Federation of State Beef Councils

1. United States Department of Agriculture Federation of State Beef Councils

2. Federation history • First Beef Checkoff in the U.S.? • 1922 – Voluntary 5¢ per carload and the first campaign was “Meat for Health” • First State Beef Councils? • 1954 – California & Montana • 1955 – Alabama & Florida • 1963 - Federation of State Beef Councils

3. Alabama – 1955 Arizona – 1971 Arkansas –1983 California – 1954 Colorado – 1965 Delaware – 1989 Florida – 1955 Georgia – 1976 Hawaii – 1988 Idaho – 1967 Illinois – 1963 Indiana – 1976 Iowa –1970 Kansas – 1973 Kentucky – 1978 Beef council history Louisiana – 1978 Maine – 1988 Maryland – 1986 Michigan – 1972 Minnesota – 1967 Mississippi – 1968 Missouri – 1986 Montana – 1954 Nebraska – 1970 Nevada – 1971 New Jersey – 1996 New Mexico – 1979 New York – 1986 North Carolina – 1986 North Dakota - 1973 Ohio – 1970 Oklahoma – 1975 Oregon – 1959 Pennsylvania – 1976 South Carolina – 1986 South Dakota – 1964 Tennessee – 1986 Texas – 1986 Utah – 1969 Vermont – 1986 Virginia – 1965 Washington –1969 West Virginia –1986 Wisconsin – 1986 Wyoming – 1971

4. First Attempt Failed in 1977 • Complicated • Value Added Assessment • Voting at ASCS offices • Required 2/3 majority • Failed (56.6%) National referendums

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

6. Third Time is a Charm in 1988! • It’s state based -- States keep 50 cents • It’s fair - Everyone pays $1 • It’s producer controlled • It’s cost effective - 5% administrative cap • It works – Results speak! • Passed (79%) National referendums

7. Established as part of 1985 Farm Bill - $1 per head • Became mandatory via national referendum vote by producers in 1988 • States retain 50 cents on the dollar; forward 50 cents to Beef Board • CBB administers program, subject to USDA approval Today’s checkoff

8. State Beef Council Board composition 664 Board Members (39 of 45 Beef Councils surveyed 2009) Industry Segments Represented: • LMA/Auction Markets = 37 • Farm Bureau = 31 • Allied Industry/Multi-industry segment = 39 • Packers/small processors = 15 • Dairy = 40 • CattleWomen = 17 • Farmers Union = 12 • CBB = 16 • Veal = 6 • R-Calf/US Cattlemen = 8 • State cattlemen’s association = 192 • Remainder (approximately 200) are unnamed, or named by segment (cow-calf, feeder, stocker)

9. National Organization Time Line 1963 Beginning of Federation Beef Industry Council NLSMB 1898-1905 National Live Stock Association of the United States 1951-1977 American National Cattlemen’s Association 1986-Today Cattlemen’s Beef Board 1922-1995 National Live Stock & Meat Board 1906-1950 American National Live Stock Association 1996-Today National Cattlemen’s Beef Association 1977-1995 National Cattlemen’s Association Cornbelt Livestock Feeders Assn. (1946-1960) National Livestock Feeders Assn. (1960-1977)

10. Urgent need for great efficiency

11. Today’s Checkoff Producer (Beef/Dairy)Pays $1 Producer (Beef/Dairy)Pays $1 Producer (Beef/Dairy)Pays $1 Producer (Beef/Dairy)Pays $1 Importers pay $1/head or equivalent as well as collections from 5 states without Qualified State Beef Councils Importers pay $1/head or equivalent as well as collections from 5 states without Qualified State Beef Councils Cattlemen’s Beef Board Cattlemen’s Beef Board 45 Qualified State Beef Council 45 Qualified State Beef Council 45 Qualified State Beef Council 45 Qualified State Beef Council 50¢ 10 Membersfrom CBB 50¢ 10 Membersfrom the Federation Beef PromotionOperating Committee Beef PromotionOperating Committee Federation of State Beef Councils(40 States Invest) Federation of State Beef Councils(40 States Invest) StatePrograms National Programs* National Programs* Dollars Make Individual Fiscal Program Decisions Programs *National contracting organizations include NCBA, ANCW, NLPA and USMEF. CBB contracts to do Producer Communications.

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

13. Build beef demand by inspiring, unifying and supporting an effective state and national Checkoff partnership. (Adopted July 2008) Federation vision

14. We believe in the success of a strong state and national partnership resulting in increased consumer demand for beef and higher consumer confidence. • We believe in the Industry Long Range Plan as a guidepost for the beef checkoff and the fundamental principle of “one vision-one plan-one voice.” • We believe in producer control of checkoff funds through Qualified State Beef Councils which are the foundation of the beef checkoff. (Adopted July 2009) Federation beliefs

15. Beef Councils Must Provide CBB: • Compliance Enforcement Plan • Annual Financial Audit (statement of negative assurance) • Annual Marketing plan • Annual Budget • Periodic CBB Audits Federation Accountability to cbb

16. THEREFORE, BE IT RESOLVED, the Federation should operate in a more independent structure while maintaining the synergies and efficiencies of the current relationship with the National Cattlemen’s Beef Association and strongly opposes any effort to sever the relationship. (Adopted July 2010) Federation resolution

17. Scott George – Federation Chair • David Dick – Federation Vice-chair • Regional Vice Presidents • Beef Council Staff – Federation Advisory Council • Revenue Seats • Auction Market Representative • Jerry Jacobs – Expert, Organizational Structure for non-profits. • John Huston – Facilitator, Former CEO, Beef Industry Council Resolution work group

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

19. 2. The Federation” consists of state beef councils. Principles of increased independence

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

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

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

23. 6. Annual budgeting for the Federation is subject to the exclusive authority of the Federation. Principles of increased independence

24. 7. A senior management executive, reporting to the NCBA CEO, will be responsible for managing the beef promotion check-off program in coordinationwith the Federation and its Executive Committee. Principles of increased independence

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

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

27. 10. The Federation achieves efficiency and transparency by participating in the nonprofit corporation status and liability protection, as well as federal income tax exemption, of NCBA; it has public transparency via NCBA’s Form 990 reporting to the Internal Revenue Service. Principles of increased independence

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

29. Questions?

30. Annual Federation Division Budgeting • The Federation Division of NCBA prepares an annual budget with the following approvals: • May – approved by Joint Budget Committee (CBB & NCBA members) • May – Beef Promotion Operating Committee (BPOC) approval • July – approved by Federation members of the Executive Committee • July – approved by Federation members of the Board of Directors • September – amended budget which includes BPOC contracts is approved by the Federation members of the Budget Committee • September – amended budget which includes BPOC contracts is approved by the Federation members of the Executive Committee

31. Federation Division Financials • Monthly Divisional P&L prepared and distributed to Federation Division leadership • Separate Checkoff Bank account maintained at separate bank for checkoff receipts and disbursements/reimbursements • Quarterly Divisional Balance Sheet prepared and reviewed by CBB • Audited financial statements reflect divisional P&L with footnote disclosure of checkoff cash balance

32. CBB Administrative oversight • CBB to ensures compliance with the “firewall” • On a monthly basis, CBB reviews every invoice for direct checkoff costs • On a monthly basis, CBB reviews all time charged to checkoff projects • Bi-annually for the preceding two years, CBB conducts a compliance audit to assess NCBA’s checkoff compliance. • Beginning with the July 2010 billing, CBB implemented additional review procedures whereby they are reviewing a much larger number of invoices and time and expense charges.

33. Federation Division annual Report • Annually, NCBA prepares an Annual Report for the Federation Division • Annual Report includes detailed Consolidating Federation Division P&L • Annual Report includes detailed Investment Summary by SBC • Annual Report is distributed to Federation members of the NCBA Board of Directors and the various SBC Board of Directors.