Content of Audited Financial Statements
The requirement for submission of audited financial statements is specified in Section 1220.228(a)(1)(vii) and 1220.228(b)(7) of the Soybean Promotion and Research Order (Order). These sections state that the State Soybean Board will “furnish the Board with an annual report by a certified public accountant or an authorized State agency of all funds remitted to such Board pursuant to this subpart.” Agricultural Marketing Service (AMS) policy requires that the “QSSB annual financial audits must be performed by a certified public accountant or an authorized State agency and must certify whether or not (1) funds were used for lobbying, (2) the AMS investment policy was adhered to, and (3) internal controls over funds met accounting standards.” (Policy letter from AMS to USB dated February 3, 1993)
In those states where the checkoff funds are collected and disbursed by a state agency, some or all of the auditing requirements may be met by the state agency auditing requirements. USB will accept annual reports by an authorized state agency in lieu of an audited report by a CPA from QSSBs provided that such annual reports by an authorized state agency will be fulfilled by the reporting requirements in the following paragraph in this section of the QSSB Manual. QSSBs should check with the USB office to respond to any questions in this regard.
The QSSB should prepare financial statements on an annual basis which show the Assessment Revenues collected by the QSSB during the period and how such Revenues were utilized. The QSSB should then have a certified public accountant (CPA) or an authorized State agency examine such financial statements and issue their opinion (report) on them. In addition to the report, the QSSB is required to obtain a negative assurance letter in regards to investments and use of funds.
The financial statement for the QSSBs may be prepared on various bases of accounting – accrual basis, modified accrual basis, cash basis or modified cash basis. The title headings used for each of the basic financial statements will depend upon the accounting basis the QSSB uses. The basic financial statements should include:
- Balance Sheet, Statement of Financial Position or Statement of Assets, Liabilities and Fund Balances.
- Statement of Income and Changes in Fund Balances or Statement of Revenues and Expenses (Expenditures) and Changes in Fund Balances.
- Statement of Cash Flows (formerly Statement of Changes in Financial Position). If the QSSB uses the cash basis, this statement may not be required.
- Notes to the Financial Statements and Supplement Information
The Notes to the Financial Statements are a required part of the financial statements, since they provide additional detail and further explanation concerning the financial statements. The financial statements for many QSSBs also include supplemental statements, schedules or exhibits that provide further detail on line items included in the basic financial statements. Therefore, in the interest of complete and uniform reporting, the financial statements or schedules should include the following disclosures:
A. Cash Balances.
B. Investment held during the year.
C. Schedule of Contracts/Grants in Process– fund description, funds committed, funds expended, remaining balance in detail. Please see Appendix M
for the Schedule Contracts/Grants in Process template.
D. Schedule of Activities – Actual and Budget Current Year to Prior Year per financial statements. Please see Appendix N
for the Schedule of Activities template.
If the QSSB uses the cash basis, the Statement of Assets, Liabilities and Fund Balances might only include two line items – Cash and Fund Balance.
Format: Statement of Revenue and Expenses
QSSBs are required to spend assessment revenues in accordance with the Soybean Promotion, Research and Consumer Information Act of 1990 (“Act”) and the Order. The USDA has stated that funds collected under the Act, including interest on investments and revenues from activities or projects financed with such assessments, may only be used for purposes authorized by the Act, which are detailed in Section 1220.230 of the Order.
The purposes are:
Promotion – defined in Sec. 1220.121
Research – defined in Sec. 1220.125
Consumer Information – defined in Sec. 1220.105
Industry Information – defined in Sec. 1220.112
Producer Communication – provided for in Sec. 1220.212(i) of the Order and meaning information to be provided to producers in the state on the programs or projects carried out and the utilization of assessment revenues.
Administration – Expenses incurred by the QSSB for its maintenance and functioning and to enable it to exercise its powers and perform its duties. USDA has stated that QSSBs are not subject to the five percent (5%) of projected revenues limitation for Administration expenses imposed on the USB.
In order to provide some consistency in the manner in which assessment revenues collected and expenditures made are presented, shown below is the required format to be used in the Statement of Revenues and Expenses and Changes in Fund Balances.
- Assessment Revenues Collected from First Purchasers
- Assessment Revenues Collected from Other QSSBs
- Less Collection Fees Prescribed by State Law Prior to 11/30/90
- Less Assessment Revenues Remitted to Other QSSBs
- Less Assessment Revenues Remitted to USB
- Net Assessment Revenues
- Interest Revenues
- Other Revenues
- Total Revenues
- Total Program
|Total Program Expenses
|Excess of Revenue Over Expenses
|Beginning Net Assets
|Ending Net Assets
Additional detail on the type and nature of the program and administration expenses should then be provided in a supplemental statement to the financial statements. A comparison should be included of budgeted and actual expenses.
Additional Statements to be Included in the Auditor’s Report
In addition to the independent auditor’s report on the financial statements, USDA has requested that the CPA or authorized State agency be asked to provide a statement of negative assurance that funds collected and invested by the QSSB were used for those purposes provided for in the Act and Order and were not used for any purposes described in Section 1220.228(a)(1)(ix)(A) of the Order.
Statement of Auditing Standards #62, paragraph 19 – Compliance With Aspects of Contractual Agreements or Regulatory Requirements Related to Audited Financial Statements sets forth the standards that should be used to comply with the USDA request. SAS #62 states that this negative assurance may be given in a separate report or in one or more paragraphs of the independent auditor’s report. An example of the language that could be used is as follows (see examples of separate reports included in this section, pages 8 and 9):
In connection with our audit, nothing came to our attention that caused us to believe the State Board failed to comply with the terms, insofar as they relate to accounting matters of the Soybean Promotion, Research and Consumer Information Act of 1990 and the Soybean Promotion and Research Order (the “Order”) relative to the use of funds collected by the State Board and with the terms described in Section 1220.228(a) of the Order relative to prohibited uses of funds collected by the State Board.
In connection with our audit, nothing came to our attention that caused us to believe the State Board failed to comply with the terms, insofar as they relate to accounting matters of the Soybean Promotion, Research and Consumer Information Act of 1990 and the Soybean Promotion and Research Order (the “Order”) relative to the investment of funds collected by the State Board and with the provisions of Section 1220.211(j). However, our audit was not directed primarily toward obtaining knowledge of such noncompliance in the use and investment of funds.
This report is intended solely for the information and use of the Directors and management of the Qualified State Soybean Board, the USB and the United States Department of Agriculture, and should not be used for any other purpose.
Other language may be used as long as it complies with the USDA request and follows SAS #62.