oversight

Controls Over Meat, Poultry, and Egg Product Labels

Published by the Department of Agriculture, Office of Inspector General on 2020-06-18.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

     United States Department of Agriculture




Controls Over Meat, Poultry, and Egg
Product Labels




Audit Report 24601-0002-23
                                               OFFICE OF INSPECTOR GENERAL
June 2020
Controls Over Meat, Poultry, and Egg Product
Labels

Audit Report 24601-0002-23
OIG evaluated FSIS’ controls over meat, poultry, and egg product labels to
ensure FSIS’ approval of labels was accurate and supported.



OBJECTIVE                             WHAT OIG FOUND
Our objective was to evaluate         The U.S. Department of Agriculture’s (USDA) Food
FSIS’ controls over meat,             Safety and Inspection Service (FSIS) ensures that the
poultry, and egg product labels       Nation’s commercial supply of meat, poultry, and egg
to ensure establishment claims
                                      products is correctly labeled and packaged, wholesome,
that FSIS approves are accurate
and supported.
                                      and not adulterated. To ensure labels are truthful
                                      and not misleading, FSIS’ Labeling and Program
                                      Delivery Staff (LPDS) review label applications and
REVIEWED                              either approve product labels or request changes. FSIS
We reviewed: (1) applicable laws,
                                      also has inspection program personnel (IPP) at each
regulations, and agency policies,     establishment who are responsible for verifying that
procedures, and guidance; (2)         labels and related files (i.e., labeling records) meet
each label, application, and          requirements. We reviewed 120 label application
supporting documentation for          packages for fiscal year (FY) 2018 to ensure that the
120 statistically selected labels;    labels FSIS approved were accurate and supported.
and (3) an additional 36 labels
to ensure final label record          While we found that FSIS’ controls over its approval
compliance. We interviewed            of labels were generally effective, we determined that
FSIS national officials, district
                                      9 of 60 required label application packages were either
officials, and IPP at select
establishments.
                                      incomplete, inaccurate, or unsupported. We also found
                                      that 11 of 60 generic label application packages were
                                      either not supported or an applicable mandatory feature
RECOMMENDS                            was missing or inaccurate. In addition, we determined
                                      that LPDS requested changes to 657 of 878 (74 percent)
LPDS should review the                generic labels to ensure these labels met requirements.
nine labels with insufficient         We also found that three establishments we visited did
supporting documentation
                                      not make the required modifications in their final generic
and develop internal standard
operating procedures to ensure
                                      labeling records.
compliance; review a sample of
approved labels on a periodic         As a result, meat, poultry, and egg product labels may
basis; enhance its outreach           reflect inaccurate statements and claims made by
efforts to establishments             establishments. Additionally, there is reduced assurance
regarding applicable mandatory        that establishments’ generic labels meet requirements.
labeling features for generic         Based on our sample results, we estimated that
labels; and update its directive to   approximately 2,038 (15.00 percent) of the approved
reflect regulatory requirements       required labels and 161 (18.34 percent) of the approved
for sampling to generic labels
                                      generic labels may have one or more exceptions.
to determine compliance with
mandatory features.
                                      FSIS generally agreed with our recommendations
                                      and we accepted management decisions on all five
                                      recommendations.
                           United States Department of Agriculture
                                  Office of Inspector General
                                    Washington, D.C. 20250


DATE:          June 15, 2020

AUDIT
NUMBER:        24601-0002-23

TO:            Paul Kiecker
               Administrator
               Food Safety and Inspection Service

ATTN:          Cara LeConte, Chief Financial Officer
               Food Safety and Inspection Service
               Office of the Chief Financial Officer

FROM:          Gil H. Harden
               Assistant Inspector General for Audit

SUBJECT:       Controls Over Meat, Poultry, and Egg Product Labels


This report presents the results of the subject review. Your written response to the official draft
is included in its entirety at the end of the report. We have incorporated excerpts from your
response, and the Office of Inspector General’s (OIG) position, into the relevant sections of the
report. Based on your written response, we are accepting management decision for all five audit
recommendations in the report, and no further response to this office is necessary. Please follow
your internal agency procedures in forwarding final action correspondence to the Office of the
Chief Financial Officer (OCFO).

In accordance with Departmental Regulation 1720-1, final action needs to be taken within 1 year
of each management decision to prevent being listed in the Department’s annual Agency
Financial Report. Please follow your internal agency procedures in forwarding final action
correspondence to OCFO.

Your written response to the official draft report expressed concerns with several aspects of our
report. Your response stated that we evaluated the labels and related applications based on rigid
standards, and we did not consider FSIS’ history and expertise. In all of the exceptions noted,
we presented your subject matter experts’ explanations on why they agreed or disagreed with our
conclusion. Your response also stated that Labeling and Program Delivery Staff (LPDS)
incorrectly agreed with OIG that the processing procedures should include the condition that the
product leaves the establishment (i.e., refrigerated or frozen). While FSIS officials then provided
Paul Kieker                                                                                     2


a different verbal explanation and additional criteria for removing those exceptions from our
report, the additional evidence did not change our conclusion or support FSIS’ position.

Your agency’s response also expressed concerns regarding our exceptions for required labels and
what you term “speculative” conclusion regarding generic labels. We met with your agency’s
officials on numerous occasions to discuss these concerns and we made several edits to this
report that we could support by evidence. In our last meeting, FSIS officials provided additional
evidence and, based on that evidence, we reduced the number of exceptions we used in OIG’s
projections. However, agency officials have not provided sufficient documented evidence to
support the other statements made in your response. Therefore, our report includes the facts and
our conclusions supported with sufficient and appropriate evidence per Generally Accepted
Government Auditing Standards.

We appreciate the courtesies and cooperation extended to us by members of your staff during our
audit fieldwork and subsequent discussions. This report contains publicly available information
and will be posted in its entirety to our website (http://www.usda.gov/oig) in the near future.
Table of Contents

Background and Objectives .........................................................................1
Section 1: FSIS Label Review and Approval Process....................................6
Finding 1: FSIS Needs to Document its Review and Approval Process for
Required Labels..........................................................................................6
        Recommendation 1........................................................................... 10
        Recommendation 2........................................................................... 10
        Recommendation 3........................................................................... 11
Finding 2: FSIS Needs to Improve Establishments’ Compliance with Generic
Label Requirements .................................................................................. 12
        Recommendation 4........................................................................... 15
     Recommendation 5........................................................................... 16
Scope and Methodology............................................................................. 18
Abbreviations ........................................................................................... 20
Exhibit A—FSIS District Offices, States, and Number of Establishments
Visited ...................................................................................................... 21
Exhibit B—Sampling Methodology for FSIS’ Controls Over Meat, Poultry,
and Egg-Product Labels ............................................................................ 22
Agency’s Response .................................................................................... 27
Background and Objectives
Background
The U.S. Department of Agriculture’s (USDA) Food Safety and Inspection Service (FSIS)
enhances public health and well-being by protecting the public from foodborne illness and
ensuring that the Nation’s meat, poultry, and egg products are safe and wholesome. 1 The
Federal Meat Inspection Act,2 the Poultry Products Inspection Act,3 and the Egg Products
Inspection Act 4 authorize FSIS to regulate over 6,000 Federally-inspected establishments
nationwide. FSIS ensures that the Nation’s commercial supply of meat, poultry, and processed
egg products—whether domestic or imported—is correctly labeled and packaged and not
adulterated. 5 This includes FSIS’ approval of any establishment’s marking, labeling, or
packaging of meat, poultry, or egg products to prevent the use of any false or misleading mark,
label, or container. FSIS is responsible for administering and enforcing meat, poultry, and egg
product labeling requirements, and establishments are responsible for ensuring that the labels
used on their products are not false or misleading.

Review Staff

FSIS’ Labeling and Program Delivery Staff (LPDS), located in Washington, D.C., review label
applications and approve product labels to ensure they are truthful and not misleading. In fiscal
year (FY) 2018, LPDS had 18 permanent staff who reviewed and approved approximately
14,000 meat, poultry, and egg product labels. 6 FSIS’ inspection program personnel (IPP) verify
that the labels and related files (i.e., labeling records) located at establishments meet
requirements.

Requirements for Labels on Meat, Poultry, and Egg Products

FSIS requires certain meat and poultry labels to be submitted for review and approval (hereafter,
referred to as “required” labels) while it considers other labels to be generically approved
(hereafter, referred to as “generic” labels) and therefore not required to be submitted for
approval. For egg products, there is no distinction between required and generic approval
because all egg product labels must be submitted to FSIS for approval. FSIS approval for
required labels remains in effect until an establishment makes changes that would cause the label
to be false or misleading.


1
  21 U.S.C. § 601 (meat); 21 U.S.C. § 451 (poultry); 21 U.S.C. § 1031 (egg products); 7 C.F.R. §§ 2.18 and
2.53 (delegations of authority).
2
  21 U.S.C. § 601 et seq.
3
  21 U.S.C. § 451 et seq.
4
  21 U.S.C. § 1031 et seq.
5
  FSIS guidance states that “a product is adulterated if it bears or contains a substance that makes it injurious to
health, or if it has been held, packed or produced under insanitary conditions.” FSIS, Guidance for Determining
Whether a Poultry Slaughter or Processing Operation is Exempt from Inspection Requirements of the Poultry
Products Inspection Act, page 4 (Apr. 2006).
6
  In FY 2018, there were 13,588 required and 878 generic labels submitted to FSIS for approval.


                                                                            AUDIT REPORT 24601-0002-23                 1
An establishment must follow the required label process when it requests to use a label for a
meat or poultry product 7 that is either: (1) under a temporary approval; (2) prepared under a
religious exemption; (3) for export, if it deviates from FSIS labeling requirements; or
(4) contains special statements and claims. LPDS may grant temporary approval for a previously
approved final label that did not match the product in some way for reasons such as a slight
change in an ingredient. LPDS grants temporary approval for such a label so the establishment
can use its remaining pre-printed labels already in stock. LPDS may grant temporary approvals
for a period not to exceed 180 calendar days, as long as the following four conditions are met:

    1) The label would not misrepresent the product;
    2) Use of the label would not present any potential health, safety, or dietary problems to the
       consumer;
    3) Denial of the request would create undue economic hardship; and
    4) An unfair competitive advantage would not result from the granting of the temporary
       approval.

“Special statements and claims” are claims, logos, trademarks, and other symbols on labels that
are generally not defined in FSIS regulations 8 or the Food Standards and Labeling Policy Book
(except for natural and negative claims). 9 Such special statements and claims include:

    •    “natural”;
    •    “gluten free”;
    •    “cage free”;
    •    “farm raised”; and
    •    “made with organic ingredients.”

Federal regulations deem generic labels to be generically approved by FSIS without submission
to LPDS. 10 Generic labels are considered to be generically approved for meat and poultry
products, providing that the label bears all applicable mandatory labeling features, in accordance
with Federal regulations, and is not otherwise false or misleading in any particular. 11 Mandatory
labeling features for both required and generic labels are:

    •    product name;
    •    safe handling statement (e.g., “keep frozen”);
    •    ingredients statement;
    •    address line (includes name and place of business of the manufacturer, packer, or
         distributor);
    •    net weight statement;
    •    inspection legend; 12

7
  All regulated egg product establishments must submit formal applications, along with sketches of their egg product
labels, to LPDS for review and approval.
8
  9 C.F.R. §§ 412.1 and 412.2; 9 C.F.R. pt. 317; 9 C.F.R. pt. 381.
9
  FSIS, Food Standards and Labeling Policy Book (Aug. 2005).
10
   9 C.F.R. § 412.2.
11
   9 C.F.R. § 412.2; 9 C.F.R. pt. 317; 9 C.F.R. pt. 381.
12
   The “inspection legend” is a symbol identifying an establishment as federally inspected.
2       AUDIT REPORT 24601-0002-23
       •   safe handling instructions (for raw products); and
       •   nutrition facts panel (includes calories, serving size, etc.).




                                     Figure 1. Mandatory labeling features.

Some generic labels may also contain certain special statements and claims that are defined in
FSIS regulations 13 or the Food Standards and Labeling Policy Book. 14 Some of these statements
and claims include:

       •   “Made in USA”;
       •   “Made with only white meat chicken”;
       •   “Made with 100% real cheese”;
       •   “BPA Free [packaging]”; and
       •   Kosher claims on products.




13
     9 C.F.R. § 412.2; 9 C.F.R. pt. 317; 9 C.F.R. pt. 381.
14
     FSIS, Food Standards and Labeling Policy Book (Aug. 2005).


                                                                      AUDIT REPORT 24601-0002-23   3
Approval Process

Before an establishment can use a required label, it must submit the label to LPDS for review
and approval. Establishments may use generic labels without prior review and approval by
LPDS, but also have the option of voluntarily submitting them to LPDS for review and
approval. 15

The approval process begins with an establishment submitting a label application package, which
includes a sketch of its label,16 the label application, and documentation to support the statements
and claims made. 17 While establishments may submit their applications through mail, LPDS
recommends that establishments submit their label requests electronically through FSIS’ Label
Submission and Approval System (LSAS). 18 LSAS is a web-based label submission application
that enables an establishment to upload supporting documentation required to demonstrate its
compliance with applicable regulatory requirements for the label that the establishment plans to
use.

Once received, LPDS performs a label review of the establishment’s application and supporting
documentation. LPDS’ review and approval process for food product labels follows several
criteria, such as Federal regulations,19 agency guidance,20 and policy handbooks. 21 Officials also
conduct research and meet frequently as a group to ensure labels are truthful and not misleading.
LPDS verifies that an establishment has displayed each applicable mandatory feature on the label
and ensures compliance regarding any special statements or claims. LPDS will compare the
statements and claims made on the label to the establishment’s supporting documentation
submitted with the application. LPDS may approve of using the label either as-is, with no
changes needed to the label (i.e., “sketch approved”), or approved with modifications (i.e.,
“approved as modified”). 22 LPDS may also return the label application to an establishment and
request additional documentation or require an establishment to make appropriate changes. 23

Once approved, LPDS returns the label application package to the establishment for it to make
any modifications necessary in order to use the label on the associated food product. The
establishments are required to make LPDS modifications before using the label. Ultimately,
establishments are responsible for ensuring that their labels are not false or misleading and for
also maintaining documentation in the form of a labeling record. According to an LPDS official,

15
   All regulated egg product establishments must submit formal applications, along with sketches of their egg
product labels, to LPDS for review and approval.
16
   A “sketch” of a label is “a printer’s proof or equivalent that is sufficiently legible to clearly show all labeling
features, size, and location.” 9 C.F.R. § 412.1(d).
17
   Supporting documentation includes, for example, a signed and dated document describing how the animals are
raised and third-party verifications.
18
   Establishments that submit an application and supporting documentation through regular mail or fax will have
their submissions uploaded by FSIS staff to LSAS and LPDS will use that system to review the submission for
possible approval.
19
   9 C.F.R. pt. 412; 9 C.F.R. pt. 317; 9 C.F.R. pt. 381; 9 C.F.R. pt. 590.
20
   FSIS, Compliance Guideline for Label Approval (Aug. 2017).
21
   FSIS, Food Standards and Labeling Policy Book (Aug. 2005).
22
   LPDS can approve label applications with modifications, such as requiring establishments to add a handling
statement or address line.
23
   LPDS returns label applications, i.e., denies approval, when the establishment fails to follow the regulations.
4      AUDIT REPORT 24601-0002-23
each labeling record must include: a copy of the final label that is in use, the product
formulation (i.e., ingredients), the processing procedure for the product, and any supporting
documentation necessary to show that the label is consistent with the Federal meat and poultry
regulations and policies regarding product labeling. 24

FSIS Verification Activities at Establishments

At each establishment, IPP verify regulatory compliance of final labels by reviewing labels for
the presence of all applicable mandatory features and any other modifications requested by
LPDS. IPP perform this verification activity—otherwise known as the general labeling task—by
reviewing the establishment’s labeling records. The general labeling task is an internal control
FSIS put in place to verify establishments’ compliance with FSIS’ final label requirements. 25

IPP are located at regulated establishments and are responsible for performing the general
labeling task when scheduled in the agency’s Public Health Information System (PHIS). 26 When
a general labeling task is scheduled at an establishment, IPP will randomly select one or more
labels—either required or generic—to verify compliance with applicable label requirements. In
addition, IPP verify whether the establishment is maintaining an adequate labeling record for the
selected meat or poultry products. If IPP find that an establishment’s label is not in compliance,
they will document this noncompliance in PHIS via a noncompliance record. After FSIS
prepares a noncompliance record, an establishment needs to bring the label into compliance. If
the establishment wants to continue using the noncompliant label, it has the option to submit a
new application to LPDS and request a temporary approval.

Objectives
Our objective was to evaluate FSIS controls over meat, poultry, and egg product labels to ensure
establishment claims that FSIS approves are accurate and supported.




24
   FSIS, Compliance Guideline for Label Approval, pp. 26-27 (Aug. 2017).
25
   GAO defines internal control as a process effected by an entity’s oversight body, management, and other
personnel that provides reasonable assurance that the objectives of an entity will be achieved. In relation to this
report, we define the general labeling task as one of those controls because FSIS verification activity is a process
performed by the IPP to ensure that establishment/industry personnel follow labeling requirements.
26
   PHIS is a web-based application designed to automate paper-based business processes into one comprehensive,
fully automated data-driven inspection system.


                                                                           AUDIT REPORT 24601-0002-23                  5
Section 1: FSIS Label Review and Approval Process
Finding 1: FSIS Needs to Document its Review and Approval Process for
Required Labels
While FSIS’ controls over its approval of meat, poultry, and egg product labels were generally
effective, we determined that 9 (15.00 percent) of our statistical sample of 60 FSIS-approved,
required label application packages were either incomplete or inaccurate. This occurred because
FSIS relied on LPDS to review label application packages without having a documented review
process or checklist to follow that ensured all criteria were verified. LPDS performed some
quality control reviews for label approval determinations made by new employees, but it did not
routinely review determinations made by experienced staff. As a result, required labels for meat,
poultry, and egg product may reflect inaccurate statements and claims made by establishments.
Based on our sample results, we estimate that approximately 2,038 (15.00 percent) of required
labels approved by LPDS in FY 2018 may have one or more exceptions. 27, 28

Required labels must be submitted by an establishment and approved by LPDS. 29
Establishments are required to submit a copy of the label, which can be a sketch of the label,
along with an application with documentation to support any statements and claims made on the
label. 30

To conduct our audit work, we statistically selected 60 required labels that LPDS previously
reviewed and approved for establishments to use in commerce. We reviewed each label,
application, and other supporting documentation to confirm LPDS’ decision to approve the label.
We found that 9 of these 60 labels’ applications or other supporting documents were either
incomplete, inaccurate, or did not support the statements or claims made on the product label.

Incomplete or Inaccurate Label Application Packages

We identified a total of 9 of the 60 approved, required labels that had applications that were
either incomplete or inaccurate. The following sections describe the types of incompleteness or
inaccuracies that we noted in our review.

        Incomplete Processing Procedures

        We found that six labels’ applications did not contain complete processing procedures,
        which are necessary for LPDS to determine whether an establishment used the correct
        handling statement. For example, if the processing procedures state that the product is
        frozen for shipping, then the product should be labeled, “keep frozen.” Federal

27
   LPDS reviewed and approved 13,588 required labels in FY 2018. We are 95 percent confident that the true value
of this estimate is between 967 and 3,607 required labels (7.12 percent and 26.55 percent, respectively).
28
   We defined exceptions as LPDS incorrect label approvals based on the establishments’ documentation presented
in a label application package.
29
   9 C.F.R. § 412.1(a).
30
   Examples of supporting documentation include a signed and dated document describing how the animals are
raised or third-party verifications.
6     AUDIT REPORT 24601-0002-23
        regulations state that packaged food products requiring special handling to maintain their
        wholesome condition shall prominently display a statement on the product’s principal
        display panel,31 such as ‘‘keep refrigerated’’ or ‘‘keep frozen.” 32 Our review of the
        establishments’ label applications found that they did not submit complete processing
        procedures for these six labels. Since the establishment’s label application did not
        contain a document or explanation on which processing procedures was used
        (refrigerated or frozen), we could not determine if the correct handling statement was
        displayed on the label or if the wholesome condition of the product could be affected.

        LPDS officials initially agreed with these six exceptions and stated that the applications’
        “processing procedures should include the condition the product leaves the establishment
        to verify the handling statement is correct.” During our review of the sample labels, we
        noted that 43 of the 60 required labels included complete processing procedures with the
        condition of the product leaving the establishment as required. However, subsequent to
        the issuance of the draft report, LPDS officials stated it does not matter which statement
        is used on the label as long as one of these statements is present. LPDS officials stated
        that it is the establishment’s responsibility to determine which handling statement is
        correct. We disagree that either statement can be used since only one would be an
        accurate statement.

        Missing Product Formula

        We determined one label’s application was incomplete because it did not contain the
        product formula, which describes the name and amount of ingredients used. The label
        was being used on a pork product that listed six ingredients, but we were unable to
        confirm that ingredient list because the product formula was missing. Without the
        product formula, LPDS cannot verify if any additional ingredients, including allergens,
        are in the product.

        Inaccurate Order of Ingredients

        We found one label’s application that did not list the ingredients in the order of
        predominance. The label was for a chicken product which listed canola oil as the
        16th ingredient on the label, but according to the product formula, it should have been
        listed as the 6th ingredient. Without a correct listing of ingredients, such labels could
        mislead consumers regarding the relative amounts of certain ingredients in food products.




31
   The principal display panel is the part of the label most likely to be displayed when offered for sale under
customary conditions. FSIS, A Guide to Federal Food Labeling Requirements for Meat, Poultry, and Egg Products,
page 29 (Aug. 2007).
32
   9 C.F.R. § 381.125(a); 9 C.F.R. § 317.2(k).


                                                                      AUDIT REPORT 24601-0002-23             7
        Ineligible Temporary Approval

        We found one label application package that received temporary approval from LPDS
        even though the establishment did not address all four of the required criteria for that type
        of approval. 33 Specifically, the establishment’s label application package did not provide
        support to show that the denial of the request would create an undue economic hardship
        or an unfair competitive advantage by granting of the temporary approval.

        LPDS officials stated that it is not necessary for the establishment to clearly show that all
        four conditions are met. LPDS officials stated that its staff must make a judgment call to
        determine whether to grant temporary approval for a label that no longer exactly matches
        the product. However, the Federal regulation states, “Temporary approvals may be
        granted...under the following conditions: (i) …label would not misrepresent the product;
        (ii) …label would not present any potential health, safety, or dietary problems to the
        consumer; (iii) Denial of the request would create undue economic hardship; and (iv) An
        unfair competitive advantage would not result from the granting of the temporary
        approval.” 34 In addition, FSIS’ instructions on their website states, “the four
        conditions…have to be met prior to receiving a temporary approval.” Establishments
        are to “provide details of all [four] conditions on the application.” 35 Without receiving
        documentary support from the establishment or documenting LPDS’ reasoning for
        granting the temporary approval, LPDS runs the risk of allowing this establishment to
        have an unfair competitive advantage over other establishments.

Unsupported Label Statements and Claims

We identified a total of eight approved, required label application packages that did not include
supporting documentation for the statements or claims made on the product label. Five of these
eight labels included claims like “5g of protein per slice” or “0g total carbs and 0g trans fats”—
nutrient content claims—and FSIS officials stated they used the nutrition facts panel of the label
itself to support these claims. However, Federal regulations state that if information from the
nutrition label [i.e., nutrition facts panel] is declared elsewhere on the label it is a nutrient content
claim. 36 FSIS guidance states that nutrition factual statements, like “0 grams of carbohydrates,”
requires LPDS approval and support in the labeling record. 37 We found no information in the
label application package to support LPDS’ decision to approve these nutrition factual
statements. For the three remaining labels with claims like “96 percent fat free” or “no synthetic
colors,” we found no support in the label application package and no explanation for why FSIS
approved these labels. We concluded that these eight label applications needed either additional
supporting documentation or an explanation on the reasons why LPDS approved these labels.


33
   Temporary approval for the use of a final label that may be deemed deficient in some particular [way] may be
granted by the FSIS LPDS. Temporary approvals may be granted for a period not to exceed 180 calendar days.
34
   9 C.F.R. § 412.1(f)(1).
35
   FSIS, Information Required for Requesting a Temporary Approval,
https://www.fsis.usda.gov/wps/portal/fsis/topics/regulatory-compliance/labeling/labeling-procedures/requesting-
temporary-approval/requesting-temporary-approval (last modified Mar. 11, 2019).
36
   9 C.F.R. § 317.313(c); 9 C.F.R. § 381.413 (c).
37
   FSIS, Compliance Guideline for Label Approval (Aug. 2017).
8     AUDIT REPORT 24601-0002-23
We recognize that LPDS uses the nutrition facts panel to support nutrient content claims, i.e. on
front of the package, for product labels. However, an LPDS staff stated that LPDS’ review of
the nutrition facts panel does not include verifying the accuracy of the data declared on the label
with submitted supporting documentation from establishments. OIG maintains that without
verifying the accuracy of the nutrition facts panel prior to label approval, nutrient content claims
declared elsewhere on the product label may not be accurate. Subsequent to the issuance of the
draft report, FSIS officials stated that, according to Federal regulations, the label of a product
may contain a statement of the amount of a nutrient if the statement does not in any way
implicitly characterize the level of the nutrient, and the statement is not false or misleading. 38
Therefore, we concluded that this issue should still be reported for full transparency but we are
not including these eight exceptions in our projections.

In total, we concluded that nine labels needed additional establishment documentation or LPDS
reviewer notes to document the reasons for approving a food label and related claims. To
determine why these labels with incomplete supporting documentation were approved, we
questioned the LPDS reviewers. Some of the LPDS reviewers stated it was an oversight on their
part for some labels. According to LPDS officials, experienced staff conduct frequent meetings
to discuss their review of label application packages. Any questions or comments that arise from
the label reviews may be brought up at that time. However, we found that these meetings and
related decisions on labels were not documented to establish a list of best practices or a standard.

In addition to our sample testing, we observed LPDS staff review and approve meat, poultry, and
egg product labels and found that the staff used criteria from multiple websites, regulations, and
policy books. When we requested a list of criteria for our sample testing, LPDS provided a list
of website links that opened other multi-layered links to LPDS policies, Federal regulations, and
directives. We found that LPDS did not have a centralized list or location for its staff to check to
ensure they covered all label requirements before approval. We also found that LPDS did not
have a written process for new or experienced staff to follow to help verify that information
presented on a label met applicable criteria.

We discussed all of the issues we found with the required labels with LPDS. The officials stated
that, in lieu of a documented process, LPDS relied upon their experienced staff to review and
independently approve label application packages. An LPDS official explained that developing
written procedures that would address every potential label approval situation would not be
feasible. An FSIS official stated that the agency has been working to ensure that labels are being
evaluated and approved consistently. In addition, while FSIS staff performed a second-level
review of label application packages approved by newer staff, they did not routinely review
experienced staff’s label approval determinations.

FSIS’ Management Control Program directive states that policies and procedures, such as
instructions, ensure that program objectives are achieved. 39 Therefore, we recommend that
LPDS document its review and approval process for all label application packages in order for
LPDS to ensure that labels meet Federal regulations and agency requirements. In addition,
LPDS should document its review and approval process to ensure that establishments provide

38
     9 CFR § 317.313(i)(3) and 9 CFR § 381.413(i)(3).
39
     USDA FSIS Directive 1090.1, Rev. 3, Management Control Program, p. 16 (Jan. 6, 2011).


                                                                        AUDIT REPORT 24601-0002-23   9
adequate support for special statements and claims. LPDS’ reliance on establishments’
generated nutrition panels for support for nutrient claims reduces the agency’s assurance that
statements and claims made on labels are not false and misleading. Finally, LPDS should
develop and implement a process to review a sample of approved labels, on a periodic basis, to
ensure its staff adhere to the label approval process. By implementing these corrective actions,
LPDS could more effectively ensure compliance with its label approval process.


Recommendation 1

For the nine labels with insufficient supporting documentation, LPDS should review these labels
and update LSAS to annotate the agency’s position for approving the label application.

Agency Response
In its May 15, 2020, response, agency officials stated that:

       FSIS has determined that 6 of the 9 labels that OIG cited as missing information on the
       application form are acceptable. The labels bear a handling statement as required by 9
       CFR 317.2(k) and 9 CFR 381.125 for compliance with FSIS regulations, so the products
       are not misbranded. The one label approved as temporary is no longer in use, therefore,
       no notification or correction in LSAS is required. LPDS will make the necessary
       corrections for the remaining 2 labels and update the applications in LSAS.

The estimated completion date is September 30, 2020.

OIG Positon
We accept management decision on this recommendation.


Recommendation 2

LPDS should develop internal standard operating procedures to ensure compliance with
regulatory labeling requirements through the label approval process.

Agency Response
In its May 15, 2020, response, agency officials stated that:

       LPDS will develop internal standard operating procedures (SOPs) to ensure staff verify
       that labels comply with regulations throughout the label approval process.

The estimated completion date is January 31, 2021.


10     AUDIT REPORT 24601-0002-23
OIG Positon
We accept management decision on this recommendation.


Recommendation 3

LPDS should develop and implement a process or procedure to review a sample of approved
labels on a periodic basis to ensure LPDS staff adhere to the label approval process.

Agency Response
In its May 15, 2020, response, agency officials stated that:

       LPDS will include all staff as part of the LSAS Quality Control (QC) procedures training
       currently used for new LPDS staff members. Labels will be randomly selected and
       routed to LPDS management for a second review for accuracy and compliance with FSIS
       regulations and policies.

The estimated completion date is January 31, 2021.

OIG Positon
We accept management decision on this recommendation.




                                                               AUDIT REPORT 24601-0002-23   11
Finding 2: FSIS Needs to Improve Establishments’ Compliance with Generic
Label Requirements
We reviewed a statistical sample of 60 FSIS-approved, generic label application packages and
found that 11 labels were either not supported or an applicable mandatory feature was missing or
inaccurate. 40 In FY 2018, LPDS reviewed and approved 878 generic labels but required
modifications to 657 (74 percent) to ensure these labels met requirements. Further, we found
that three establishments we visited did not make the required modifications in their final
labeling records. This occurred because FSIS did not have an adequate process to determine
establishments’ compliance with generic labeling requirements. As a result, there is reduced
assurance that establishments’ generic labels used in commerce meet requirements. Based on
our sample results for the 11 labels, we estimated that 161 of the 878 generic labels
(18.34 percent) have one or more exceptions. 41, 42

Federal regulations require generic labels to contain all applicable mandatory label features, such
as an inspection legend (a symbol identifying an establishment as Federally-inspected),
ingredients statement, safe handling statement, product name, address line, safe handling
instructions, net weight, and nutrition facts. 43 FSIS allows establishments to use these labels
without submission for approval, as long as the labels contain all applicable mandatory features
and do not contain any special statements and claims. 44

While Federal regulations do not require establishments to submit generic labels for review and
approval, establishments have the option to voluntarily submit any generic label for LPDS
review and approval. 45 In FY 2018, LPDS approved 878 generic labels submitted for review.
We selected a statistical sample of 60 of those 878 approved generic labels and reviewed the
establishments’ label application packages. Of the 60 application packages we reviewed, we
determined that LPDS approved 11 generic labels (18.34 percent) that were either not supported,
missing a mandatory feature, or inaccurate. 46 Of these 11 generic labels:

     •   9 label application packages had incomplete processing procedures, which are necessary
         for determining each label’s “handling statement,” a requirement that helps to maintain




40
   Of the 11 labels, 1 had both missing and inaccurate information.
41
   We are 95 percent confident that the true value of this estimate is between 85 and 264 generic labels (9.68 percent
and 30.07 percent, respectively).
42
   We defined “exceptions” as LPDS incorrect label approvals based on the establishments’ documentation
presented in a label application package.
43
   9 C.F.R. § 412.2.
44
   Ibid.
45
   Ibid.
46
   LPDS approved six generic labels “as is,” without modifications, and five generic labels were “approved as
modified.”
12       AUDIT REPORT 24601-0002-23
         the product’s wholesome condition. 47 In addition, one of the nine labels did not list the
         zip code of the establishment, as required by regulations. 48

     •   1 label did not have the product ingredients in the correct order, as required by
         regulations; 49 and

     •   1 label did not list the correct serving size, as required by regulations. 50

LPDS officials agreed with our conclusions for these 11 label application packages. Some LPDS
reviewers stated that it was a lack of oversight on their part and they missed verifying the support
for those items during their review.

Establishments’ Compliance Regarding Generic Labels

While LPDS and IPP are responsible for administration and enforcement, such as verifying that
labels are meeting applicable requirements, establishments are ultimately responsible for
ensuring their labels are not false or misleading. However, our review found that establishments
did not always ensure their generic labels contained the applicable mandatory features and IPP
did not always enforce those requirements.

We analyzed data provided by LPDS from LSAS, which contained the total number of generic
label applications that LPDS approved in FY 2018. In our review, LPDS required modifications
to 657 of the 878 (74 percent) approved, generic label applications. As a result of LPDS
modifications, establishments needed to make corrections to their labels in order for LPDS to
consider the labels to be compliant with requirements. The LSAS data did not include reasons
for these modifications; however, we were able to review the 60 label application packages in
our sample and found that 43 labels (71.7 percent) required modifications to one or more of the
eight applicable mandatory features (see Figure 2 for details). 51




47
   Nine establishments did not completely list products’ processing procedures in their label application packages,
which state the condition in which the product must be kept, e.g., “keep refrigerated” or “keep frozen,” once the
product leaves the establishment. FSIS Form 7234-1, Application for Approval of Labels, Marking or Device
(Nov. 16, 2011).
48
   9 C.F.R. § 381.122.
49
   9 C.F.R. § 317.2(f)(1).
50
   9 C.F.R. § 317.309(b)(1).
51
   Our review determined that 25 of the 43 generic labels had multiple errors on the same label.


                                                                        AUDIT REPORT 24601-0002-23               13
                          Figure 2. Number of Modifications to Mandatory Features

                                              Safe         Establishment’s
                                            Handling       Address Line, 2
                                          Instructions,
                                                4
                           Net Weight
                           Statement, 5                                  Product
                                                                        Name, 22
                          Inspection
                          Legend, 9




                                Handling
                              Statement, 13
                                                                   Ingredients
                                                                  Statement, 20




When we discussed the issue with LPDS officials, they acknowledged that 657 labels indeed
required modifications but explained the large percentage of modifications could be due to minor
changes rather than issues of noncompliance. However, our review determined that the
requested modifications did cover noncompliance issues related to seven of the eight applicable
mandatory features. We learned that LPDS does not track the number of generic labels used in
commerce, so we were unable to determine the scale of the issue. However, based on the large
number (657) of modifications in our sample,52 we concluded that there could be generic labels
in commerce that were not submitted for review that do not comply with FSIS requirements.

Out of the 10 establishments we visited during our audit, 3 establishments had a total of
4 generic labels to which LPDS required modifications. During our visits, we evaluated
whether: (1) establishments made modifications to their generic labels, as required by LPDS;
and (2) IPP verified and enforced compliance regarding generic labels at the establishments. Of
the establishments we visited, we found that none made the LPDS-required modifications to the
generic labels in its labeling records.

When we discussed this issue with the three establishments’ personnel, they provided various
reasons for why they did not make the label modifications required by LPDS. For example, we
found that one establishment had submitted its label application twice for the same product.
After receiving differing approval responses, it relied on the application that LPDS approved
without modifications. 53 We reviewed both of these applications and confirmed that each
application was approved by a different LPDS reviewer, who evaluated the identical label and


52
   The large number of exceptions in our sample refers to the number of labels that were approved with
modifications by LPDS (required modifications).
53
   The establishment submitted its application a second time after not receiving what it perceived to be a timely
response. The establishment received responses for both applications within 6 days of one another. Its first label
application was approved as modified while the second label application was approved without modifications.
14      AUDIT REPORT 24601-0002-23
application but made different approval decisions. At the second establishment, we determined
that the person responsible for labels was new to the position, had no knowledge of the labeling
process, and was not aware of the modifications to either of the two labels due to being on the
job for only 3 weeks. At the third establishment, personnel stated they did not understand why
LPDS made certain modifications to the label and decided not to make the changes, as they did
not agree. We also interviewed IPP at two establishments, and they stated they did not realize
LPDS’ requested modifications were not made because the products were not yet in production.
Therefore, those labels were not yet subject to selection for a general labeling task review. After
our visit to the second establishment, IPP issued a noncompliance record to the establishment as
a result of it not making the requested label modifications. FSIS subsequently closed the
noncompliance record.

Also during our establishment visits, we observed IPP’s performance of a general labeling task.
We determined that IPP did not specifically choose generic labels to review when performing a
labeling task verification. 54 Federal regulations require IPP to select samples of generic labels
from the labeling records to determine compliance with label requirements. 55 However, agency
requirements do not incorporate these Federal regulations, which state that IPP are to randomly
select one or more labels, required or generic, for verification from products in production. 56

We discussed these issues with LPDS officials, who stated that LPDS needs to conduct more
outreach to establishments to ensure they are aware of generic label requirements and added that
LPDS has already started this process. Since establishments are not required to submit generic
labels for approval, it is essential that establishments understand and comply with labeling
requirements. In addition, when new regulations are approved,57 LPDS officials stated that they
will conduct more outreach to explain the updates and changes from the previous regulations to
ensure establishments are knowledgeable of agency requirements. LPDS officials stated that
they are committed to improving customer service and developing and delivering outreach
focused on enhancing the communication of labeling information. LPDS is also committed to
collaborating with FSIS’ Office of Field Operations to ensure IPP have the tools they need to
verify and enforce compliance with FSIS’ labeling requirements.

Consumers expect product labels to be accurate when they choose products to purchase. If FSIS
is not verifying a sample of generic labels, the agency runs the risk of inaccurate or unsupported
product labels being in commerce. Therefore, we determined that LPDS needs to continue its
efforts in performing outreach to establishments and to implement processes to verify generic
labels are accurate and complete.

Recommendation 4

LPDS should enhance its outreach efforts to establishments to ensure they are aware of all
applicable mandatory labeling features for generic labels.

54
   Two establishments produced egg products and are required to submit all label applications to LPDS.
55
   9 C.F.R. § 412.2(a).
56
   USDA FSIS Directive 7221.1, Rev. 1, Prior Labeling Approval, p. 3 (Jan. 6, 2014).
57
   In December 2019, FSIS published two new labeling guidelines that are out for public comment that ends
February 25, 2020.


                                                                     AUDIT REPORT 24601-0002-23             15
Agency Response
In its May 15, 2020, response, agency officials stated that:

       LPDS has already begun its outreach to establishments through developing and revising
       labeling guidance on the FSIS website. LPDS will also schedule generic labeling
       webinars for its stakeholders that will include training on the mandatory labeling features.
       Additionally, LPDS is planning to present webinars on recently published guidance to the
       FSIS Website. FSIS continues to send LPDS staff to meetings for various stakeholders
       (e.g., consulting firms and trade associations) presenting information on various labeling
       subject matter. These presentations include general labeling requirements including all
       mandatory features. LPDS will also continue to include entries in the Agency’s
       Constituent Update (which provides weekly FSIS updates on the FSIS web page) on a
       biweekly basis to help industry understand and comply with FSIS labeling requirements.
       These entries provide information on various topics to help establishments comply with
       labeling requirements, such as information on completing the label application form,
       information on the label submission requirements for using special statements and claims,
       and information on label records that must be maintained by establishments.

The estimated completion date is May 31, 2021.

OIG Positon
We accept management decision on this recommendation.


Recommendation 5

Ensure that FSIS Directive 7221.1, Rev. 1 reflects the requirement in 9 C.F.R. § 412.2 (a)(2) that
IPP verify that some generically approved labels in the establishment’s labeling records contain
the mandatory eight features. When IPP find noncompliance, they should document
noncompliance and require establishments take appropriate corrective actions.

Agency Response
In its May 15, 2020, response, agency officials stated that:

       FSIS will revise FSIS Directive 7221.1 Rev. 1 to ensure IPP label verification activities
       include generically approved labels. IPP will document noncompliance and require
       establishments to change labels that are not in compliance with FSIS’s labeling
       regulations and policies.

The estimated completion date is May 31, 2021.



16     AUDIT REPORT 24601-0002-23
OIG Positon
We accept management decision on this recommendation.




                                                        AUDIT REPORT 24601-0002-23   17
Scope and Methodology

To accomplish our objective, we evaluated FSIS’ controls over the review and approval of meat,
poultry, and egg product labels for FY 2018. We performed our work at the FSIS national office
and interviewed LPDS officials located in Washington, D.C. We also interviewed FSIS district
officials from Des Moines, Iowa (District 25), and Philadelphia, Pennsylvania (District 60). We
interviewed frontline supervisors at 10 non-statistically selected establishments in 4 States. 58 We
performed audit fieldwork from June 2018 to October 2019.

In FY 2018, LPDS reviewed and approved 13,588 required and 878 generic label applications.
We selected a statistical sample of 100 required and 87 generic label applications with a
sequential, or stop-or-go, approach. 59 We elected to implement the stop-or-go approach and
reviewed the first 60 labels in each sample. See Exhibit B for our sampling methodology.

We non-statistically selected 10 establishments within the Des Moines, Iowa, and Philadelphia,
Pennsylvania, district offices. We selected these two districts because they contained:
(1) various establishment sizes (large, small, and very small); (2) meat, poultry, and egg product
establishments; and (3) labels that LPDS approved as required, generic, and “as-modified.” At
the 10 establishments, we verified an additional 36 labels that were not in our statistical sample
to assess establishments’ compliance with label requirements.

To accomplish our objectives, we:

     •   Reviewed applicable laws, regulations, and agency policies, procedures, and guidance
         related to the audit objective to gain an understanding of the written label requirements
         for FSIS and official establishments’ personnel;

     •   Interviewed FSIS national officials who review and approve label applications to gain an
         understanding of the general background, controls, and label review and approval
         process;

     •   Reviewed each label, application, and supporting documentation obtained from FSIS for
         the 120 labels—60 required and 60 generic—in our statistical sample;

     •   Evaluated the controls over the label processing procedures based on FSIS requirements
         and documented our results;

     •   Interviewed FSIS district officials to determine the controls over administration and
         enforcement of labeling activities at the establishments;




58
  See Exhibit A.
59
  After inspecting the first 60 samples for each of the 2 audit universes (required and generic), we observed that the
sample objectives regarding precision could still be met while stopping the sampling early.
18       AUDIT REPORT 24601-0002-23
   •   Interviewed IPP at the 10 establishments to gain an understanding of their knowledge,
       roles, and responsibilities regarding FSIS label application submission requirements and
       label verification activities; and

   •   Reviewed and evaluated an additional 36 labels at the 10 establishments to ensure final
       label records complied with label requirements.

We used data from two FSIS information systems—LSAS and PHIS. FSIS supplied the
universe data from LSAS, which contained both required and generic label applications and
supporting documentation. We performed data validation procedures to verify the completeness
of the universe data received before selecting our samples. We also used establishment profile
data in PHIS to select the district offices and establishments. We compared the label application
packages obtained from LSAS with the label records maintained at the establishments during our
site visits. During the course of our audit, we did not solely rely on information in any agency
information system, and we make no representation regarding the adequacy of any agency
computer system, or the information generated from them because evaluating the effectiveness
of information systems or information technology controls was not one of the engagement
objectives.

We provided the universe data from LSAS to OIG’s Office of Data Sciences (ODS) to develop
the sampling methodology and to calculate the projections based on our exceptions. Since we
relied on the work by ODS specialists, we obtained documentation to ensure these specialists
were qualified professionally, competent in the work we relied upon, and met independence
standards.

We conducted this performance audit in accordance with Generally Accepted Government
Auditing Standards. Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions
based on our objectives. We believe the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.




                                                            AUDIT REPORT 24601-0002-23        19
Abbreviations
C.F.R. ............Code of Federal Regulations
CI ..................confidence interval
FSIS ...............Food Safety and Inspection Service
FY .................fiscal year
IPP ................inspection program personnel
IT...................information technology
LPDS .............Labeling and Program Delivery Staff
LSAS .............Label Submission and Approval System
ODS...............Office of Data Sciences
OIG................Office of Inspector General
PHIS ..............Public Health Information System
U.S.C. ............United States Code
USDA ............U.S. Department of Agriculture




20     AUDIT REPORT 24601-0002-23
Exhibit A—FSIS District Offices, States, and Number
of Establishments Visited
The table below identifies the FSIS districts we visited and includes the district name and
location, States covered by the district, and the number of States and establishments visited
during the audit.

                                                                                   Number of
   District Number                                                  States       Establishments
    and Location                  States Covered                    Visited          Visited
                         Connecticut, Massachusetts, Maine,        New York              3
 District 60             New Hampshire, New York,
 (Philadelphia, PA)      Pennsylvania, Rhode Island, and
                         Vermont                                  Pennsylvania           2
                                                                   Minnesota             4
 District 25             Iowa, Minnesota, North Dakota,
 (Des Moines, IA)        South Dakota, and Wisconsin
                                                                   Wisconsin             1
 Total                                                                  4               10




                                                             AUDIT REPORT 24601-0002-23         21
Exhibit B—Sampling Methodology for FSIS’ Controls Over Meat,
Poultry, and Egg-Product Labels
Objective
This statistical sample was designed by ODS to support OIG Audit 24601-0002-23. FSIS
requires establishments to submit product label information for some product types. After an
establishment submits product labeling information, FSIS reviews the information to ensure that
label requirements are met. The objective of this audit was to evaluate FSIS’ controls over meat,
poultry, and egg product labels to ensure establishments’ claims that FSIS approves are accurate
and supported.

To help achieve this objective, we developed representative, random statistical samples of
product labels for review.

Audit Universe
The universe contains information related to product labels that were sent to FSIS as part of
required or generic reviews. The audit team focused specifically on meat, poultry, and egg
product labels. In order to ensure that FSIS was conducting complete and accurate reviews of
product label information, we split the universe into two separate groups: required and generic
product labels. These two groups are mutually exclusive and give the audit team the opportunity
to observe whether or not required reviews are being performed and if generic reviews are being
performed with the same degree of accuracy and completeness.

Sample Design
We considered various sample designs and ultimately chose to audit 100 required labels and
87 generic labels, each randomly selected without replacement from those in the audit
universes. 60

Required Labels
The sample size was determined based on the following factors:

       •   Audit universe: 13,588 required labels.
       •   Confidence level: We are reporting two-tailed, 95 percent confidence intervals (CI).
       •   Precision: We wanted to report CI no wider than 20 percent (i.e., average precision of
           10 percent, and ±10 percent if symmetrical around the point estimate) and consistent with
           sequential (or stop-or-go) sampling, per paragraph 3.64 and Appendix B of the American
           Institute of Certified Public Accountants’ Audit Guide; Audit Sampling (May 1, 2017).




60
     Microsoft Excel was used to select each simple random sample within the universe and report the selection order.
22         AUDIT REPORT 24601-0002-23
     •   Expected exception rate: We did not have reliable historical information to help estimate
         this rate, so we used an exception rate of 50 percent since this rate provided the most
         conservative sample size.

Generic Labels
The sample size was determined based on the following factors:

     •   Audit universe: 878 generic labels.
     •   Confidence level: We are reporting two-tailed, 95 percent confidence intervals (CI).
     •   Precision: We wanted to report CI no wider than 20 percent (i.e., average precision of
         10 percent, and ±10 percent if symmetrical around the point estimate) and consistent with
         sequential (or stop-or-go) sampling, per paragraph 3.64 and Appendix B of American
         Institute of Certified Public Accountants’ Audit Guide; Audit Sampling (May 1, 2017).
     •   Expected exception rate: We did not have reliable historical information to help estimate
         this rate, so we used an exception rate of 50 percent since this rate provided the most
         conservative sample size.

Results
After inspecting the first 60 samples for each of the two audit universes—required and generic—
auditors observed that the sample objectives regarding precision could still be met while
stopping the sampling early. The results in the tables provided are projected to the required and
generic audit universes of 13,588 and 878 labels, respectively. We used the Clopper-Pearson 61
approach to compute the exact CI for the hypergeometric distribution (sampling without
replacement). In the case where only one finding was identified in the sample of 60, this CI
approach yielded a negative lower bound, so we replaced these lower bounds with the actual
number of findings from the sample, which was one.




61
  Clopper, C.J. & Pearson, E.S., The Use of Confidence or Fiducial Limits Illustrated in the Case of the Binomial,
Biometrika, Vol. 26, No. 4, pp. 404-413, (Dec. 1934).


                                                                       AUDIT REPORT 24601-0002-23              23
                                                Statistical Estimates

                                                    Required Labels
                 N=     13588                   number of required labels in our universe
                  n=    60                      number of required labels in our sample
                             Number of            95% Lower                                 95% Upper
      Criteria                                                           Estimate                                Precision
                             Exceptions             Bound                                     Bound

Handling Statement                6                            512              1,359                2,784
                                                                                                                   8.36%
  as a %                                                   3.77%              10.00%                 20.49%
Interpretation: Based on our sample results, we estimate that 1,359 labels (10.00 percent) in our audit universe have an
exception in this criteria tested. We are 95 percent confident that the true value of this estimate is between 512
(3.77 percent) and 2,784 labels (20.49 percent).

Ingredients
                                  2                             55                453                1,565         5.56%
Statement
  as a %                                                   0.40%                3.33%                11.52%
Interpretation: Based on our sample results, we estimate that 453 labels (3.33 percent) in our audit universe have an
exception in this criteria tested. We are 95 percent confident that the true value of this estimate is between 55 (0.40 percent)
and 1,565 labels (11.52 percent).
Temporary
                                  1                              5                227                1,213         4.45%
Approval
  as a %                                                   0.04%                1.67%                 8.93%
Interpretation: Based on our sample results, we estimate that 227 labels (1.67 percent) in our audit universe have an
exception in this criteria tested. We are 95 percent confident that the true value of this estimate is between 5 (0.04 percent)
and 1,213 labels (8.93 percent).

Overall projection                9                            967              2,038                3,607
                                                                                                                   9.71%
  as a %                                                  7.12%              15.00%               26.55%
Interpretation: Based on our sample results, we estimate that 2,038 labels (15.00 percent) in our audit universe have one or
more exceptions. We are 95 percent confident that the true value of this estimate is between 967 (7.12 percent) and 3,607
labels (26.55 percent).




   24         AUDIT REPORT 24601-0002-23
                                                    Generic Labels 62
                   N=   878                     number of generic labels in our universe
                   n=   60                      number of generic labels in our sample
                              Number of           95% Lower                                95% Upper
        Criteria                                                         Estimate                                Precision
                              Exceptions            Bound                                    Bound

Handling Statement                9                             64                132                  230
                                                                                                                   9.45%
  as a %                                                   7.29%              15.03%                 26.20%
Interpretation: Based on our sample results, we estimate that 132 labels (15.03 percent) in our audit universe have an
exception in this criteria tested. We are 95 percent confident that the true value of this estimate is between 64 (7.29 percent)
and 230 labels (26.20 percent).

Address Line                      1                              1                  15                  77
                                                                                                                   4.33%
  as a %                                                   0.11%                1.71%                 8.77%
Interpretation: Based on our sample results, we estimate that 15 labels (1.71 percent) in our audit universe have an
exception in this criteria tested. We are 95 percent confident that the true value of this estimate is between 1 (0.11 percent)
and 77 labels (8.77 percent).
Nutrition Facts
                                  1                              1                  15                  77         4.33%
Panel
  as a %                                                   0.11%                1.71%                 8.77%
Interpretation: Based on our sample results, we estimate that 15 labels (1.71 percent) in our audit universe have an
exception in this criteria tested. We are 95 percent confident that the true value of this estimate is between 1 (0.11 percent)
and 77 labels (8.77 percent).
Ingredients
                                  1                              1                  15                  77         4.33%
Statement
  as a %                                                   0.11%                1.71%                 8.77%
Interpretation: Based on our sample results, we estimate that 15 labels (1.71 percent) in our audit universe have an
exception in this criteria tested. We are 95 percent confident that the true value of this estimate is between 1 (0.11 percent)
and 77 labels (8.77 percent).

Overall projection               11                             85                161                  264
                                                                                                                  10.19%
  as a %                                                  9.68%              18.34%              30.07%
Interpretation: Based on our sample results, we estimate that 161 labels (18.34 percent) in our audit universe have one or
more exceptions. We are 95 percent confident that the true value of this estimate is between 85 (9.68 percent) and
264 labels (30.07 percent).




   62
     With respect to our overall projection regarding generic labels, one label had two exceptions identified. Thus,
   there are a total of 11 labels with exceptions that were identified.

                                                                             AUDIT REPORT 24601-0002-23                25
26   AUDIT REPORT 24601-0002-23
Agency’s Response




FOOD SAFETY AND INSPECTION SERVICE
    RESPONSE TO AUDIT REPORT




                     AUDIT REPORT 24601-0002-23   27
Food Safety and      TO:             Gil H. Harden
Inspection Service
                                     Assistant Inspector General
1400 Independence                    Office of Inspector General
Avenue, SW,
Washington, D.C.     FROM:           Paul Kiecker      / s / May 15, 2020
20250
                                     Administrator
                                     Food Safety and Inspection Service

                     SUBJECT:        OIG Official Draft Report, Controls Over Meat, Poultry,
                                     and Egg Product Labels, Audit Number 24601-0002-23

                     FSIS appreciates the opportunity to review and comment on this Official Draft
                     report. The Food Safety and Inspection Service (FSIS) reviewed the Official
                     Draft report and has general and technical comments followed by a response to
                     each recommendation.

                     FSIS General and Technical Comments
                     OIG’s audit of FSIS’ Controls Over Meat, Poultry, and Egg product Labels
                     report is flawed in several areas. OIG has misinterpreted specific labeling
                     regulations and how they are applied to the labeling review process. OIG has not
                     acknowledged FSIS repeated corrections or comments to the report.
                     FSIS believes for this audit to achieve its intended purpose of evaluating the
                     Agency’s label review and approval program to determine whether there are
                     ways that the program can be improved, OIG needs to understand FSIS’ labeling
                     regulations. OIG acquiring an understanding of FSIS’s labeling regulations
                     would help OIG understand the context in which the label review and approval
                     program functions.

                     OIG evaluated the program based on a rigid set of standards that do not
                     accurately reflect FSIS’s regulations or do not consider FSIS’s history and
                     expertise in implementing the regulations and reviewing labels.
                     Finding 1: FSIS Needs to Document its Review and Approval Process for
                     Required Labels
                     On pages 8-9 in Finding 1 under “Incomplete or Inaccurate Label Application
                     Packages” section, OIG states that “since the establishment’s label application
                     did not contain a document or explanation on which processing procedure was
                     used (refrigerated or frozen), we could not determine if the correct handling
                     statement was displayed on the label or if the wholesomeness of the product
                     could be affected.”
This statement is problematic for several reasons. Generally, whether a product is
refrigerated, or frozen, may affect the shelf life but not the overall wholesome condition
of the product. The regulations do not require that establishments submit information
concerning whether a product will be kept refrigerated or frozen to support the label (9
CFR 317.2(k)).
As FSIS mentioned in discussions with OIG, under the label application and FSIS
regulations, refrigeration and freezing are not ordinarily considered “processing” or
“preparing.” The label application instructions for block #16 state that “Poultry Products
provide complete processing procedures as required in 9 CFR 381.134.” The poultry
regulations cited in block #16 of the application include information concerning
ingredients and methods of preparation. In addition, the term “process” is defined in the
poultry products inspection regulations to mean “to conduct any operation or
combination of operations, whereby poultry is slaughtered, eviscerated, canned, salted,
stuffed, rendered, boned, cut up or manufactured or processed.” (9 CFR 381.1(b)). These
regulations further specify that “the term ‘process’ does not refer to freezing of poultry
products, except when freezing is incidental to operations otherwise classed as
‘processing’ under this paragraph.”

Block #16 of the label application requests for meat products that applicants complete
processing procedures as required. In the meat regulations (9 CFR 301.2), the term
“prepared” means: “slaughtered, canned, salted, rendered, boned, cut up, or otherwise
manufactured or processed.” The meat regulations define the term “prepared” rather than
“processed,” but the meaning is consistent with the definition of the term “process” in the
poultry regulations.

Lastly, it is not up to FSIS to determine whether a product should be refrigerated or
frozen. That is a determination made by the producer of the product based on marketing
considerations. FSIS’s responsibility is to ensure that if the product is not shelf stable, it
bears one of those statements, or that if the product is being held under conditions that do
not comply with the label statement, it acts to remove the product from commerce or
rescind FSIS label approval and require that the establishment correct the label. Thus,
OIG is faulting FSIS for not enforcing a records submission requirement that does not
exist, and OIG’s statement that 15 of the label applications (both required and generic
labels) it reviewed were incomplete is simply wrong. FSIS’s responsibility in this area is
to verify that the products have a handling statement consistent with the nature of the
product, which the Agency performs daily during the labeling review process.
FSIS will acknowledge that in its discussion with OIG, the Labeling and Program
Delivery Staff (LPDS) officials incorrectly agreed with OIG that the processing
procedures should include the condition that the product leaves the establishment (i.e.,
refrigerated or frozen). However, at the initial meeting and on at least two other
occasions, FSIS has explained the correct policy yet OIG has not acknowledged these
verbal and written corrections. For FSIS to require submission of additional information
for label approvals, we would need to conduct rulemaking or other public notice with no
public health benefit. Additionally, FSIS would need to assess costs and benefits; at this
time, FSIS anticipates no benefits because there are currently no problems to address.
Therefore, FSIS still maintains that the six labels should be removed from OIG’s count of
labels that had applications that were incomplete or inaccurate and as a result, OIG only
found three such labels in error.
On page 10 of its draft report, OIG states they found one label application package that
received temporary approval even though the establishment did not address all four of the
required criteria for temporary approval. This statement suggests that the application for
temporary approval that FSIS approved, and OIG reviewed, is incomplete or inaccurate.
FSIS disagrees with this statement. FSIS needs to find that the four conditions set out in
the regulation for granting temporary approval are met. OIG is correct that, if FSIS
grants an application without documentary support in the application with respect to one
of the conditions, it is vulnerable to having its judgment reversed by a reviewing court
should the Agency be sued. It is likely that the establishment met all four conditions of
the label application; however, FSIS does not have adequate records concerning that label
approval. At this time, the approved temporary label is now expired, per the date on the
label application since temporary approvals expire after six months. Thus, this label
should not be included as incomplete or inaccurate and should not be included with the 9
labels referenced in Recommendation 1 of the report.
On pages 10 - 11, under the section “Unsupported Label Statements and Claims,” OIG
states that 8 approved and required label application packages did not include supporting
documentation for the statement and claims made on the product label because they
relied on nutrition fact information. As stated in the report, FSIS officials use the
nutrition facts panel of the label itself to verify that claims are truthful and not
misleading. OIG maintains that without FSIS verifying the accuracy of the nutrition facts
panel prior to label approval, statements of the amount of a nutrient declared elsewhere
on the product label may be inaccurate. Nutrition labeling has appeared on food labels for
more than 25 years, and there has been no evidence of any significant misstatements of
amounts declared on nutrition labels. In 9 CFR 317.309 (h), FSIS set out, after full notice
and comment rulemaking, how it would monitor compliance with respect to nutrition
labels. In the preamble to the final rule, FSIS stated that it would not require that
establishments submit analytical data to support nutrient values and content claims on
food labels (58 FR 656). Thus, as FSIS made clear in the regulations, FSIS does not
require nutrition data to be submitted with label applications submitted for approval. To
require additional information from establishments would be an added cost and burden on
industry. Given this regulatory history, the issue OIG raises on page 11 is without merit,
and this entire section of the report should be stricken. OIG is suggesting that
establishments need to submit additional documentation to FSIS without considering the
regulatory history or costs and benefits of new requirements.
Finding 2: FSIS Needs to Improve Establishments’ Compliance with Generic Label
Requirements
Under this finding, FSIS disagrees with the conclusion on page 13 that there is a reduced
assurance that establishments’ generic labels used in commerce meet requirements
because FSIS does not have an adequate process to determine whether establishments
generic labels meet requirements.
On page 13, for the reasons stated above, FSIS maintains the 9 label applications cited for
incomplete processing procedures to determine the handling statement should be
removed from the report.
Under the section “Establishment’s Compliance Regarding Generic Labels,” specifically
on page 15, OIG states that, based on the large number of modifications that FSIS made
in the generic labels that had been submitted to it for approval, there could be generic
labels in commerce that were not submitted to FSIS for review and that do not comply
with FSIS requirements. FSIS believes that this statement is completely speculative.
Although labels were voluntarily submitted to the Agency that were approved with
modifications, that does not mean that labels that are not submitted will require
modifications. Therefore, OIG should remove the last sentence in the first paragraph on
page 15 from its report.


FSIS’ Response to OIG’s Recommendations

Finding 1: FSIS Needs to Document its Review and Approval Process for Required
Labels

Recommendation 1
For the 9 labels with insufficient supporting documentation, LPDS should review these
labels and update LSAS to annotate the agency’s position for approving the label
application.

FSIS Response
FSIS has determined that 6 of the 9 labels that OIG cited as missing information on the
application form are acceptable. The labels bear a handling statement as required by 9
CFR 317.2(k) and 9 CFR 381.125 for compliance with FSIS regulations, so the products
are not misbranded. The one label approved as temporary is no longer in use, therefore,
no notification or correction in LSAS is required. LPDS will make the necessary
corrections for the remaining 2 labels and update the applications in LSAS.
Estimated Completion Date: September 30, 2020.

Recommendation 2
LPDS should develop internal standard operating procedures to ensure compliance with
regulatory labeling requirements through the label approval process.

FSIS Response
LPDS will develop internal standard operating procedures (SOPs) to ensure staff verify
that labels comply with regulations throughout the label approval process.

Estimated Completion Date: January 31, 2021

Recommendation 3
LPDS should develop and implement a process or procedure to review a sample of
approved labels on a periodic basis to ensure LPDS staff adhere to the label approval
process.

FSIS Response
LPDS will include all staff as part of the LSAS Quality Control (QC) procedures training
currently used for new LPDS staff members. Labels will be randomly selected and routed
to LPDS management for a second review for accuracy and compliance with FSIS
regulations and policies.

Estimated Completion Date: January 31, 2021

Finding 2: FSIS Needs to Improve Establishments’ Compliance with Generic
Label Requirements

Recommendation 4
LPDS should enhance its outreach efforts to establishments to ensure they are aware of
all applicable mandatory labeling features for generic labels.

FSIS Response
LPDS has already begun its outreach to establishments through developing and revising
labeling guidance on the FSIS website. LPDS will also schedule generic labeling
webinars for its stakeholders that will include training on the mandatory labeling features.
Additionally, LPDS is planning to present webinars on recently published guidance to the
FSIS Website. FSIS continues to send LPDS staff to meetings for various stakeholders
(e.g., consulting firms and trade associations) presenting information on various labeling
subject matter. These presentations include general labeling requirements including all
mandatory features. LPDS will also continue to include entries in the Agency’s
Constituent Update (which provides weekly FSIS updates on the FSIS web page) on a
biweekly basis to help industry understand and comply with FSIS labeling requirements.
These entries provide information on various topics to help establishments comply with
labeling requirements, such as information on completing the label application form,
information on the label submission requirements for using special statements and claims,
and information on label records that must be maintained by establishments.

Estimated Completion Date: May 31, 2021 (although outreach activities will be
ongoing)

Recommendation 5
Ensure that FSIS Directive 7221.1, Rev. 1 reflects the direction in 9 CFR § 412.2 (a)(2)
that IPP verify that some generically approved labels in the establishment’s labeling
records contain the mandatory eight features. When IPP find noncompliance, they should
document noncompliance and require establishments change their labels to meet
requirements.

FSIS Response
FSIS will revise FSIS Directive 7221.1 Rev. 1 to ensure IPP label verification activities
include generically approved labels. IPP will document noncompliance and require
establishments to change labels that are not in compliance with FSIS’s labeling
regulations and policies.

Estimated Completion Date: May 31, 2021
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