Agricultural Trade:

Cooperator Conflict of Interest Regulation Needs Strengthening

NSIAD-91-217: Published: May 22, 1991. Publicly Released: May 22, 1991.

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Allan I. Mendelowitz
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Pursuant to a congressional request, GAO reviewed whether the U.S. Department of Agriculture's (USDA) conflict-of-interest regulation for the Cooperator Foreign Market Development Program, and the restructuring of the Purebred Dairy Cattle Association's International Marketing Development Council (IMDC) effectively addressed conflict-of-interest situations for individual exporters.

GAO found that: (1) the association established IMDC to serve as the dairy livestock cooperator in the Cooperator Foreign Market Development Program, to develop international markets for U.S. dairy genetics; (2) the USDA Foreign Agricultural Service (FAS) enacted regulations to prevent conflicts of interest by dairy livestock breeder organizations operating private for-profit export subsidiaries while participating in government-funded market development activities; (3) the regulations prohibited cooperators from exporting the agricultural commodities they promoted with project funds and using program activities to promote private interests or conduct private business; (4) the regulations established sanctions for violations, but applied only to the cooperators and not their members; (5) since IMDC relied on a staff of its members to carry out its foreign market development activities, the potential for IMDC members to promote their interests while acting as cooperator staff existed; (6) FAS did not apply the export prohibition to individual cooperator members, since the loss of their export activities could result in decreased program funding, loss of expertise in developing market development programs, and the loss of skilled staff able to demonstrate the uses of U.S. products overseas; and (7) the IMDC manual did not state what would happen if members failed to comply with FAS directives while conducting overseas market development activities.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Secretary of Agriculture has directed the Administrator, FAS, to strengthen the conflict-of-interest prohibition.

    Recommendation: The Secretary of Agriculture should direct the Administrator, FAS, as part of the plans to strengthen the conflict-of-interest prohibition, to specifically provide that any firm, organization, or individual involved in approved Cooperator Foreign Market Development Program activities shall not improperly use the activities to promote private self-interests or conduct private business.

    Agency Affected: Department of Agriculture

  2. Status: Closed - Implemented

    Comments: Guidelines reflecting this change are being converted to regulations, which were finalized.

    Recommendation: To ensure that cooperators effectively implement the conflict-of-interest regulation, since the current regulation does not specifically address sanctions for noncompliance by members, the Secretary of Agriculture should direct the Administrator, FAS, to require that the cooperators establish: (1) appropriate internal controls to ensure that members of cooperators comply with the regulation; and (2) procedures specifying sanctions when members do not comply. These sanctions should include withholding member reimbursement for expenses and declaring members ineligible for continued participation in the program.

    Agency Affected: Department of Agriculture


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