Savings Are Possible Through Better Management of Government-Owned Dairy Products

CED-82-79: Published: May 18, 1982. Publicly Released: May 18, 1982.

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GAO reviewed the Department of Agriculture's (USDA) policies and procedures for storing dairy products acquired through the dairy price-support program. The purpose of the review was to evaluate how these products were managed, because the government-owned inventories of butter, cheese, and nonfat dry milk increased substantially during fiscal years 1980 and 1981, and these products comprise the largest share of government-owned commodities.

USDA successfully located sufficient storage space for the dairy products, which increased from about 705 million pounds in the fall of 1979 to more than 2 billion pounds by the fall of 1981. GAO concluded that USDA would realize an estimated annual savings of up to $1.4 million if it purchased its requirements for 1-pound packages of butter directly from suppliers. Butter in 1-pound packages is used in the domestic school lunch and food-for-the-needy programs and is supplied by repackaging blocks of bulk butter. USDA did not act on previous recommendations to buy 1-pound packages of butter because of the large inventory of bulk butter on hand and its concern that the older stock would deteriorate before it was used. GAO concluded that warehouses storing the dairy products are examined more often than necessary. It was estimated that approximately 2600 staff hours of warehouse examiners' time could be saved annually if the frequency of examinations were reduced from three times to two times a year for warehouses that have good performance records. This would provide time for the decreasing staff of examiners to cope with an increasing workload.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Although USDA has begun purchasing butter in 1-pound packages direct from processors since the report was issued, it still does not fill all its requirements through direct purchase. The Deputy Secretary said that, as more bulk items are used, USDA will be in a better position to purchase more products in ready-to-use form.

    Recommendation: The Secretary of Agriculture should direct the Administrator of the Agricultural Stabilization and Conservation Service to establish a policy to buy the Department's requirements for 1-pound packages of butter directly from suppliers whenever possible. The Administrator should implement this policy immediately so that part of the requirement for the next full quarter could be acquired in this manner based on an analysis of projected needs and present inventory. For each succeeding quarter, the Administrator should reevaluate government-owned butter inventories to determine the amount such purchases can be increased so that eventually all requirements can be obtained by direct purchases.

    Agency Affected: Department of Agriculture

  2. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Agriculture should direct the Administrator of the Agricultural Stabilization and Conservation Service to identify those warehouses that have good performance records and reduce the examination frequency for these warehouses to twice a year.

    Agency Affected: Department of Agriculture

 

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