2014 Beef Checkoff Annual Report | Page 17

Notes to Financial Statements (Modified Cash Basis) September 30, 2014 and 2013 (1) ORGANIZATION AND OPERATIONS The Beef Promotion and Research Act of 1985 (the Act), approved on December 23, 1985, by the United States Congress, established a coordinated program of promotion and research designed to strengthen the beef industry’s position in the marketplace, as well as to maintain and expand domestic and foreign markets and uses for beef and beef products. As provided in the Act, the Secretary of the United States Department of Agriculture (the Secretary) issued the Beef Promotion and Research Order (the Order), effective July 18, 1986, which provides the terms and conditions for the Act’s administration. The Cattlemen’s Beef Promotion and Research Board (the Board), which was created and approved by the Secretary to administer the Act, consists of 103 members who are representatives of the cattle industry in the United States, including importers. Board members are appointed by the Secretary. The program is financed by a $1 per head assessment on domestic sales of cattle and on imported cattle, beef, and beef products. The Board, as part of its responsibilities under the Act and Order, may certify no more than one Qualified State Beef Council (Council) in each state and authorize that Council to collect such assessments. The assessments are remitted to the Councils or the Board. The Board receives one‐half of assessment monies from states with Councils and the Councils retain the remainder. The Board receives all assessment revenues from states without Councils and from imported cattle, beef, and beef products. Pursuant to the Act, the Board’s expenses for administration are limited to 5% or less of projected revenues. All remaining revenues are expended on programs related to promotion, research, and information for the beef industry. The Board contracts with established national cattle‐ or beef‐industry‐ governed nonprofit organizations for the implementation and conduct of these programs. Under the terms of these contracts, the entities, which receive Board contracts, are subject to annual audits and reviews. During fiscal years 2014 and 2013, the Board reimbursed the following industry organizations for program expenses incurred on approved projects: Name of Contractor 2014 2013 Meat Importers Council of America (MICA) $326,416 $470,453 National American Meat Association (NAMA) $616,795 $123,959 $33,530,014 $33,661,423 National Livestock Producers Association (NLPA) $30,000 $25,000 American National CattleWomen (ANCW) $402,419 $203,400 National Cattlemen’s Beef Association (NCBA) The program expenses incurred by NCBA during fiscal years 2014 and 2013 included reimbursements for costs incurred under subcontracts with the American National CattleWomen of $198,811 and $296,444, and the U.S. Meat Export Federation of $7,355,729 and $6,036,723, respectively. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The accompanying financial statements have been prepared on the modified cash basis of accounting. Under this method, certain revenues are recognized when received rather than when earned and certain expenses are recognized when paid rather than when incurred. At September 30, 2014 and 2013, there were assessment receivables of approximately $6,900,000 and $6,700,000, interest receivables of approximately $12,000 and $10,000, accured compensated absences of approximately $46,000 and $4,000 and accounts payable of approximately $7,000,000 and $6,700,000, respectively, which are not reflected in the accompanying financial statements. Accounts payable relate to appropriated expenditures and are included in the net assets designated for future expenses in the accompanying statements of assets, liabilities and net assets (Note 5). As discussed in Note 1, the Board receives one‐half of the assessment monies collected by the Councils and the remainder is retained by the Councils. The accompanying financial statements include only the Board’s share of assessment monies and do not include amounts related to either revenues or expenses of the individual Councils. Cash, Cash Equivalents and Short‐Term Investments For purposes of classifying investments, the Board considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash equivalents and short‐term investments are recorded at cost. Depreciation Capital assets, which include equipment and leasehold improvements, are recorded at cost. Depreciation is computed using the straight‐line method over the estimated useful lives of three to ten years. Use of Estimates The preparation of financial statements require management to make estimates and assumptions that affect certain reported amounts and disclosures, primarily those estimates included in the Basis of Accounting disclosure above. Accordingly, actual results could differ from those estimates. (3) CASH, CASH EQUIVALENTS, AND SHORT‐TERM INVESTMENTS The Secretary has provided that excess cash may be invested, on a short‐term basis, in certificates of deposit insured by the Federal Deposit Insurance Corporation or obligations of the United States, U.S. Government agencies, or U.S. Government‐ sponsored corporations. Cash, cash equivalents and short‐term investments at September 30, 2014 and 2013, by investment type, are as follows: 2014 Beef Board Annual Report 17