Summary: GAO produced a report on the operation of a dairy farm by the United States Naval Academy, Annapolis, Maryland. The dairy was established in 1911 to provide the midshipmen with a source of pure milk following an outbreak of typhoid fever attributed to the unprocessed milk purchased for the midshipmen's mess. Our examination was directed, primarily, toward an evaluation of the Naval Academy's need to operate a dairy to fulfill its mission. In connection therewith, we considered (a) the purpose for which the dairy had been established and the need for its continued existence, (b) the relative costs to the Government for milk and milk products produced by the Academy dairy with those available from commercial sources, and (c) the operation of the Academy dairy in relation to the Government's policies with respect to retention of high-value properties and competition with private enterprise.
In the 54 years which have passed since the dairy was established, commercial dairy operations have improved to the point that there is no longer any reason to consider it necessary for the Naval Academy to operate a dairy to ensure the availability of a supply of pure milk and milk products. Further, its continued operation appears to be contrary to Government policies with respect to competition with private enterprise and retention of real property. The records maintained by the dairy indicate that the cost to the Government for milk and milk products obtained from the Academy dairy was less than the prices charged other Government activities by commercial sources. We found, however, that certain additional adjustments to the dairy farm cost were necessary in order to reflect the true cost to the Government. After these adjustments, annual savings of about $84,000 would be realized by the Government if the Academy dairy farm was sold and the Academy's milk needs were obtained from commercial sources. Inasmuch as the continued operation of the dairy farm appears contrary to Government policy and in view of the economies which could be realized through discontinuing its operation, we proposed to the Navy that consideration be given to the disposal of the dairy farm. The computations in this report were based on the assumption that the proceeds from the sale of the dairy farm would accrue to the United States Government and that any other disposition of such proceeds would alter the comparative costs of the procurement of dairy products by the Academy, and, thus, the savings to the Government. In the event that the Navy determines that any proceeds from the sale of the dairy should not be deposited with the Treasury, the proposed disposition of the proceeds should be submitted with an appropriate explanation of the basis for the Navy's determination to the Comptroller General for a decision.
