AMS’s Guidelines for AMS Oversight of Commodity Research and  Promotion Programs, most recently updated in September 2015, is  designed to facilitate the application of legislative and regulatory  provisions of the check-off programs and promote consistency in AMS’s  oversight of the 22 check-off programs. AMS Has Improved Its Oversight of Check-off Programs, but Some Oversight Activities Are Not Consistent across Programs

AMS has responded to recommendations for improving oversight made in  the OIG’s 2012 report, particularly by developing and implementing  standard operating procedures and conducting internal reviews of AMS  check-off program oversight. In response to the OIG’s second recommendation, AMS has developed  and implemented guidance for conducting internal reviews of its oversight  of check-off programs. We found that the marketing specialist for one of the eight programs we  reviewed chose a sample of subcontracts for the management review and  documented this selection in the management review report. Marketing specialists for the other four  programs said they did not review subcontracts. Without revising its standard operating procedures for  check-off programs to recognize that each management review is to  include a sample of subcontracts for review, AMS’s ability to prevent  misuse of subcontract funds is impaired. According to the Business Roundtable and the  Organisation for Economic Cooperation and Development’s principles of  corporate governance, a strong disclosure regime that promotes  transparency is central to stakeholders being able to access regular,  reliable, and comparable information. Moreover, AMS’s guidelines state that  annual budget summaries should be posted on the check-off board’s  website and that three additional documents are either to be on the  website or otherwise made available: (1) the bylaws and policy  statements, (2) annual reports, and (3) the independent economic  evaluation of effectiveness. Four of the eight check-off programs in our  sample posted all four documents on the programs’ websites. Industry organization representatives we interviewed said that  transparency of how funds are used and the effectiveness of the  programs are important to their members. Without  including in the guidelines and standard operating procedures that all four  key check-off board documents (i.e., bylaws and policy statements,  annual reports, and independent evaluations of economic effectiveness)  should be posted on a check-off program’s website, AMS may be missing  an opportunity to ensure that some assessment payers have access to  information on program operations and effectiveness. The evaluations we  reviewed varied both in the methods used to conduct the analysis and  how information was reported and revealed certain methodological  limitations. In other words, for every dollar invested in the  check-off programs, the programs returned from $2.14 to $17.40 in  revenue to assessment payers (see table 3). One of the evaluation reports included a  recommendations section, while others did not. If spillover effects pertain to a commodity,  failure to account for these effects could overstate the benefits of a  program and cause an upward bias in computing the BCR. AMS Does Not Consistently Document Reviews of Check-off Evaluations

In addition to ensuring that independent economic evaluations are  conducted every 5 years and encouraging boards to make them available  to assessment payers, AMS’s standard operating procedures state that  marketing specialists should ensure that independent economic  evaluations (1) have a credible methodology and results, (2) articulate  shareholder benefits, and (3) present results in a non-technical manner. Without  developing criteria by which AMS can assess the methodology and  results of independent evaluations and document those assessments to  ensure that the standard operating procedures are met, the agency’s  assessments of independent economic evaluations may be inconsistent  across check-off programs and misleading to agency officials, check-off  boards, and assessment payers. Conclusions

AMS oversees commodity check-off programs that conduct research and  promotion activities to strengthen 22 commodities’ position in the  marketplace. For example, AMS has not  consistently reviewed subcontracts during its management reviews. Further, although principles of corporate governance state the importance  of transparency for stakeholders, AMS has not ensured that certain  information, such as budget summaries and program evaluations, are  presented on check-off program websites and has not included in its  guidelines or standard operating procedures that certain information  should be included on program websites, although the agency’s program  guidelines recognize that transparency of check-off funds is critical. Recommendations for Executive Action

We are making the following five recommendations to the Administrator of  the Agricultural Marketing Service:  The Administrator of AMS should revise the standard operating  procedures for AMS’s check-off programs to state that management  reviews include a sample of subcontracts for review.
Why GAO Did This Study

“Got milk?” and “Pork: The Other White Meat” are examples of advertising campaigns undertaken by 2 of the 22 federal agricultural research and promotion programs, commonly known as commodity check-off programs. These programs, funded by a fraction of the sale of each unit of a commodity, are led by boards consisting of industry members appointed by the Secretary of Agriculture. The programs conduct research and promotion activities to strengthen a commodity's position in the market. In 2016, check-off funds totaled over $885 million. By law, funds cannot be used for lobbying or disparaging other commodities, among other things. AMS has primary responsibility for overseeing the check-off programs.
GAO was asked to review AMS's oversight of the check-off programs. This report examines (1) the extent to which AMS has addressed previously identified weaknesses in its oversight and (2) how the effectiveness of the programs has been evaluated and what the results have indicated. GAO selected a sample of 8 such programs—selected, in part, based on total funds collected—and reviewed laws, regulations, and agency guidance. GAO interviewed agency officials, check-off board executives, and economists.

What GAO Found

The U.S. Department of Agriculture's (USDA) Agricultural Marketing Service (AMS) has improved its oversight of check-off programs since USDA's Office of Inspector General (OIG) made recommendations in a 2012 report. In response to two OIG recommendations, AMS developed and implemented standard operating procedures, which outline specific oversight responsibilities of AMS, and began to conduct internal reviews of its oversight functions. However, GAO found that AMS does not consistently review subcontracts—a legal agreement between a contractor and third party—or ensure that certain documents are shared with stakeholders on program websites.
Subcontracts. Under AMS's 2015 guidelines for check-off programs, which cover broad oversight activities, staff are to review a sample of subcontracts during agency reviews of program operations. However, AMS did not revise its standard operating procedures to match its guidelines with this responsibility, and GAO found that AMS reviewed subcontracts for only one check-off program in its sample of eight. Without revising the standard operating procedures to include a review of subcontracts, AMS's ability to prevent misuse of funds is impaired.
Transparency. According to leading business principles, transparency is central to stakeholders' access to regular, reliable, and comparable information. However, GAO found that four of the eight check-off programs reviewed posted all key documents, such as budget summaries and evaluations of effectiveness, to program websites. GAO found that AMS's guidelines state that budget summaries should be posted on program websites, while the other key documents are to be available on the website or otherwise made available to stakeholders. Agency officials said that boards would supply documentation if contacted by a stakeholder. Industry representatives GAO interviewed said that transparency of how funds are used and the effectiveness of programs are important to their members. Without including in its guidelines and standard operating procedures that all key documents should be posted on a check-off program's website, AMS may miss an opportunity to ensure that stakeholders have access to information on program operations and effectiveness.
Independent economic evaluations of the effectiveness of check-off programs, required by law to be conducted every 5 years, have generally shown positive financial benefits. For the eight evaluations GAO reviewed, benefits ranged from an average of $2.14 to $17.40 for every dollar invested in the programs. However, the evaluations varied in the methods used and had certain methodological limitations. For example, some evaluations did not account for the effects of promotion from competing commodities, which could overstate the programs' benefits. AMS's standard operating procedures state that the agency should review the evaluations to ensure that there is a credible methodology, among other things; however, AMS did not consistently document reviews of the evaluations or have criteria by which to review the evaluations. Without developing criteria to assess the methodology and results of evaluations, the agency's assessments of independent economic evaluations may be inconsistent across check-off programs and misleading to stakeholders.

What GAO Recommends

GAO is making five recommendations, including that USDA revise its standard operating procedures to include the review of subcontracts, include key documents on check-off program websites, and develop criteria to assess evaluations. USDA generally agreed with GAO's recommendations.