s Examination Department of Livestock Expenses Directly Incurred Through the Collection of Beef Check-Off Fees For the Contract Term July 1, 2011 to September 2012 30, November 2012 . Legislative Audit Division 12SP-35 MontanaStateLibrary 3 0864 1006 8063 9 Examination Legislative Audit Examinations are conducted bythe Legislative Audit Division to Committee provide a high-level ofassurance on a subject matter, or assertion about a subject matter, that is the responsibility of another Representatives party. In performing the examination work, the audit staff uses Randy Brodehl standards set forth by the American Institute ofCertified Public [email protected] Accountants and the United Stated Government Accountability Tom Burnett Office. Those standards require that we plan and perform the [email protected] examinationto obtain sufficient evidence to provide a reasonable Virginia Court basis for the conclusion expressed in the examination report. [email protected] Mary McNally The results of this examination, contained in this report, are [email protected] intended forthe sole use ofthe MontanaLegislature, Department Trudi Schmidt of Livestock, and Montana Beef Council. These parties can be [email protected] presumed to have an adequate understanding of the criteria Wayne Stahl, Vice Chair used by audit staff in performing the examination. The report, [email protected] however, is a public document and its distribution is not limited. Senators Debby Barrett The examination was performed in order to fulfill the Legislative Audit Division’s statutory responsibility under §81-8-901, MCA. [email protected] Gary Branae It was conducted by Financial-compliance audit staff members. [email protected] Financial-compliance audit staff hold degrees with an emphasis Taylor Brown in accounting, and most hold Certified Public Accountant (CPA) [email protected] certificates. Cliff Larsen [email protected] Fredrick (Eric) Moore [email protected] Mitch Tropila, Chair Audit Staff [email protected] Members serve until a John Fine Karen E. Simpson member’s legislative term OF OFFICE ENDS OR UNTIL A SUCCESSOR IS APPOINTED, WHICHEVER OCCURS FIRST. Reports can be found in electronic format at: MCA §5-13-202(2), http://leg.mt.gov/audit Fraud Hotline (Statewide) 1-800-222-4446 (in Helena) 444-4446 [email protected] LEGISLATIVE AUDIT DIVISION Tori Hunthausen, Legislative Auditor Deputy Legislative Auditors Deborah F. Butler, Legal Counsel CindyJorgenson Angus Maciver November 2012 The Legislative Audit Committee ofthe Montana State Legislature: This is the report for our examination of the direct costs incurred by the Montana Department ofLivestock (Department) through the collection ofBeefCheck-Offfees, for the contract period of July 1, 2011, to September 30, 2012. This report provides information about the Beef Check-Off program and the Department’s collection activities related to the program. We thank the Montana Department ofLivestock Executive Officer, Department staff, and Montana Beef Council staff for their cooperation and assistance throughout the examination. The Department’s response to the report is at page B-l. Respectfully submitted, Legislative Auditor Room 160 • StateCapitol Building• PO Box 201705 • Helena, MT • 59620-1705 Phone (406) 444-3122 • FAX (406) 444-9784 • E-Mail [email protected] Table of Contents Figures and Tables ii Appointed and Administrative Officials iii Report Summary S-l CHAPTER - INTRODUCTION I 1 Introduction 1 Background 1 2011 Legislative Changes 2 Examination Engagement Methodologies 3 Examination Results 3 Communication ofDeficiencies in Internal Control and Violation ofContractAgreements...3 Deficiencies in Internal Control 5 Violation ofProvisions ofContract Agreements 5 Examination Summary 5 INDEPENDENTACCOUNTANT’S REPORT IndependentAccountant’s Report A-l DEPARTMENT RESPONSE Department ofLivestock B-l Figures and Tables Tables Table 1 BeefCheck-offFees Collected 2 Ill Appointed and Administrative Officials Location Industrv Term Exp: Board ofLivestock Jan French, Chair Hobson Cattle 2015 Linda Nielson, Vice Chair Nashua Cattle 2017 Stan Boone Ingomar Cattle 2013 Brett DeBruycker Dutton Cattle 2015 Ed Waldner Chester Swine 2017 Jeffrey Lewis Corvallis Dairy 2017 John H. Lehfeldt Lavina Sheep 2013 Department ofLivestock Christian Mackay, Executive Officer John Grainger, Administrator, Brands Enforcement Division George Harris, Administrator, Centralized Services Division For additional information concerning the Department ofLivestock, contact: Christian Mackay, Executive Officer Department ofLivestock P.O. Box 202001 MT Helena, 59620-2001 (406) 444-4994 e-mail: [email protected] 12SP-35 Digitized by the Internet Archive 2016 in https://archive.org/details/examinationdepar2012mont S-l Montana Legislative Audit Division Examination Expenses Directly Incurred by the Department of Livestock Through the Collection of Beef Check-Off Fees For the Contract Term July 1, 2011, to September 30, 2012 November 2012 12SP-35 Report Summary For the contract period, the Department of Livestock (Department) billed the Montana Beef Council (Council) approximately $13,000 for costs incurred for the collection of over $1,000,000 of beef check-offfees. Context Results Section 81-8-901, MCA, requires the Our examination found that, for the contract Department to contract with the Council for period, the Department billed the Council the collection of $1 per head beef check-off approximately $13,000, which did not fee. Proceeds of the check-off fees are used to exceed 5 percent of the total beef check-off promote the beef industry through research fees collected. This $13,000 includes almost and marketing. $4,800 for printed materials. Department management anticipates these materials will Under state law, the contract between the be used in the future, and does not expect to Department and Council must contain a incur similar costs on an annual basis. provision requiring the Council to reimburse the Department for all direct costs incurred However, at the time of our review, the in the collection of the check-off fees, not to Department did not have records available exceed 5 percent of the total check-off fees indicating the actual amount ofcosts directly collected. These direct costs are required to be incurred for postage or personal services verified by the Legislative Auditor. associated with the collection of the fee. As a result, we were unable to verify that the To address the verification requirement Department billed the Council for all direct in §81-8-901, MCA, we performed an costs incurred for the collection of beef examination of the expenses directly incurred check-offfees during the contract period. by the Department through the collection of beefcheck-offfees. Foracompletecopyofthe report (12SP-35) orforfurther information, contact the LegislativeAudit Division at406-444-3122; e-mail to [email protected]. orcheck thewebsiteat http://leg.mt.gov/audit Report Fraud, Waste, andAbuseto theLegislativeAuditor’s FRAUD HOTLINE Call toll-free 1-800-222-4446, ore-mail [email protected]'.