USDA report lambastes MilkPEP

Dairy Foods, Nov, 1998

A report from USDA's Office of the Inspector General (OIG) lambasted the Milk Processor Education Program, alleging a number of improprieties in management, contractual and operational procedures. The report came a month before processors will vote on whether to extend the $110 million a year promotion program and just as it merges with the "Got milk?" program.

The 101-page report, which is dated Sept. 23 but was not made public until early October, actually addresses most of its criticism to USDA's Agricultural Marketing Service (AMS) for not adequately monitoring the MilkPEP program. This report follows a "management alert" issued May 6, 1997, by OIG, when most of the criticisms apparently were first raised.

Many of the issues are bureaucratic in nature, but the most damaging appear to be that some payments exceeded contract limits; that AMS had approved only three of 71 contracts reviewed before their effective dates; and that the payment to the board's administrator, which includes the use of his accounting firm, more than doubled in less than a year.

The report calls the MilkPEP board "detached from day to day operations of the program, delegating all administrative tasks to contractors and taking no independent actions to ascertain the effectiveness of the program." At one point, the OIG recommends a termination of the MilkPEP board until AMS and the board can jointly develop a plan for better oversight.

Scottie Mayfield, chairman of the MilkPEP board and also president of Mayfield Dairy in Athens, Tenn., reacted angrily, saying the report contains "misleading information and misplaced accusations." But he also expressed a desire to settle the issues it raises.

AMS, itself, fired off a sometimes testy response to the OIG report, saying many of the questions were answered a year ago and that some recommendations, such are more competitive bidding of contracts and the acquisition of all Milk Mustache photographic rights, are impractical.

One AMS official, who asked not to be identified, said the OIG report "showed a lack of understanding of how business, especially a high-end marketing one like MilkPEP, operates."

Both MilkPEP and AMS officials said the report found no improper use or mismanagement of program funds, and both sides said AMS is satisfied with the board's handling of the program.

Milk processors are voting this month on whether to extend their 20 cents per hundredweight assessment that funds MilkPEP.

AMS is expected to make a formal response by Nov. 23. The full report can be read on the Internet at www2.hqnet.usda.gov/oig.