Improved Administration of Special Surplus Dairy Product Distribution Program Needed

RCED-84-58: Published: Mar 14, 1984. Publicly Released: Mar 14, 1984.

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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.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Although the action taken was not fully responsive to this recommendation in that FNS did not establish parameters on eligibility criteria, the states now have income standards ranging from 125 percent to 185 percent of poverty levels.

    Recommendation: The Secretary of Agriculture should direct the Food and Nutrition Service (FNS) Administrator to ensure that the final regulations issued by FNS, at a minimum, establish some parameters on the eligibility criteria established by states to help create more equitable state and local programs and to help minimize the extent of commercial sales displacement resulting from the program. In establishing such parameters, FNS should consider the amount of commercial sales displacement likely to occur at various household income levels on the basis of data compiled through USDA household food consumption surveys.

    Agency Affected: Department of Agriculture

  2. Status: Closed - Implemented

    Comments: FNS issued final regulations on April 16, 1986 that require: (1) distributing agencies to obtain the name and address of program participants; (2) that states develop FNS-approved monitoring plans; and (3) that states make annual reviews of distributing agencies.

    Recommendation: The Secretary of Agriculture should direct the FNS Administrator to ensure that the final regulations issued by FNS minimize program abuse by requiring states to develop reasonable program controls. Such controls should, at a minimum, require program participants to provide identification and evidence of eligibility.

    Agency Affected: Department of Agriculture


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