10-30049B-08

Purpose of the Report

In accordance with Title 24 of the Alaska Statutes and a special request by the Legislative Budget and Audit Committee, we have conducted an audit to address various issues and concerns related to the dissolution of the Creamery Corporation which does business as Matanuska Maid (MatMaid). The Creamery Corporation was a private sector, dairy product wholesaler. The State of Alaska through the Department of Natural Resources (DNR), Division of Agriculture, Agricultural Revolving Loan Fund (ARLF) is the sole stockholder in the Creamery Corporation.

Report Conclusions

As the second of a multi-part audit, we were directed to analyze the disposal of the dairy’s assets and the accounting for the proceeds generated by disposal. We were also directed to review the process currently in place to manage and account for revenues still being generated by the lease of some MatMaid assets.

The Report Conclusions section sets out our findings related to the other audit objectives, as follows:

1. Sale of MatMaid assets were done in compliance with appropriate standards and practices. Given the classification of the assets involved and the private sector status of the Creamery Corporation d/b/a MatMaid procedures followed in the disposition of assets were appropriate.
2. Buy out value of leased equipment would exceed likely auction value. Some assets with an appraised and assessed value of approximately $650,000 were leased to a start-up dairy operation in the Matanuska Valley. The start-up dairy operation has the option to purchase all the equipment identified in the lease for approximately $400,000. If the option to purchase is exercised, the Creamery Corporation would receive over 60% return, which is more than the 46% the auction received of appraised value.
3. $600,000 of auction proceeds was not accounted for appropriately. In 2007 the legislature appropriated $600,000 to the DNR to pay for MatMaid operations. The chair of the Creamery Corporation board stated, in a letter requesting the funds, it was the intent of the board that the funds be repaid to the State of Alaska. The language of the appropriation does not require such a repayment and any proceeds generated from the sale of MatMaid assets should be credited to the ARLF.
4. Public confused by the standards used for various decisions made by either the Board of Agriculture and Conservation (BAC) and Creamery Corporation board. The overlapping membership of the BAC and the Creamery Corporation boards generated confusion about what standards and procedures governed a particular decision.