Improved Administration of Special Surplus Dairy Product Distribution Program Needed

Gao ID: RCED-84-58 March 14, 1984

In response to a congressional request, GAO reviewed the Department of Agriculture's (USDA) program for distributing surplus dairy products to the needy. Specifically, GAO was asked to determine whether program administration adequately ensured that products were provided only to the needy and to develop estimates on the extent to which donated products displaced commercial sales.

GAO believes that the absence of national program guidelines on key issues, such as the target population to be served and controls to ensure that participants are eligible, contributed to widely varying programs among the states and, in some cases, among localities. GAO found that: (1) three of the eight states studied had not established any needs tests for program participants; (2) distribution frequencies and quantities of products made available to participants varied; (3) controls over the distribution of products were generally inadequate; and (4) until April 1983, when the quantities of products made available were cut back, the states were able to order virtually unlimited amounts of dairy products. As a result, abuses occurred and displacement of commercial sales was greater than necessary. Legislation enacted in September 1983 required the establishment of program criteria and required USDA to: (1) provide commodities in quantities which can be used without waste; (2) ensure that the commodities provided do not displace commercial sales; and (3) minimize the paperwork requirements imposed on distribution agencies. To the extent that products given away displace commercial sales, they increase market surpluses which USDA is obligated to purchase under the Dairy Price-Support Program and increase USDA inventories of dairy products. GAO estimated that about 31 percent of the cheese distributed from December 1981 to April 1983 in the eight states would have displaced commercial sales of cheese.


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