsible for notifying and following up with packers until the packers reported correctly. The Secretary of Agriculture was authorized to assess a civil penalty of up to $10,000 a day per violation on a packer that violated the act. AMS designed its livestock mandatory market news reporting program with elements intended to ensure the quality of its news reports. USDA officials, for example, developed a Web-based reporting system with automated and manual screening of packer transaction data and established an audit surveillance program to ensure packers reported accurately. However, we found that while AMS had made progress, its livestock market news program fell short of ensuring reliability because AMS reporting was not fully transparent, and AMS audits of packers revealed some problems with the quality of packers’ transaction data. AMS developed a mandatory livestock market news reporting program incorporating a number of features to ensure quality. More specifically, AMS took the following steps to ensure the quality of its livestock mandatory market news reports: AMS hired two contractors to assist in developing a rapid and reliable reporting system: Computer & Hi-Tech Management, Inc. was hired to assess the capability of the packing companies to provide electronic data; and PEC Solutions developed the computer software processes upon which the mandatory livestock reporting system is now based. AMS and PEC Solutions developed a software system that allows packers to provide their transaction data on web-based forms or to upload completed files into the reporting system data base. PEC Solutions prepared an industry guide to give packers instructions for correctly submitting transaction data. PEC Solutions used programmers who did not participate in developing the systems to test the functioning of the system. AMS further tested the system using simulated production data, because packers had not started reporting actual data. As a further validation step, AMS staff manually calculated data for several reports and compared that data with data generated by the system. AMS established computer based data security controls and computerized screening of packer transaction data to ensure it is being correctly reported. AMS established an audit function to periodically test the accuracy of transaction data that packers submit to AMS by visiting packer facilities, checking documentation in support of reported transactions and testing the completeness of packers’ reports. In addition, in May 2001, the Secretary of Agriculture appointed a top level USDA team—the Livestock Mandatory Price Reporting Review Team—to review problems in its calculations of certain boxed-beef prices. In addition to reviewing that problem and making related recommendations, most of which AMS adopted, the team assessed the overall integrity and accuracy of the program. This team found that for the most part, AMS had succeeded in gathering and reporting accurate data in a timely fashion. The team’s major criticism was that AMS had not adequately tested its system to ensure it was accurately calculating data that packers had reported. Subsequently, AMS initiated further testing to ensure the accuracy of its reports. The team also found that AMS’s plan for audit surveillance of packers was behind schedule due to difficulties in hiring qualified auditors. At that time AMS had conducted audits at only 19 of the 119 packer facilities it planned to reach. Since then, AMS has overcome these problems and conducted over 1,100 audits at packers’ facilities. The Livestock Mandatory Reporting Act was intended to provide producers with readily understandable market information on a significant portion of livestock industry transactions. The quality of this information is especially important because livestock transactions negotiated each day may be influenced by AMS reported prices, and some contracts between packers and producers rely on the weighted average prices that AMS reports. AMS was authorized to make reasonable adjustments in information reported by packers to reflect price aberrations or other unusual or unique occurrences that the Secretary determined would distort the published information to the detriment of producers, packers, or other market participants. In addition, AMS should have adhered to the Office of Management and Budget and USDA guidelines for disseminating influential statistical and financial information with a high degree of transparency about the data sources and methods, while maintaining the confidentiality of the underlying information. In addition, AMS has recognized the usefulness of providing the public with information about the preparation of its market reports. We found that AMS reporters adjusted the transaction data that packers report in an effort to report market conditions, but this practice has not been made transparent. We observed that AMS reporters sometimes eliminated small numbers of apparent erroneous transactions, as would be expected. Significantly, however, we found that AMS reporters eliminated numerous low- and some high-priced transactions that they believed did not reflect market conditions, particularly when reporting on cattle. Our analysis shows that from April through June 2005, when livestock prices were declining somewhat, AMS reporters excluded about 9 percent of the cattle transactions that packers had reported to AMS, about 3 percent of the reported beef transactions, and 0.2 percent of the reported hog transactions. Excluding small percentages of livestock or meat transactions may have had a small effect on the range of prices that AMS reported and a negligible effect on weighted average prices. However, as the percent of transactions excluded increased, so too did the possibility that AMS weighted average prices would be changed from what AMS would otherwise report. Table 1 provides more details about the transactions excluded during this period. In addition, our analysis shows that from May through October 2003, when cattle prices were rising and changing to greater extents, AMS reporters excluded about 23 percent of cattle transactions packers reported to AMS. Concerning hogs, during a period of rising prices between October 2003 and March 2004, we found that 0.1 percent of hog transactions were excluded from AMS reports. Because AMS reports excluded significantly more cattle transactions, we performed further analyses on them. Tables 2 and 3 show (1) information about the cattle transactions that AMS excluded from certain livestock mandatory market news reports from May through October 2003, and (2) examples of 12 days from this period showing the effects of the transactions that AMS excluded on the reported price ranges, and weighted average prices. During the period, AMS reporters’ decisions to exclude transactions had some effect on the cattle data we analyzed in AMS reports on about one third of the days and almost no effects on the others. Further details of our analyses are discussed in appendix I and shown in appendix II. AMS guidance for its reporters on eliminating transactions is limited, lacking clarity and precision. These instructions advise AMS reporters to review transactions which packers have reported each day, and to eliminate certain low- and high-priced transactions. AMS’s varying instructions for reporters are described in table 4. Senior AMS supervisors review reporters’ decisions to eliminate transactions, and AMS headquarters officials monitor the number of—and reasons why—transactions are being excluded by reporters. AMS officials explained, in general, their reviews and adjustments are intended to exclude transactions that are outside the prevailing market price ranges, and to avoid reporting ranges of prices that appear overly broad. Furthermore, Market News officials explained that this process is conducted because they believe that livestock market reports are intended to convey overall market conditions rather than precise statistics. Also, an AMS official noted that AMS Market News reporters mostly exclude low- price transactions involving small quantities, because those transactions often are lower quality animals or products. Concerning hogs, AMS’s reporters of hog transactions said that they were verbally instructed to exclude few hog transactions by headquarters officials soon after the start of the program. AMS headquarters officials said that these verbal instructions were provided after one or more large packers complained that it appeared AMS was excluding transactions because of price alone.