USMEF Audit and Budget Committee Compliance Report

1. USMEF Audit and Budget CommitteeCompliance Report Presented by Reginald Staples May 16, 2012

2. Compliance Overview • Promotes a culture of ethical behavior and commitment to compliance • Enables compliance with funding organizations, governing laws and internal policies and procedures • Communicates organizational expectations and commitment • Provides mechanisms for reporting potential compliance issues • Prevents and detects non-compliance • Makes a positive impression on membership and gives assurances to funding organizations Provided for the Members of the Audit Budget Committee

3. Compliance Goals • Establishing, monitoring, and enforcing policies, procedures and expectations that support the Code of Ethics and our values • Promoting awareness of USMEF compliance standards and expectations through communication and periodic training • Evaluating and continuously improving the compliance function Provided for the Members of the Audit Budget Committee

4. 2012 Compliance Highlights • Continue to Monitor Compliance Risks and Risk Control Procedures • USMEF Issued Updated International Accounting Manual • Code of Ethics and Conflict of Interest (COI) • USMEF staff full participation in our Code of Ethics and COI acknowledgement annual process • USMEF EC members 95% completion of the new COI acknowledgement • Training and Communication • Presented compliance topics at the November International Accounting Conference • Civil Rights Training – Denver Employees • Send Periodic messages on relevant compliance topics • Internal Compliance Activities • Food & Agriculture Export Alliance – Accounting and Governance Review • Denver Voucher Review • Oversee the development and implementation of corporate policies/procedures • Continuous monitoring of all USMEF Bank Reconciliations • Review processes to comply with new MAP guidelines - PENDING • Follow-up review procedures Provided for the Members of the Audit Budget Committee

5. External Compliance Audits • The major funding organizations often conduct routine audits of the USMEF accounting records to validate compliance with the respective funding agreements. The following schedule provides a status for each audit. • NPB – National Pork Board completed annual their audit with minimal findings • Final audit report pending • CBB – Cattlemen's Beef Board audits • Audit of 2009-2011 near completion • Audit of 2012 ongoing monthly review and year-end procedures • OIG – Office of Inspector General review of the Agriculture Marketing Service’s oversight of the various research and promotion boards that administer checkoff funds. • NCBA – National Cattlemen’s Beef Association monthly review with minor findings • FAS – Foreign Agriculture Services prior year audit completed with minimal findings. • Report pending. The fieldwork for the current year audit is scheduled for the week of June 4 – 8, 2012 Provided for the Members of the Audit Budget Committee

6. Classificationof USMEF Government Interactions Check-off funds may not be used to influence U.S. government policy or action Lobbying is defined (per the LDA) as contacts with a covered U.S. government official for the purpose of influencing U.S. government policy or action USMEF is not prohibited from engaging in lobbying activities to influence government policy or actions Registration required if “lobbying activities” (per the LDA definition) constitute 20% or more of a USMEF employee’s time during any three-month period Checkoff Definition Activities to influence USG policy or action – Cannot use check-off funds for this purpose MS LDA and 990 Definition Contacts with “covered” USG officials for the purpose of influencing USG policy or action. Note: USMEF pays tax on the time and expenses in this category. Provided for the Members of the Audit Budget Committee

7. Comparative Six Month TrendGovernment Affairs and Market Access Support Provided for the Members of the Audit Budget Committee

8. Potential Compliance Dashboard Metrics Improve transparency and oversight • Audit Schedule Status – Scheduled, In-Process and Completed • Completed Audit Statistics • Quantify audit sample and total population subject to audit • Results of Audits - Number of exceptions and dollar amount • Classify each audit finding - error, application/interpretation or documentation • Number of Days Recommendations/Audit Findings Outstanding • Contract Compliance Review Activity – Number of contracts reviewed and dollar amount Provided for the Members of the Audit Budget Committee

9. 2012 Compliance Projects • Update the USMEF 2009-2010 Risk Assessment • Review Monitoring Procedure for Vendor Payments • Benchmark Anti-Corruption Foreign Corrupt Practices Act Policies and Procedures with Best Practices • Revise Conflict of Interest Policy and Procedures • IT Governance • Oversee and Coordinate - Funding Compliance Audits • Identify and Report on New Compliance Metrics for Dashboard Provided for the Members of the Audit Budget Committee