Foreign Assistance
Multiple Challenges Hinder the Efficiency and Effectiveness of U.S. Food Aid Gao ID: GAO-08-83T October 2, 2007The United States is the largest global food aid donor, accounting for over half of all food aid supplies to alleviate hunger and support development. Since 2002, Congress has appropriated an average of $2 billion per year for U.S. food aid programs, which delivered an average of 4 million metric tons of food commodities per year. Despite growing demand for food aid, rising business and transportation costs have contributed to a 52 percent decline in average tonnage delivered between 2001 and 2006. These costs represent 65 percent of total emergency food aid, highlighting the need to maximize its efficiency and effectiveness. This testimony is based on a recent GAO report that examined some key challenges to the (1) efficiency of U.S. food aid programs and (2) effective use of U.S. food aid.
Multiple challenges hinder the efficiency of U.S. food aid programs by reducing the amount, timeliness, and quality of food provided. Factors that cause inefficiencies include (1) insufficiently planned food and transportation procurement, reflecting uncertain funding processes, that increases delivery costs and time frames; (2) ocean transportation and contracting practices that create high levels of risk for ocean carriers, resulting in increased rates; (3) legal requirements that result in awarding of food aid contracts to more expensive service providers; and (4) inadequate coordination between U.S. agencies and food aid stakeholders in tracking and responding to food and delivery problems. U.S. agencies have taken some steps to address timeliness concerns. USAID has been stocking or prepositioning food domestically and abroad, and USDA has implemented a new transportation bid process, but the long-term cost effectiveness of these initiatives has not yet been measured. The current practice of using food aid to generate cash for development projects--monetization--is also inherently inefficient. Furthermore, since U.S. agencies do not collect monetization revenue data electronically, they are unable to adequately monitor the degree to which revenues cover costs. Numerous challenges limit the effective use of U.S. food aid. Factors contributing to limitations in targeting the most vulnerable populations include (1) challenging operating environments in recipient countries; (2) insufficient coordination among key stakeholders, resulting in disparate estimates of food needs; (3) difficulties in identifying vulnerable groups and causes of their food insecurity; and (4) resource constraints that adversely affect the timing and quality of assessments, as well as the quantity of food and other assistance. Furthermore, some impediments to improving the nutritional quality of U.S. food aid may reduce its benefits to recipients. Finally, U.S. agencies do not adequately monitor food aid programs due to limited staff, competing priorities, and restrictions on the use of food aid resources. As a result, these programs are vulnerable to not getting the right food to the right people at the right time.
GAO-08-83T, Foreign Assistance: Multiple Challenges Hinder the Efficiency and Effectiveness of U.S. Food Aid
This is the accessible text file for GAO report number GAO-08-83T
entitled 'Foreign Assistance: Multiple Challenges Hinder the Efficiency
and Effectiveness of U.S. Food Aid' which was released on October 2,
2007.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as part
of a longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
Testimony:
Before the Subcommittee on Agriculture, Rural Development, Food and
Drug Administration, and Related Agencies, Committee on Appropriations,
House of Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 10:00 a.m. EDT:
October 2, 2007:
Foreign Assistance:
Multiple Challenges Hinder the Efficiency and Effectiveness of U.S.
Food Aid:
Statement of Thomas Melito, Director:
International Affairs and Trade:
GAO-08-83T:
GAO Highlights:
Highlights of GAO-08-83T, a testimony before the Subcommittee on
Agriculture, Rural Development, Food and Drug Administration, and
Related Agencies, Committee on Appropriations, House of Representatives
Why GAO Did This Study:
The United States is the largest global food aid donor, accounting for
over half of all food aid supplies to alleviate hunger and support
development. Since 2002, Congress has appropriated an average of $2
billion per year for U.S. food aid programs, which delivered an average
of 4 million metric tons of food commodities per year. Despite growing
demand for food aid, rising business and transportation costs have
contributed to a 52 percent decline in average tonnage delivered
between 2001 and 2006. These costs represent 65 percent of total
emergency food aid, highlighting the need to maximize its efficiency
and effectiveness. This testimony is based on a recent GAO report that
examined some key challenges to the (1) efficiency of U.S. food aid
programs and (2) effective use of U.S. food aid.
What GAO Found:
Multiple challenges hinder the efficiency of U.S. food aid programs by
reducing the amount, timeliness, and quality of food provided. Factors
that cause inefficiencies include (1) insufficiently planned food and
transportation procurement, reflecting uncertain funding processes,
that increases delivery costs and time frames; (2) ocean transportation
and contracting practices that create high levels of risk for ocean
carriers, resulting in increased rates; (3) legal requirements that
result in awarding of food aid contracts to more expensive service
providers; and (4) inadequate coordination between U.S. agencies and
food aid stakeholders in tracking and responding to food and delivery
problems. U.S. agencies have taken some steps to address timeliness
concerns. USAID has been stocking or prepositioning food domestically
and abroad, and USDA has implemented a new transportation bid process,
but the long-term cost effectiveness of these initiatives has not yet
been measured. The current practice of using food aid to generate cash
for development projects”monetization”is also inherently inefficient.
Furthermore, since U.S. agencies do not collect monetization revenue
data electronically, they are unable to adequately monitor the degree
to which revenues cover costs.
Figure: Selected Trends in U.S. Food Aid, Fiscal Years 2002 through
2006:
This image is of a line chart showing the relation between the U.S.
dollars spent on program funding (U.S. dollars in millions), and the
metric tons of food delivered (in thousands). The bottom of of the
chart labels the years 2002 through 2006, and specific countries of
major emergencies: Afghanistan and southern Africa in 2002, Iraq in
2003, Sudan, Ethiopia, and Eritrea, in 2005, and Sudan and Horn of
Africa in 2006.
[See PDF for image]
Source: GAO analysis of USAID and ISDA data.
[End of figure]
Numerous challenges limit the effective use of U.S. food aid. Factors
contributing to limitations in targeting the most vulnerable
populations include (1) challenging operating environments in recipient
countries;
(2) insufficient coordination among key stakeholders, resulting in
disparate estimates of food needs; (3) difficulties in identifying
vulnerable groups and causes of their food insecurity; and (4) resource
constraints that adversely affect the timing and quality of
assessments, as well as the quantity of food and other assistance.
Furthermore, some impediments to improving the nutritional quality of
U.S. food aid may reduce its benefits to recipients. Finally, U.S.
agencies do not adequately monitor food aid programs due to limited
staff, competing priorities, and restrictions on the use of food aid
resources. As a result, these programs are vulnerable to not getting
the right food to the right people at the right time.
What GAO Recommends:
GAO recommended that the Administrator of the U.S. Agency for
International Development (USAID) and the Secretaries of the U.S.
Department of Agriculture (USDA) and the Department of Transportation
(DOT) enhance the efficiency and effectiveness of U.S. food aid by
improving logistical planning, transportation contracting, and
monitoring, among other actions. In general, USAID, USDA, and DOT found
our recommendations to be helpful and have created an interagency
Executive Working Group to identify actions to address them. However,
USDA disagreed with some of our analysis.
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-83T].
To view the full product, including the scope
and methodology, click on the link above.
For more information, contact Thomas Melito (202) 512-9601
(MelitoT@gao.gov).
[End of section]
Madam Chair and Members of the Subcommittee:
I am pleased to appear today to discuss ways to improve the efficiency
and effectiveness of U.S. food aid. The United States is the largest
provider of food aid in the world, accounting for over half of all
global food aid supplies intended to alleviate hunger and support
development in low-income countries. Since its last reauthorization of
the Farm Bill in 2002, Congress has appropriated an average of $2
billion per year in annual and supplemental funding for U.S.
international food aid programs, which delivered an average of 4
million metric tons of agricultural commodities per year. In 2006, the
largest U.S. food aid program, Title II of Public Law 480, benefited
over 70 million people through emergency and development-focused
projects. However, about 850 million people in the world are currently
undernourished--a number that has remained relatively unchanged since
the early 1990s, according to United Nations (UN) Food and Agriculture
Organization (FAO) estimates.[Footnote 1] Furthermore, the number of
food and humanitarian emergencies has doubled from an average of about
15 per year in the 1980s to more than 30 per year since 2000, due in
large part to increasing conflicts, poverty, and natural disasters
around the world. Despite the growing demand for food aid, rising
transportation and business costs have contributed to a 52 percent
decline in average tonnage delivered from 2001 to 2006.[Footnote 2] For
the largest U.S. food aid program, these noncommodity costs now account
for approximately 65 percent of program expenditures, highlighting the
need to maximize the efficiency and effectiveness of U.S. food aid.
My testimony is based on a report that we issued on April 13,
2007.[Footnote 3] Today, I will focus on the need to (1) increase the
efficiency of U.S. food aid programs in terms of the amount,
timeliness, and quality of food provided; and (2) ensure the
effectiveness of U.S. food aid so that it reaches the most vulnerable
populations and does not cause negative market impact. We define
efficiency as the extent to which a program is acquiring, protecting,
and using its resources in the most productive manner. We define
effectiveness as the extent to which U.S. food aid programs are being
used to achieve their goals and objectives.
In preparing this testimony, we relied on our completed review of the
efficiency and effectiveness of U.S. food aid. To address our
objectives, we analyzed food aid procurement and transportation data
provided by the U.S. Department of Agriculture's (USDA) Kansas City
Commodity Office (KCCO); reviewed food aid proposals and funding data
provided by USDA and the U.S. Agency for International Development
(USAID); conducted interviews with U.S. agencies, U.S.-and foreign-flag
ocean carriers, nongovernmental organizations (NGO), freight
forwarders, and agricultural commodity groups; conducted fieldwork in
Rome, Ethiopia, Kenya, and Zambia; and visited ports in Texas, South
Africa and Kenya, as well as prepositioning sites in Louisiana and
Dubai. We also discussed our preliminary findings with a roundtable of
15 food aid experts and practitioners. We conducted the work for our
report and this testimony between May 2006 and March 2007 in accordance
with generally accepted government auditing standards.
Summary:
Multiple challenges in logistics combine to hinder the efficiency of
U.S. food aid programs by reducing the amount, timeliness, and quality
of food provided. Specific factors that cause inefficiencies in food
aid delivery include the following:
* Insufficiently planned food and transportation procurement,
reflecting uncertain funding processes, that increases food aid
delivery costs and time frames. Difficulty in timing food procurement
and transportation to avoid commercial peaks in demand often results in
higher prices than if such purchases were more evenly distributed
throughout the year.
* Ocean transportation contracting practices that differ from
commercial practices and create high levels of risk for ocean carriers,
increasing food aid costs. For example, food aid transportation
contracts often hold ocean carriers responsible for logistical problems
occurring at the load port or costly delays at destination when the
port or implementing organization is not ready to receive the cargo.
Ocean carriers factor these costs into their freight rates, driving up
the cost of food aid.
* Legal requirements that result in the awarding of food aid contracts
to more expensive providers and contribute to delivery delays. For
example, cargo preference laws require 75 percent of food aid to be
shipped on U.S.-flag carriers, which are generally more costly than
foreign-flag carriers. The U.S. Department of Transportation (DOT)
reimburses certain transportation costs, but the sufficiency of these
reimbursements varies.
* Inadequate coordination between U.S. agencies and stakeholders in
tracking and responding to food and delivery problems. For example,
while food spoilage has been a long-standing concern, USAID and USDA
lack a shared, coordinated system to systematically track and respond
to food quality complaints.
To enhance the efficiency of food aid delivery, U.S. agencies have
taken measures to improve their ability to provide food aid on a more
timely basis. For example, USAID prepositioned food commodities in Lake
Charles (Louisiana) and Dubai (United Arab Emirates) until August 2007
and continues this practice in San Jacinto Port (Texas) and Djibouti
(East Africa). Additionally, in February 2007, USAID and USDA
implemented a new transportation bid process in an attempt to increase
competition and reduce procurement time frames. Although both efforts
may result in food aid reaching vulnerable populations faster in an
emergency, their long-term cost-effectiveness has not yet been
measured. Despite such initiatives to improve the process of delivering
food aid, the current practice of using food aid as a means to generate
cash for development projects--monetization--is an inherently
inefficient use of resources. Monetization entails not only the costs
of procuring, transporting, and handling food, but also the costs of
marketing and selling it to generate cash for funding development
projects. Furthermore, NGOs must maintain the expertise necessary to
sell and market food aid abroad, which diverts resources from their
core missions. In addition, U.S. agencies do not collect or maintain
data electronically on the revenues generated from monetization. The
absence of such electronic data impedes the agencies' ability to
adequately monitor the degree to which monetization revenues can cover
the costs.
Various challenges limit the effective use of food aid to alleviate
hunger. Given limited food aid resources and increasing emergencies,
ensuring that food aid reaches the most vulnerable populations--such as
poor women who are pregnant or children who are malnourished--is
critical to enhancing its effectiveness and avoiding negative market
impact in recipient countries. Specific factors that impede the
effective use of food aid include the following:
* Challenging operating environments characterized by poor
infrastructure and lack of physical safety and security, which restrict
access to populations in need and cause delays. For example, we
recently reported that frequent violence has hampered the ability of
implementing organizations to access parts of the Darfur region of
Sudan to provide food and other assistance to vulnerable populations.
* Insufficient coordination among key stakeholders, resulting in
disparate estimates of food needs. For example, separate assessments by
host governments, WFP, and NGOs have resulted in significantly
different estimates of food needs and numbers of intended recipients,
resulting in delays in donor assistance until the various stakeholders
reach agreement on these estimates.
* Difficulties in identifying the most vulnerable groups and
understanding the causes of their vulnerability. For example, it has
been challenging for implementing organizations to determine the causes
of chronic food insecurity--such as poor health and water quality, in
addition to lack of food--and provide appropriate assistance.
* Resource constraints that adversely affect the timing and quality of
assessments, as well as the quantity of food and other assistance. U.S.
food aid funding available to conduct assessments in advance of program
implementation is limited. Furthermore, in cases where recipients do
not receive sufficient complementary assistance, they may be forced to
sell part of their food rations to buy other basic necessities and,
therefore, may not get the full health benefits of food aid.
Impediments to improving the nutritional quality of U.S. food aid,
including a lack of an interagency mechanism to update food aid
products and specifications, may result in recipients not receiving the
most nutritious or appropriate food. For example, although U.S.
agencies have undertaken some measures to improve the nutritional
quality of food aid, such as updating food aid product specifications
with fortification enhancements, they have not fully addressed some key
concerns. Finally, USAID and USDA do not sufficiently monitor food aid
programs, particularly in recipient countries, due to limited staff,
competing priorities, and restrictions on the use of food aid
resources. For example, although USAID had some non-Title II-funded
staff assigned to monitoring, it had only 23 Title II-funded staff
assigned to missions and regional offices in 10 countries to monitor
programs costing about $1.7 billion in 55 countries in fiscal year
2006. USDA has even less of a field presence for monitoring than USAID.
As a result, U.S. agencies may not be accomplishing their goals of
getting the right food to the right people at the right time.
Our report made recommendations to the Administrator of USAID, the
Secretary of Agriculture, and the Secretary of Transportation to work
to improve the efficiency of U.S. food aid delivery, including
instituting measures to (1) improve food aid logistical planning, (2)
modernize transportation contracting practices, (3) update
reimbursement methodologies to minimize the cost impact of cargo
preference regulations on food aid transportation expenditures, (4)
track and resolve food quality complaints systematically, and (5)
develop an information collection system to track monetization revenues
and costs. Further, to improve the effective use of food aid, we
recommended that the Administrator of USAID and the Secretary of
Agriculture also work to (1) enhance the reliability and use of needs
assessments; (2) determine ways to provide adequate nonfood resources,
when appropriate; (3) develop a coordinated interagency mechanism to
update food aid specifications and products; and (4) improve monitoring
of food aid programs.
As required by law,[Footnote 4] DOT, USAID, and USDA reported the
actions they have taken or begun to take to address our
recommendations, in written statements to congressional committees.
These actions included the creation of an interagency Executive Working
Group to identify ways to respond to several issues we raise in our
report. DOT stated that it strongly supported the transportation-
related initiatives we recommended. USAID outlined actions it is
considering, has initiated, or intends to take on each of our nine
recommendations. Although USDA disagreed with some of our analysis, it
cited efforts in progress that it believes address the issues raised in
our report.
Background:
Countries Provide Food Aid through In-kind or Cash Donations, with the
United States the Largest Donor:
Countries provide food aid through either in-kind donations or cash
donations. In-kind food aid is food procured and delivered to
vulnerable populations,[Footnote 5] while cash donations are given to
implementing organizations to purchase food in local, regional, or
global markets. U.S. food aid programs are all in-kind, and no cash
donations are allowed under current legislation. However, the
administration has recently proposed legislation to allow up to 25
percent of appropriated food aid funds to purchase commodities in
locations closer to where they are needed.
Other food aid donors have also recently moved from providing primarily
in-kind aid to more or all cash donations for local procurement.
Despite ongoing debates as to which form of assistance are more
effective and efficient, the largest international food aid
organization, the United Nations (UN) World Food Program (WFP),
continues to accept both.[Footnote 6] The United States is both the
largest overall and in-kind provider of food aid to WFP, supplying
about 43 percent of WFP's total contributions in 2006 and 70 percent of
WFP's in-kind contributions in 2005. Other major donors of in-kind food
aid in 2005 included China, the Republic of Korea, Japan, and Canada.
Most U.S. Food Aid Goes to Africa, with Nonemergency Funding Declining:
In fiscal year 2006, the United States delivered food aid through its
largest program to over 50 countries, with about 80 percent of its
funding allocations for in-kind food donations going to Africa, 12
percent to Asia and the Near East, 7 percent to Latin America, and 1
percent to Eurasia. Of the 80 percent of the food aid funding going to
Africa, 30 percent went to Sudan, 27 percent to the Horn of Africa, 18
percent to southern Africa, 14 percent to West Africa, and 11 percent
to Central Africa.
Over the last several years, funding for nonemergency U.S. food aid
programs has declined. For example, in fiscal year 2001, the United
States directed approximately $1.2 billion of funding for international
food aid programs to nonemergencies. In contrast, in fiscal year 2006,
the United States directed approximately $698 million for international
food aid programs to nonemergencies.
U.S. Food Aid Is Delivered through Multiple Programs with Multiple
Mandates:
U.S. food aid is funded under four program authorities and delivered
through six programs administered by USAID and USDA;[Footnote 7] these
programs serve a range of objectives, including humanitarian goals,
economic assistance, foreign policy, market development, and
international trade.[Footnote 8] (For a summary of the six programs,
see app. I.) The largest program, P.L. 480 Title II, is managed by
USAID and represents approximately 74 percent of total in-kind food aid
allocations over the past 4 years, mostly to fund emergency programs.
The Bill Emerson Humanitarian Trust, a reserve of up to 4 million
metric tons of grain, can be used to fulfill P.L. 480 food aid
commitments to meet unanticipated emergency needs in developing
countries or when U.S. domestic supplies are short.[Footnote 9] U.S.
food aid programs also have multiple legislative and regulatory
mandates that affect their operations. One mandate that governs U.S.
food aid transportation is cargo preference, which is designed to
support a U.S.-flag commercial fleet for national defense purposes.
Cargo preference requires that 75 percent of the gross tonnage of all
government-generated cargo be transported on U.S.-flag vessels. A
second transportation mandate, known as the Great Lakes Set-Aside,
requires that up to 25 percent of Title II bagged food aid tonnage be
allocated to Great Lakes ports each month.[Footnote 10]
Multiple Challenges Hinder the Efficiency of U.S. Food Aid Programs:
Multiple challenges in logistics hinder the efficiency of U.S. food aid
programs by reducing the amount, timeliness, and quality of food
provided. While in some cases agencies have tried to expedite food aid
delivery, most food aid program expenditures are for logistics, and the
delivery of food from vendor to village is generally too time-consuming
to be responsive in emergencies. Factors that increase logistical costs
and lengthen time frames include uncertain funding processes and
inadequate planning, ocean transportation contracting practices, legal
requirements, and inadequate coordination in tracking and responding to
food delivery problems. While U.S. agencies are pursuing initiatives to
improve food aid logistics, such as prepositioning food commodities and
using a new transportation bid process, their long-term cost-
effectiveness has not yet been measured. In addition, the current
practice of selling commodities to generate cash resources for
development projects--monetization--is an inherently inefficient yet
expanding use of food aid.
Various Logistical Factors Increase Delivery Costs and Lengthen Time
Frames:
Inadequately planned food and transportation procurement increases food
aid delivery costs and time frames. U.S. agencies bunch their
procurement, purchasing the largest share of food aid tonnage during
the last quarter of each fiscal year, in part because USDA requires 6
months to approve programs and because USDA and USAID may not receive
funding until the middle of a fiscal year (after the Office of
Management and Budget has approved budget apportionments for the
agencies or through a supplemental appropriation). Higher food and
transportation prices result from procurement bunching as suppliers try
to smooth earnings by charging higher prices during their peak seasons
and as food aid contracts must compete with seasonally high commercial
demand. According to KCCO data for fiscal years 2002 through 2006,
average commodity and transportation prices were each $12 to $14 per
metric ton higher in the fourth quarter than in the first quarter of
each year.[Footnote 11] Although USAID has improved its cash flow
management to achieve more stable monthly purchases in fiscal years
2004 and 2005, total food aid procurement has not been consistent
enough to avoid the higher prices associated with bunching.
Ocean transportation contracting practices--such as freight and
payment terms, claims processes, and time penalties--further increase
ocean freight rates and contribute to delivery delays. DOT officials,
experts, and ocean carriers emphasized that commercial transportation
contracts include shared risk between buyers, sellers, and ocean
carriers. In food aid transportation contracts, risks are
disproportionately placed on ocean carriers, discouraging
participation and resulting in expensive freight rates. For example,
food aid transportation contracts often hold ocean carriers responsible
for logistical problems occurring at the load port or costly delays at
destination when the port or implementing organization is not ready to
receive the cargo. Ocean carriers factor these costs into their freight
rates, driving up the cost of food aid.
Legal requirements governing food aid procurement can also increase
delivery costs and time frames, with program impacts dependent on the
sufficiency of associated reimbursements. In awarding contracts, KCCO
must meet various legal requirements, such as cargo preference and the
Great Lakes Set-Aside. Each requirement may result in higher commodity
and freight costs. Cargo preference laws, for example, require 75
percent of food aid to be shipped on U.S.-flag carriers, which are
generally more expensive than foreign-flag carriers by an amount known
as the ocean freight differential (OFD).[Footnote 12] The total annual
value of this cost differential between U.S.-and foreign-flag carriers
averaged $134 million from fiscal years 2001 to 2005. DOT
reimbursements have varied from $126 million in fiscal year 2002 to
$153 million in fiscal year 2005.[Footnote 13] However, USAID officials
expressed concern that the OFD calculations do not fully account for
the additional costs of shipping on older U.S. vessels or for contracts
that did not receive a bid from a foreign carrier. Finally, USAID and
DOT officials have not yet agreed on whether cargo preference applies
to shipments from prepositioning sites.
U.S. agencies and stakeholders do not coordinate adequately to respond
to food and delivery problems when they arise. For example, while food
spoilage has been a long-standing concern, USAID and USDA lack a
shared, coordinated system to track and respond to food quality
complaints.[Footnote 14] Having disparate quality complaint tracking
mechanisms that monitor different levels of information, KCCO, USDA and
USAID are unable to determine the extent of and trends in food quality
problems. In addition, because implementing organizations track food
quality concerns differently, if at all, it is difficult for them to
coordinate to share concerns with each other and with U.S. government
agencies. For example, since WFP--which accounts for approximately 60
percent of all U.S. food aid shipments--independently handles its own
claims, KCCO officials are unable to track the quality of food aid
delivery programwide. Although KCCO established a hotline to provide
assistance on food quality complaints, KCCO officials stated that it
was discontinued because USDA and USAID officials wanted to receive
complaints directly, rather than from KCCO.
Prepositioning and New Transportation Bid Process Could Improve
Efficiency, but Their Related Long-term Costs and Benefits Have Not Yet
Been Measured:
To improve timeliness in food aid delivery, USAID has prepositioned
food aid on a limited basis,[Footnote 15] and KCCO is implementing a
new transportation bid process.[Footnote 16] USAID has used warehouses
in Lake Charles (Louisiana) since 2002 and Dubai (United Arab Emirates)
since 2004 to stock commodities in preparation for food aid
emergencies. As of August 2007, USAID had closed the warehouses that it
had been operating in Lake Charles and Dubai; it is now operating out
of San Jacinto Port (Texas) and Djibouti (East Africa). Prepositioning
is beneficial because it allows USAID to bypass lengthy procurement
processes and to reduce transportation time frames. USAID officials
told us that diverting food aid cargo to the site of an emergency
before it reaches a prepositioning warehouse further reduces response
time and eliminates storage costs. However, agencies face several
challenges to their effective management of this program. For example,
inadequate inventory management increases the risk of cargo
infestation, and limited monitoring and evaluation funds constrain
USAID's oversight capacity. Regarding KCCO's transportation bid
process, KCCO expects this new system to cut 2 weeks from procurement
time frames and to reduce cargo handling costs as cargo loading becomes
more consolidated. However, the long-term cost-effectiveness of both
prepositioning and the new bid process have not yet been measured.
Monetization Is an Inefficient, Expanding Practice and Agencies' Lack
of Electronic Data Impedes Their Monitoring Ability:
The current practice of selling commodities as a means to generate
resources for development projects--monetization--is an inherently
inefficient yet expanding use of food aid. Monetization entails not
only the costs of procuring, shipping, and handling food, but also the
costs of marketing and selling it in recipient countries. Furthermore,
the time and expertise needed to market and sell food abroad requires
NGOs to divert resources from their core missions. However, the
permissible use of revenues generated from this practice and the
minimum level of monetization allowed by the law have expanded. The
monetization rate for Title II nonemergency food aid has far exceeded
the minimum requirement of 15 percent,[Footnote 17] reaching close to
70 percent in 2001 but declining to about 50 percent in 2005.
Despite these inefficiencies, U.S. agencies do not collect or maintain
data electronically on monetization revenues, and the lack of such data
impedes the agencies' ability to fully monitor the degree to which
revenues can cover the costs related to monetization. USAID used to
require that monetization revenues cover at least 80 percent of costs
associated with delivering food to recipient countries, but this
requirement no longer exists. Neither USDA nor USAID was able to
provide us with data on the revenues generated through monetization.
These agencies told us that the information should be in the results
reports, which are in individual hard copies and not available in any
electronic database.
Various Challenges Reduce the Effective Use of Food Aid:
Various challenges to implementation, improving nutritional quality,
and monitoring reduce the effectiveness of food aid programs in
alleviating hunger. Since U.S. food aid assists only about 11 percent
of the estimated hungry population worldwide, it is critical that
donors and implementers use it effectively by ensuring that it reaches
the most vulnerable populations and does not cause negative market
impact. However, challenging operating environments and resource
constraints limit implementation efforts in terms of developing
reliable estimates of food needs and responding to crises in a timely
manner with sufficient food and complementary assistance. Furthermore,
some impediments to improving the nutritional quality of U.S. food aid,
including lack of interagency coordination in updating food aid
products and specifications, may prevent the most nutritious or
appropriate food from reaching intended recipients. Despite these
concerns, USAID and USDA do not sufficiently monitor food aid programs,
particularly in recipient countries, as they have limited staff and
competing priorities and face legal restrictions on the use of food aid
resources.
Challenging Operating Environments Have Hindered Implementation of Food
Aid Programs in Recipient Countries:
Difficult operating environments characterized by poor infrastructure
and concerns about physical safety and security have impeded access to
the most vulnerable populations and caused delays in providing food
aid, especially in conflict zones. We recently reported that ongoing
violence and an increase in attacks on humanitarian staff in the Darfur
region of Sudan limited the ability of implementing organizations to
access parts of the region and provide food and other assistance to
vulnerable populations including internally displaced persons. As a
result, approximately 460,000 people in northern Darfur were cut off
from emergency food aid in July 2006, and 355,000 people were still not
receiving food aid in August 2006, according to UN sources.[Footnote
18]
Insufficient coordination among key stakeholders and use of
noncomparable methods has resulted in disparate assessments of food
needs and numbers of recipients. For example, according to an NGO
official in Zambia, the Zambian government and NGOs conducted two
parallel but separate assessments in 2005 that resulted in
significantly different estimates. This discrepancy led to a 6-month
delay in declaring an emergency while the difference in assessment
results was resolved.
Accurately identifying vulnerable populations and the causes of their
vulnerability has been difficult due to the complexity of factors--such
as poverty, environmental degradation, and disease--that contribute to
food insecurity.[Footnote 19] For example, donors and implementers
misdiagnosed the cause of the 2005 food crisis in Niger as a lack of
food availability, when in fact it was caused by other factors such as
health, water, and sanitation problems, according to WFP and USAID
assessments. As a result, although the crisis reached emergency
proportions in February 2005, donors did not respond until May 2005 and
recipients did not receive food until August 2005. The request for aid
was revised 7 times in the interim because insufficient understanding
of the causes of the crisis initially led to a disagreement between the
recipient government and WFP on how to respond to the situation.
Limitations on the amount and use of cash resources have adversely
affected the quality and timing of assessments, particularly for Title
II-funded programs. U.S. agencies provide very limited or no resources
to conduct assessments prior to the implementing organizations'
submission of proposals requesting food aid.[Footnote 20] This is
because requests for cash for materials or activities related to U.S.
food aid funding, such as assessments, must accompany requests for food
commodities. Since cash is in effect tied to requests for commodities,
the U.S. government cannot provide assistance for activities such as
needs assessments that may enhance the use of food aid but may not
require commodities at the same time.
Resource constraints have also limited the quantity of food and other
complementary assistance that is provided to intended
recipients.[Footnote 21] In 2003, we reported that due to the lack of
adequate donor funding in Afghanistan, food rations to refugees and
internally displaced persons were reduced to a third of the original
planned amount, and program implementation was delayed by up to 10
weeks in some cases.[Footnote 22] During our field work, we found
instances where insufficient complementary assistance to meet basic
needs in addition to food has also limited the benefits of food aid to
recipients. For example, people with HIV/AIDS receiving food aid in
Wukuru, Ethiopia, informed us that they sold part of their food rations
to pay for other basic necessities because they lack other assistance
or income.
Impediments to Improving Nutritional Quality Reduce the Benefits of
Food Aid:
Some impediments to improving nutritional quality further reduce the
effectiveness of food aid. Although U.S. agencies have made efforts to
improve the nutritional quality of food aid, the appropriate
nutritional value of the food and the readiness of U.S. agencies to
address nutrition-related quality issues remain uncertain. Further,
existing interagency food aid working groups have not resolved
coordination problems on nutrition issues. Moreover, USAID and USDA do
not have a central interagency mechanism to update food aid products
and their specifications.[Footnote 23] As a result, vulnerable
populations may not be receiving the most nutritious or appropriate
food from the agencies, and disputes may occur when either agency
attempts to update the products.
U.S. Agencies Do Not Sufficiently Monitor Food Aid Programs:
Although USAID and USDA require implementing organizations to regularly
monitor and report on the use of food aid, these agencies have
undertaken limited field-level monitoring of food aid programs. Agency
inspectors general have reported that monitoring has not been regular
and systematic, that in some cases intended recipients have not
received food aid, or that the number of recipients could not be
verified. Our audit work also indicates that monitoring has been
insufficient due to various factors including limited staff, competing
priorities, and legal restrictions on the use of food aid resources. In
fiscal year 2006, although USAID had some non-Title II-funded staff
assigned to monitoring, it had only 23 Title II-funded USAID staff
assigned to missions and regional offices in 10 countries to monitor
programs costing about $1.7 billion in 55 countries.[Footnote 24] USDA
administers a smaller proportion of food aid programs than USAID and
its field-level monitoring of food aid programs is more limited.
Without adequate monitoring from U.S. agencies, food aid programs may
not effectively direct limited food aid resources to those populations
most in need. As a result, agencies may not be accomplishing their goal
of getting the right food to the right people at the right time.
Conclusions:
U.S. international food aid programs have helped hundreds of millions
of people around the world survive and recover from crises since the
Agricultural Trade Development and Assistance Act (P.L. 480) was signed
into law in 1954. Nevertheless, in an environment of increasing
emergencies, tight budget constraints, and rising transportation and
business costs, U.S. agencies must explore ways to optimize the
delivery and use of food aid. U.S. agencies have taken some measures to
enhance their ability to respond to emergencies and streamline the
myriad processes involved in delivering food aid. However,
opportunities for further improvement remain to ensure that limited
resources for U.S. food aid are not vulnerable to waste, are put to
their most effective use, and reach the most vulnerable populations on
a timely basis.
To improve the efficiency of U.S. food aid--in terms of its amount,
timeliness, and quality--we recommended in our previous report that the
Administrator of USAID and the Secretaries of Agriculture and
Transportation (1) improve food aid logistical planning through cost-
benefit analysis of supply-management options; (2) work together and
with stakeholders to modernize ocean transportation and contracting
practices; (3) seek to minimize the cost impact of cargo preference
regulations on food aid transportation expenditures by updating
implementation and reimbursement methodologies to account for new
supply practices; (4) establish a coordinated system for tracking and
resolving food quality complaints; and (5) develop an information
collection system to track monetization transactions.
To improve the effective use of food aid, we recommended that the
Administrator of USAID and the Secretary of Agriculture (1) enhance the
reliability and use of needs assessments for new and existing food aid
programs through better coordination among implementing organizations,
make assessments a priority in informing funding decisions, and more
effectively build on lessons from past targeting experiences; (2)
determine ways to provide adequate nonfood resources in situations
where there is sufficient evidence that such assistance will enhance
the effectiveness of food aid; (3) develop a coordinated interagency
mechanism to update food aid specifications and products to improve
food quality and nutritional standards; and (4) improve monitoring of
food aid programs to ensure proper management and implementation.
DOT, USAID, and USDA--the three U.S. agencies to whom we directed our
recommendations--have submitted written statements to congressional
committees, as required by law, to report actions they have taken or
begun to take to address our recommendations. In May 2007, these
agencies established an interagency Executive Working Group to identify
ways to respond to several of our recommendations. DOT stated that it
strongly supported the transportation-related initiatives we
recommended, noting that they offer the potential to help U.S. agencies
achieve efficiencies and reduce ocean transportation costs while
supporting the U.S. merchant fleet. USAID outlined actions it is
considering, has initiated, or intends to take to address each of our
nine recommendations. USDA stated that in general it found our
recommendations to be helpful and cited some of its ongoing efforts to
improve its food aid programs. However, USDA questioned some of our
conclusions that it believed were the result of weaknesses in our
methodology. For example, USDA does not agree that the current practice
of monetization as a means to generate cash for development projects is
an inherently inefficient use of resources. We maintain that it is an
inherently inefficient use of resources because it requires food to be
procured, shipped, and eventually sold, and the revenues from
monetization may not recover shipping, handling, and other costs.
Furthermore, U.S. agencies do not electronically collect data on
monetization revenues, without which their ability to adequately
monitor the degree to which revenues cover costs is impeded. We stand
by our conclusions and recommendations, which are based on a rigorous
and systematic review of multiple sources of evidence, including
procurement and budget data, site visits, previous audits, agency
studies, economic literature, and testimonial evidence collected in
both structured and unstructured formats.
Madam Chair and Members of the Subcommittee, this concludes my prepared
statement. I would be pleased to answer any questions that you may
have.
GAO Contact and Staff Acknowledgments:
Should you have any questions about this testimony, please contact
Thomas Melito, Director, at (202) 512-9601 or MelitoT@gao.gov. Other
major contributors to this testimony were Phillip Thomas (Assistant
Director), Carol Bray, Ming Chen, Debbie Chung, Martin De Alteriis,
Leah DeWolf, Mark Dowling, Etana Finkler, Kristy Kennedy, Joy Labez,
Kendall Schaefer, and Mona Sehgal.
[End of section]
Appendix I: Program Authorities:
The United States has principally employed six programs to deliver food
aid: Public Law (P.L.) 480 Titles I, II, and III; Food for Progress;
the McGovern-Dole Food for Education and Child Nutrition; and Section
416(b). Table 1 provides a summary of these food aid programs.
Table 1: U.S. Food Aid by Program Authority:
Program;
Program: Total budget[A];
P.L. 480: Title I: $30 million;
P.L. 480: Title II: $1,706.9 million;
P.L. 480: Title III: 0[B];
Food for Progress: $207.8 million;
McGovern-Dole Food for Education
and Child Nutrition: $97 million;
Section 416(b): $20.8 million[C].
Program: Managing agency;
P.L. 480: Title I: USDA;
P.L. 480: Title II: USAID;
P.L. 480: Title III: USAID;
Food for Progress: USDA;
McGovern-Dole Food for Education
and Child Nutrition: USDA[D];
Section 416(b): USDA.
Program: Year established;
P.L. 480: Title I: 1954;
P.L. 480: Title II: 1954;
P.L. 480: Title III: 1954;
Food for Progress: 1985;
McGovern-Dole Food for Education
and Child Nutrition: 2003;
Section 416(b): 1949.
Program: Description of assistance;
P.L. 480: Title I: Concessional sales of agricultural commodities;
P.L. 480: Title II: Donation of commodities to meet emergency and
nonemergency needs; commodities may be sold in-country for development
purposes;
P.L. 480: Title III: Donation of commodities to governments of least
developed countries;
Food for progress: Donation or credit sale of commodities to developing
countries and emerging democracies;
McGovern-Dole Food for Education and Child Nutrition: Donation of
commodities and provision of financial and technical assistance in
foreign countries;
Section 416(b): Donations of surplus commodities to carry out purposes
of P.L. 480 (Title II and Title III) and Food for Progress programs.
Program: Type of assistance;
P.L. 480: Title I: Nonemergency;
P.L. 480: Title II: Emergency and nonemergency;
P.L. 480: Title III: Nonemergency;
for progress: Emergency and nonemergency;
McGovern-Dole Food for Education and Child Nutrition: Nonemergency;
Section 416(b): Emergency and nonemergency.
Program: Implementing partners;
P.L. 480: Title I: Governments and private
entities;
P.L. 480: Title II: World Food Program and NGOs;
P.L. 480: Title III: Governments;
Food for progress: Governments, agricultural trade organizations,
intergovernmental organizations, NGOs, and cooperatives;
McGovern-Dole Food for Education and Child Nutrition: Governments,
private entities, intergovernmental organizations;
Section 416(b): See implementing partners for Title II, Title III, and
Food for Progress programs.
Source: GAO analysis based on USAID and USDA data.
[A] Budget data are for fiscal 2006. USDA data represent programmed
funding, while USAID data represent appropriated funds as of August
2006.
[B] This program has not been funded in recent years.
[C] This program is currently inactive due to the unavailability of
government-owned commodities. Because it is permanently authorized, it
does not require reauthorization under the Farm Bill.
[D] USDA administers this program as stipulated by law, which states
that the President shall designate one or more federal agencies.
[End of table]
[End of section]
Footnotes:
[1] According to FAO's 2006 The State of Food and Agriculture report,
conditions in Asia have improved while those in Africa have worsened.
[2] While we acknowledge that commodity prices also affect tonnage,
there has been no clear trend in total average commodity prices for
food aid programs from fiscal years 2002 through 2006.
[3] GAO, Foreign Assistance: Various Challenges Impede the Efficiency
and Effectiveness of U.S. Food Aid, GAO-07-560 (Washington, D.C.: Apr.
13, 2007).
[4] 31 U.S.C. 720 requires the head of a federal agency to submit a
written statement of actions taken on GAO recommendations to the Senate
Committee on Homeland Security and Governmental Affairs and the House
Committee on Government Reform not later than 60 calendar days from the
date of the report, and to the House and Senate Committees on
Appropriations with the agency's first request for appropriations made
more than 60 calendar days after that date.
[5] In-kind food aid usually comes in two forms: nonprocessed foods and
value-added foods. Nonprocessed foods consist of whole grains like
wheat, corn, peas, beans, and lentils. Value-added foods consist of
processed foods that are manufactured and fortified to particular
specifications and include milled grains, such as cornmeal and bulgur,
and fortified milled products, such as corn soy blend (CSB) and wheat
soy blend (WSB).
[6] WFP relies entirely on voluntary contributions to finance its
humanitarian and development projects, and national governments are its
principal source of funding. More than 80 countries fund the
humanitarian and development projects of WFP.
[7] The authority for these U.S. international food aid programs is
provided through P.L. 480 (the Agricultural Trade Development and
Assistance Act of 1954, as amended, 7 USC § 1701 et seq.); the Food for
Progress Act of 1985, as amended, 7 USC § 1736o; section 416(b) of the
Agricultural Act of 1949, as amended, 7 USC § 1431; and the Farm
Security and Rural Investment Act of 2002 (P.L. 107-171).
[8] See GAO, Food Aid: Experience of U.S. Programs Suggests
Opportunities for Improvement, GAO-02-801T (Washington, D.C.: June 4,
2002).
[9] As of January 2007, the Bill Emerson Humanitarian Trust held about
$107.2 million in cash and about 915,350 metric tons of wheat valued at
$133.9 million. The Food Assistance Policy Council--including
representatives from USDA, USAID, and other key government agencies--
oversees the trust. The Secretary of Agriculture authorizes the use of
the trust in consultation with the Food Assistance Policy Council.
[10] P.L. 104-239, 110 Stat. 3138. See GAO, Maritime Security Fleet:
Many Factors Determine Impact of Potential Limits on Food Aid
Shipments, GAO-04-1065 (Washington, D.C.: Sept. 13, 2004).
[11] These figures exclude prices for nonfat dry milk and vegetable
oil.
[12] U.S.-flag rates are subject to DOT's Fair and Reasonable Rate
guidelines, which take into account operating and capital costs, cargo
handling costs, and depreciation. See 46 C.F.R. 382.3.
[13] The Food Security Act of 1985 requires DOT to reimburse food aid
agencies for a portion of the OFD cost and for ocean transportation
costs that exceed 20 percent of total program costs. Reimbursement
methodologies are governed by a 1987 interagency memorandum of
understanding.
[14] GAO uses the term food quality to refer to the degree of food
spoilage, infestation, contamination and/or damage that can result from
factors such as inadequate fumigation, poor warehouse conditions, and
transportation delays.
[15] P.L. 480 authorizes USAID to preposition food aid both
domestically and abroad with a cap on storage expenses of $2 million
per fiscal year.
[16] In the prior two-step system, during a first procurement round,
commodity vendors bid on contracts and ocean carriers indicated
potential freight rates. Carriers provided actual rate bids during a
second procurement round once the location of the commodity vendor had
been determined. In the new one-step system, ocean carriers will bid at
the same time as commodity vendors.
[17] In 1990, Congress increased the minimum monetization rate to 10
percent and the permissible use of monetized revenues was expanded to
include broad development purposes, including agricultural
development. In 1996, the minimum monetization level was further
increased to 15 percent for non-emergency Title II.
[18] GAO, Darfur Crisis: Progress in Aid and Peace Monitoring
Threatened by Ongoing Violence and Operational Challenges, GAO-07-9
(Washington, D.C.: Nov. 9, 2006).
[19] According to WFP officials in southern Africa, identifying people
with HIV/AIDS who need food aid has been very difficult because the
social stigma associated with the disease may discourage intended
recipients from getting tested for it. It is also difficult to assess
whether deterioration in health is due to hunger or the disease itself.
[20] USAID provides NGOs limited funding through institutional capacity-
building grants that are not directly linked to proposals requesting
food for projects. Additionally, in some cases, USAID has provided
resources other than Title II to undertake assessments and data
collection efforts.
[21] To ensure that limited food aid resources are targeted to areas
where they are most needed, USAID identified 15 priority countries in
2006 for nonemergency or development programs. According to USAID
officials, focusing resources on the most vulnerable countries will
help to build their resilience and ensure that food aid will be less
necessary in the future.
[22] GAO, Foreign Assistance: Lack of Strategic Focus and Obstacles to
Agricultural Recovery Threaten Afghanistan's Stability, GAO-03-607
(Washington, D.C.: June 2003).
[23] Food aid commodity specifications include specific requirements
that the commodity vendor must follow to meet USDA's contracts for
producing and delivering the commodities. The specifications contain
standards relating to the quality, appearance, and delivery of the
product; conditions under which it is to be grown or produced; explicit
descriptions regarding its nutrient content; and details of the
inspection process.
[24] In addition to Title II-funded positions, USAID missions and
regional offices have positions that are funded through other sources,
such as development assistance or operating budgets for these offices.
Although staff in these positions may participate in monitoring food
aid programs, they also administer other development assistance
programs.
GAO's Mission:
The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting
its constitutional responsibilities and to help improve the performance
and accountability of the federal government for the American people.
GAO examines the use of public funds; evaluates federal programs and
policies; and provides analyses, recommendations, and other assistance
to help Congress make informed oversight, policy, and funding
decisions. GAO's commitment to good government is reflected in its core
values of accountability, integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each
weekday, GAO posts newly released reports, testimony, and
correspondence on its Web site. To have GAO e-mail you a list of newly
posted products every afternoon, go to [hyperlink, http://www.gao.gov]
and select "Subscribe to Updates."
Order by Mail or Phone:
The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or
more copies mailed to a single address are discounted 25 percent.
Orders should be sent to:
U.S. Government Accountability Office:
441 G Street NW, Room LM
Washington, D.C. 20548:
To order by Phone:
Voice: (202) 512-6000:
TDD: (202) 512-2537:
Fax: (202) 512-6061:
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]:
E-mail: fraudnet@gao.gov:
Automated answering system: (800) 424-5454 or (202) 512-7470:
Congressional Relations:
Gloria Jarmon, Managing Director, JarmonG@gao.gov:
(202) 512-4400:
U.S. Government Accountability Office:
441 G Street NW, Room 7125:
Washington, D.C. 20548:
Public Affairs:
Susan Becker, Acting Manager, Beckers@gao.gov:
(202) 512-4800:
U.S. Government Accountability Office:
441 G Street NW, Room 7149:
Washington, D.C. 20548:
