Foreign Assistance
Various Challenges Impede the Efficiency and Effectiveness of U.S. Food Aid Gao ID: GAO-07-560 April 13, 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 over the last 5 years. These costs represent 65 percent of total emergency food aid, highlighting the need to maximize its efficiency and effectiveness. Based on analysis of agency documents, interviews with experts and practitioners, and fieldwork, this report examines 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. Specific factors that cause inefficiencies include (1) funding and planning processes that increase delivery costs and lengthen 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 to track and respond to food and delivery problems. U.S. agencies have taken some steps to address timeliness concerns. The U.S. Agency for International Development (USAID) has been stocking or prepositioning food commodities domestically and abroad, and the U.S. Department of Agriculture (USDA) has implemented a new transportation bid process, but the long-term cost effectiveness of these initiatives has not yet been measured. In addition, the current practice of using food aid to generate cash for development projects--monetization--is an inherently inefficient use of resources. 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) difficulty in identifying vulnerable groups and causes of their food insecurity; and (4) resource constraints on conducting reliable assessments and providing food and other assistance. Further, some impediments to improving the nutritional quality of U.S. food aid may reduce the benefits of food aid 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.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-07-560, Foreign Assistance: Various Challenges Impede the Efficiency and Effectiveness of U.S. Food Aid
This is the accessible text file for GAO report number GAO-07-560
entitled 'Foreign Assistance: Various Challenges Impede the Efficiency
and Effectively of U.S. Food Aid' which was released on April 13, 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.
Report to the Committee on Agriculture, Nutrition, and Forestry, U.S.
Senate:
United States Government Accountability Office:
GAO:
April 2007:
Foreign Assistance:
Various Challenges Impede the Efficiency and Effectiveness of U.S. Food
Aid:
GAO-07-560:
GAO Highlights:
Highlights of GAO-07-560, a report to the Committee on Agriculture,
Nutrition, and Forestry, U.S. Senate
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 over
the last 5 years. These costs represent 65 percent of total emergency
food aid, highlighting the need to maximize its efficiency and
effectiveness. Based on analysis of agency documents, interviews with
experts and practitioners, and fieldwork, this report examines 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. Specific
factors that cause inefficiencies include (1) funding and planning
processes that increase delivery costs and lengthen 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 to track and respond to food
and delivery problems. U.S. agencies have taken some steps to address
timeliness concerns. The U.S. Agency for International Development
(USAID) has been stocking or prepositioning food commodities
domestically and abroad, and the U.S. Department of Agriculture (USDA)
has implemented a new transportation bid process, but the long-term
cost effectiveness of these initiatives has not yet been measured. In
addition, the current practice of using food aid to generate cash for
development projects”monetization”is an inherently inefficient use of
resources. 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:
[See PDF for Image]
Source: GAO analysis of USAID and USDA 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) difficulty in
identifying vulnerable groups and causes of their food insecurity; and
(4) resource constraints on conducting reliable assessments and
providing food and other assistance. Further, some impediments to
improving the nutritional quality of U.S. food aid may reduce the
benefits of food aid 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 recommends that the Administrator of USAID and the Secretaries of
Agriculture and Transportation enhance the efficiency and effectiveness
of U.S. food aid by improving logistical planning, transportation
contracting, and monitoring, among other actions. DOT supports the
transportation initiatives GAO highlighted. While recognizing that
improvements can be made, USAID and USDA did not directly respond to
GAO‘s recommendations but disagreed with some of GAO‘s analysis.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-560].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Thomas Melito at (202)
512-9601 or MelitoT@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Multiple Challenges Hinder the Efficiency of U.S. Food Aid Programs:
Various Challenges Reduce the Effective Use of Food Aid:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Program Authorities and Congressional Mandates:
Appendix III: Ensuring Food Aid Reaches Intended Recipients Is
Important to Avoid Market Distorting Effect of Food Aid:
Appendix IV: Food Distribution Activities to Target Recipients of Food
Aid:
Appendix V: Comments from the U.S. Department of Transportation:
GAO Comment:
Appendix VI: Comments from the U.S. Agency for International
Development:
GAO Comments:
Appendix VII: Comments from the U.S. Department of Agriculture:
GAO Comments:
Appendix VIII: GAO Contact and Staff Acknowledgments:
Related GAO Products:
Tables:
Table 1: USAID Tonnage and Costs for Prepositioning, Fiscal Years 2005
through 2006:
Table 2: U.S. Food Aid by Program Authority:
Table 3: Congressional Mandates for P.L. 480:
Figures:
Figure 1: The United States Was the Largest Provider of WFP Food Aid in
2006:
Figure 2: Regions That Received Food from the Largest U.S. Food Aid
Program in Fiscal Year 2006:
Figure 3: Nonemergencies Represent a Decreasing Share of U.S. Food Aid
from Fiscal Years 2001 through 2006:
Figure 4: Average Shares of Total Funding for U.S. Food Aid by Program
Authority from Fiscal Years 2002 through 2006:
Figure 5: U.S. Food Aid Ocean Transportation Costs:
Figure 6: An Example of a U.S. Food Aid Purchase and Its Delivery from
Vendor to Village:
Figure 7: Funding for USAID Food Aid Programs from Fiscal Year 2002 to
Fiscal Year 2006:
Figure 8: Bill Emerson Humanitarian Trust Commodity Balances (1984 to
2006):
Figure 9: Carriers Views on Costly Food Aid Ocean Transportation
Practices and Recommended Improvements:
Figure 10: Estimated Cargo Preference Ocean Freight Differential Costs
and Department of Transportation Reimbursements to Food Aid Programs:
Figure 11: Delays Led to Contamination of U.S. Food Aid in Durban,
South Africa:
Figure 12: Use of Monetization by Program Authority:
Figure 13: Targeting Process to Ensure That Food Reaches the Most
Vulnerable Populations:
Figure 14: Food Distribution Activities to Target Recipients of Food
Aid:
Abbreviations:
APHIS: Animal and Plant Health Inspection Service, U.S. Department of
Agriculture:
BEHT: Bill Emerson Humanitarian Trust:
CSB: corn soy blend:
DOD: Department of Defense:
DOT: U.S. Department of Transportation:
DOT/MARAD: Department of Transportation/U.S. Maritime Administration:
FACG: Food Aid Consultative Group:
FAM: Food Aid Management:
FAPC: Food Assistance Policy Council:
FAS: Foreign Agricultural Service, U.S. Department of Agriculture:
FAO: Food and Agriculture Organization:
ITSH: Internal Transportation, Storage, and Handling:
KCCO: Kansas City Commodity Office U.S. Department of Agriculture:
NGO: Nongovernmental organization:
OFD: ocean freight differential:
OMB: Office of Management and Budget:
PRM: Bureau of Population, Refugees, and Migration (U.S. Department of
State):
PSC: Personal Services Contractor:
SENAC: Strengthening Emergency Needs Assessment Capacity:
State: U.S. Department of State:
TCP: tricalcium phosphate:
TQSA: Total Quality Systems Audit:
UN: United Nations:
USAID: U.S. Agency for International Development:
USDA: U.S. Department of Agriculture:
WSB: wheat soy blend:
WFP: World Food Program:
United States Government Accountability Office:
Washington, DC 20548:
April 13, 2007:
The Honorable Tom Harkin:
Chairman:
The Honorable Saxby Chambliss:
Ranking Republican Member:
Committee on Agriculture, Nutrition, and Forestry:
United States Senate:
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 over the last 5 years.[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.
To inform Congress as it begins the process of reauthorizing the food
aid provisions of the Farm Bill in 2007, we examine in this report some
key challenges to the (1) efficiency of U.S. food aid programs and (2)
effective use of U.S. food aid.[Footnote 3]
To address these objectives, we analyzed food aid procurement and
transportation data provided by the U.S. Department of Agriculture's
(USDA) Kansas City Commodity Office (KCCO) and food aid budget and
expenditure data provided by USDA and the U.S. Agency for International
Development (USAID). We determined that the food aid data obtained were
sufficiently reliable for our purposes. We reviewed economic literature
on the implications of food aid on local markets and recent reports,
studies, and papers issued on U.S. and international food aid programs.
We conducted structured interviews of 14 U.S.-and foreign-flag ocean
carriers that transport over 80 percent of U.S. food aid tonnage. In
Washington, D.C., we interviewed officials from USAID, USDA, the
Departments of State (State) and Defense (DOD), the Department of
Transportation Maritime Administration (DOT/MARAD), and the Office of
Management and Budget (OMB). We also met with a number of officials
representing nongovernmental organizations (NGO) that serve as
implementing partners to USAID and USDA in carrying out U.S. food aid
programs overseas, freight forwarding companies, and agricultural
commodity groups. In Rome, we met with officials from the U.S. Mission
to the UN Food and Agriculture Agencies, the UN World Food Program
(WFP) headquarters, and FAO. We also conducted fieldwork in three
countries that are recipients of food aid--Ethiopia, Kenya, and Zambia-
-and met with officials from U.S. missions, implementing organizations,
and relevant host government agencies in these countries and South
Africa. We visited a port in Texas from which food is shipped, two food
destination ports in South Africa and Kenya, and two sites in Louisiana
and Dubai where U.S. food may be stocked prior to shipment to
destination ports. For the countries we visited, we also reviewed
numerous documents on U.S. food aid, including all the proposals that
USDA approved and approximately half of the proposals that USAID
approved from fiscal years 2002 through 2006 for the food aid programs
that they respectively administer.[Footnote 4] In January 2007, we also
convened a roundtable of 15 experts and practitioners--including
representatives from academia, think tanks, implementing organizations,
the maritime industry, and agricultural commodity groups--to further
delineate, based on GAO's initial work, some key challenges to the
efficient delivery and effective use of U.S. food aid and to explore
options for improvement. We took the roundtable participants' views
into account as we finalized our analysis of these challenges and
options. We conducted our work between May 2006 and March 2007 in
accordance with generally accepted government auditing standards.
(Appendix I provides a detailed discussion of our objectives, scope,
and methodology.)
Results in Brief:
Multiple challenges combine to hinder the efficiency of U.S. food aid
programs. These challenges reduce the amount, timeliness, and quality
of food provided. Specifically, factors that cause inefficiencies in
food aid delivery include the following:
* Funding and planning processes that increase delivery costs and
lengthen time frames. These processes make it difficult to time food
procurement and transportation to avoid commercial peaks in demand,
often resulting in higher prices than if such purchases were more
evenly distributed throughout the year.
* Ocean transportation and 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, such as improperly filled containers, 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. 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 has been stocking food commodities, or
prepositioning them, in Lake Charles (Louisiana) and Dubai (United Arab
Emirates) for the past several years and is in the process of expanding
this practice. 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. However, a number of factors limit
effectiveness including the following:
* Challenging operating environments characterized by poor
infrastructure and lack of physical safety and security in recipient
countries that restrict access to populations in need and cause delays.
Limited recipient government participation has in some cases also
contributed to insufficient or lack of timely coverage of 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.
Consequently, donor assistance has been delayed until the various
stakeholders reach agreement on these estimates. Moreover, assessments
may not be sufficiently used to inform proposed programs.
* Difficulties in identifying the most vulnerable groups and
understanding the causes of food insecurity. For example, it has been
challenging for implementing organizations to determine the causes of
chronic food insecurity in people--such as poor health and water
quality, in addition to lack of food--and provide appropriate
assistance. Moreover, these difficulties have been exacerbated by
insufficient use of best practices and institutional knowledge.
* 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, that 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.
This report makes 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
recommend 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.
DOT, USAID, and USDA provided comments on a draft of our report. We
have reprinted these agencies' comments in appendixes V, VI, and VII,
respectively, along with our responses to specific points. DOT stated
that it strongly supports the transportation initiatives highlighted in
our report, which it agrees could reduce ocean transportation costs.
USAID stated that we did not adequately recognize its recent efforts to
strategically focus resources to reduce food insecurity in highly
vulnerable countries. Although food security was not a research
objective of this study, we recognize the important linkages between
emergencies and development programs and used the new USAID Food
Security Strategic Plan for 2006-2010 to provide context, particularly
in our discussion on the effective use of food aid. USDA took issue
with a number of our findings and conclusions because it believes that
hard analysis was lacking to support many of the weaknesses that we
identified. We disagree. Each of our report findings and
recommendations is 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. DOT, USAID, and USDA, along with DOD, State, FAO, and WFP,
also provided technical comments and updated information, which we have
included throughout this report as appropriate.
Background:
Food aid comprises all food-supported interventions by foreign donors
to individuals or institutions within a country. It has helped save
millions of lives and improve the nutritional status of the most
vulnerable groups, including women and children, in developing
countries. Food aid is one element of a broader global strategy to
enhance food security[Footnote 5] by reducing poverty and improving the
availability of, access to, and use of food in low-income, less
developed countries. Food aid is utilized as both a humanitarian
response to address acute hunger in emergencies and a development-
focused response to address chronic hunger. Large-scale conflicts,
poverty, weather calamities, and severe health-related problems are
among the underlying causes of both acute and chronic hunger.
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 6] 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 is more effective and efficient, the largest
international food aid organization, the UN WFP, continues to accept
both.[Footnote 7] 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 (see fig. 1) 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.
Figure 1: The United States Was the Largest Provider of WFP Food Aid in
2006:
[See PDF for image]
Source: GAO analysis based on February 2006 WFP data.
Note: "Other donors" includes approximately 82 countries and 8 other
entities, including associations of nations, NGOs, private donors, the
Organization of Petroleum Exporting Countries fund, and international
finance institutions such as the World Bank and the African Development
Bank.
[End of figure]
Most U.S. Food Aid Goes to Africa:
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 (see fig. 2).
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.
Figure 2: Regions That Received Food from the Largest U.S. Food Aid
Program in Fiscal Year 2006:
[See PDF for image]
Sources: GAO analysis based on USAID Title II data as of August 2006;
Nova Development (map).
[End of figure]
Programs Use Assessments to Determine Emergency and Nonemergency Food
Aid Needs:
Food aid is used for emergency[Footnote 8] and nonemergency purposes.
Program design and implementation decisions for both emergency and
nonemergency situations are informed by assessments that help determine
the nature and scale of humanitarian crises and the type and scope of
assistance needed. These assessments inform the selection of geographic
areas to be targeted as well as criteria for the selection of intended
recipients.
The majority of U.S. emergency food aid resources are distributed to
affected communities and households that require food assistance to
survive an emergency and begin the process of recovery. Emergency needs
assessments include analyses of various factors, among them the effects
of the crisis on vulnerable populations, strategies used by these
populations to deal with the crisis, and the outcome in terms of food
insecurity. They are usually carried out as a joint effort by several
organizations, including FAO, WFP, and NGOs, in response to a request
from the government of an affected country. In addition to collecting
primary data, assessors may use information from other sources, such as
population estimates and agricultural data from recipient governments.
Assessors may also rely on pre-crisis vulnerability assessments and
information generated by early warning systems, such as the USAID-
funded Famine Early Warning System Network and the FAO-funded Global
International Early Warning System.
In nonemergency situations, U.S. commodities may be provided to address
chronic hunger. In addition, U.S. law allows U.S. commodities to be
sold--i.e., monetized--in developing countries to generate cash for
development activities that address causes and symptoms of chronic food
insecurity. For example, food may be provided in exchange for labor in
poor communities to build agricultural infrastructure, or cash from
monetization may be used to provide basic health services, nutrition
education, and agricultural training. Assessments conducted during
nonemergency situations help to identify vulnerable populations and the
need for food aid interventions.
Nonemergency Funding for U.S. Food Aid Has Declined:
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 (see fig. 3).
Figure 3: Nonemergencies Represent a Decreasing Share of U.S. Food Aid
from Fiscal Years 2001 through 2006:
[See PDF for image]
Source: GAO analysis of USAID and USDA data.
Note: These data represent all food aid programs administered by USAID
and USDA. USDA funding data for 2006 is estimated.
[End of figure]
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 9] the
programs serve a range of objectives, including humanitarian goals,
economic assistance, foreign policy, market development, and
international trade.[Footnote 10] (For a description of each of these
programs, see app. II.) 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 (see fig. 4). In addition, P.L. 480, as amended,
authorizes USAID to preposition food aid both domestically and abroad
with a cap on storage expenses for foreign prepositioning sites of $2
million per fiscal year.
Figure 4: Average Shares of Total Funding for U.S. Food Aid by Program
Authority from Fiscal Years 2002 through 2006:
[See PDF for image]
Source: GAO analysis of USAID and USDA data.
[A] This includes the Bill Emerson Humanitarian Trust.
[End of figure]
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 11] Other mandates
require that a minimum of 2.5 million metric tons of food aid be
provided through Title II programs and that of this amount, a
subminimum of 1.825 million metric tons be provided for nonemergency
programs.[Footnote 12] (For a summary of congressional mandates for
P.L. 480, see app. II.)
Text Box: Cargo Preference as Applied to U.S. Food Aid:
The cost-effectiveness of food aid cargo preference as a means of
supporting a U.S.-flag commercial fleet has not been studied recently.
The Department of Transportation reports that about 100 U.S.-flag
vessels”employing about 5,000 U.S. citizen mariners”have carried U.S.
food aid cargoes in the past several years. Operating U.S.-flag vessels
is relatively expensive due to taxes, health and safety regulations,
and labor costs. By providing a protected market, cargo preference
regulations are largely designed to ensure the availability of an
adequate number of U.S.-flag vessels and U.S. citizen mariners in the
event of a national defense need (see GAO-04-1065 for further details).
In 2006, 68 percent of U.S.-flag vessels participating in food aid
programs also supported DOD‘s military operations by serving as
connecting vessels in the Middle East, Korea, and Japan and
transporting ammunition, among other activities. DOD relies on
commercial vessels, mariners, and infrastructure and estimates that it
would cost DOD billions of dollars to replicate this capacity. Given
that food aid accounts for almost a third of preference cargoes, DOD
officials have indicated their support for cargo preference.
[End of text box]
Multiple U.S. Government Agencies and Stakeholders Coordinate U.S. Food
Aid Programs through Various Forums:
Multiple U.S. government agencies coordinate U.S. food aid programs.
USDA and USAID share in the administration of all U.S. food aid
programs. USDA's KCCO manages the product standards, purchase, and
delivery of all food aid commodities, while other branches of USDA--
such as the Animal and Plant Health Inspection Service (APHIS) and the
Federal Grain Inspection Service (FGIS)--conduct quality reviews and
certification of food aid products. DOT/MARAD is also involved in
supporting the ocean transport of food aid on U.S. vessels. Finally,
the U.S. Department of State works to advance U.S. food aid as part of
its international humanitarian and multilateral assistance initiatives.
U.S. food aid programs also involve many stakeholders, including
donors, implementing organizations (also known as cooperating
sponsors), agricultural commodity groups, and the maritime industry.
U.S. agencies channel U.S. food aid contributions through organizations
such as WFP, NGOs, and recipient country governments that serve as
implementing partners. The level of contributions that each
implementing partner receives varies for each food aid program. For
example, between 2001 and 2006, WFP received the majority of U.S. Title
II emergency food aid resources--approximately 78 percent--while NGOs
received 94 percent of nonemergency Title II resources. Recipient
country governments received considerable amounts of funding for USDA
food aid programs. For example, the governments received 43 percent of
funding for the Food for Progress program, while NGOs received 55
percent.
Stakeholders use various forums to discuss and coordinate U.S. food aid
programs. The principal interagency forums are the Food Assistance
Policy Council and the Food Aid Consultative Group. Led by USDA's Under
Secretary for Farm and Foreign Agricultural Services, the Food
Assistance Policy Council includes representatives from USDA, USAID,
and other key government agencies. The council oversees the Bill
Emerson Humanitarian Trust, an emergency food reserve.[Footnote 13] The
Food Aid Consultative Group, which includes various working groups, is
led by USAID's Office of Food for Peace. As stipulated by law, the Food
Aid Consultative Group includes representatives from USAID, USDA, NGOs,
and agricultural commodity groups.[Footnote 14] It meets at least twice
a year and addresses issues concerning the effectiveness of the
regulations and procedures that govern food assistance programs.
Multiple Challenges Hinder the Efficiency of U.S. Food Aid Programs:
Multiple challenges reduce the efficiency of U.S. food aid programs,
including logistical constraints that impede food aid delivery and
reduce the amount and quality of food provided as well as
inefficiencies inherent in the current practice of using food aid to
generate cash resources to fund development projects. 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 time frames
include uncertain funding and inadequate planning, ocean transportation
contracting practices that disproportionately increase risks for ocean
carriers (who then factor those risks into freight rates), legal
requirements, and inadequate coordination to systematically track and
respond to food delivery problems, such as food spoilage or
contamination. While U.S. agencies are pursuing initiatives to improve
food aid logistics--such as prepositioning food commodities--their long-
term cost-effectiveness has not yet been measured. In addition, the
current practice of selling commodities as a means to generate
resources for development projects--monetization--is an inherently
inefficient 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 away from their core missions. In addition, U.S. agencies do
not collect or maintain an electronic database 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.
Food Aid Procurement and Transportation Are Costly and Time-Consuming:
Transportation costs represent a significant share of food aid
expenditures. For the largest U.S. food aid program (Title II),
approximately 65 percent of expenditures are for transportation to the
U.S. port for export, ocean transportation, in-country delivery,
associated cargo handling costs, and administration. According to
USAID, these noncommodity expenditures have been rising in part due to
the increasing number of emergencies and the expensive nature of
logistics in such situations. For all food aid programs, rising
transportation and business costs have contributed to a 52 percent
decline in average tonnage delivered over the last 5 years.[Footnote
15] To examine procurement costs (expenditures on commodities and ocean
transportation)[Footnote 16] for all U.S. food aid programs, we
obtained KCCO procurement data for fiscal years 2002 through 2006. KCCO
data also suggest that ocean transportation has been accounting for a
larger share of procurement costs, with average freight rates rising
from $123 per metric ton in fiscal year 2002 to $171 per metric ton in
fiscal year 2006 (see fig. 5).[Footnote 17] Further, U.S. food aid
ocean transportation costs are relatively expensive compared with those
of some other donors. WFP transports both U.S. and non-U.S. food aid
worldwide at reported ocean freight costs averaging around $100 per
metric ton--representing just over 20 percent of its total procurement
costs.[Footnote 18] At current U.S. food aid budget levels, every $10
per metric ton reduction in freight rates could feed almost 850,000
more people during an average hungry season.[Footnote 19]
Figure 5: U.S. Food Aid Ocean Transportation Costs:
[See PDF for image]
Source: GAO analysis of Kansas City Commodity Office data; GAO (
photos).
Note: Total procurement costs include commodity and ocean
transportation costs. Costs incurred to transport the cargo to the U.S.
port for export are included in the commodity and ocean transportation
costs, dependent on contract terms.
[End of figure]
Delivering U.S. food aid from vendor to village is also a time-
consuming task, requiring on average 4 to 6 months. Food aid purchasing
processes and sample time frames are illustrated in figure 6. While
KCCO purchases food aid on a monthly basis, it allows implementing
partner orders to accumulate for 1 month prior to purchase in order to
buy in scale. KCCO then purchases the commodities and receives
transportation offers leading to awards of transportation contracts
over the following month. Commodity vendors bag the food and ship it to
a U.S. port for export during the next 1 to 2 months.[Footnote 20]
After an additional 40 to 50 days for ocean transportation to
Africa,[Footnote 21] for example, the food arrives at an overseas port,
where it is trucked or railroaded to the final distribution location
over the next few weeks. While agencies have in some cases tried to
expedite food aid delivery, the entire logistics process often lacks
the timeliness required to meet humanitarian needs in emergencies and
may at times result in food spoilage. Additionally, the largest tonnage
of U.S. food aid is purchased during August and September. Average
tonnage purchased during the fourth quarter of the last 5 fiscal years
has exceeded that purchased during the second and third quarters by
more than 40 percent. Given a 6-month delivery window, these food
commodities do not arrive in country in most cases until the end of the
peak hungry season (from October through January in southern Africa,
for example).[Footnote 22]
Figure 6: An Example of a U.S. Food Aid Purchase and Its Delivery from
Vendor to Village:
[See PDF for image]
Sources: GAO analysis of USAID and USDA data; GAO and Art Resources (
photos).
[End of figure]
Various Factors Cause Inefficiencies in Food Aid Logistics:
Food aid logistics are costly and time-consuming for a variety of
reasons. First, uncertain funding processes for emergencies can result
in bunching of food aid purchases, which increases food and
transportation costs and lengthens delivery time frames. Many experts,
officials, and stakeholders emphasized the need for improved logistical
planning. Second, 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.
Third, legal requirements such as cargo preference can increase
delivery costs. Although DOT reimburses food aid agencies for certain
transportation expenditures, the sufficiency of reimbursement levels
varies and officials disagree on whether the levels are sufficient to
cover the additional costs of such requirements. Fourth, when food
delivery problems arise, such as food spoilage or contamination, U.S.
agencies and stakeholders lack adequately coordinated mechanisms to
systematically track and respond to complaints.
Funding and Planning Processes Increase Delivery Costs and Lengthen
Time Frames:
Uncertain funding processes, combined with reactive and insufficiently
planned procurement, increase food aid delivery costs and time frames.
Food aid emergencies are increasingly common and now account for 70
percent of USAID program expenditures. To respond to sudden-onset
emergencies--such as Afghanistan in 2002; Iraq in 2003; Sudan, Eritrea,
and Ethiopia in 2005; and Sudan and the Horn of Africa in 2006--U.S.
agencies largely rely on supplemental appropriations and the Bill
Emerson Humanitarian Trust (BEHT) to augment annual appropriations by
up to a quarter of their budget. Figure 7, for example, illustrates
that USAID supplemental appropriations and other funding in addition to
its annual appropriations have ranged from $270 million in fiscal year
2002 and $350 million in fiscal year 2006 to over $600 million annually
in fiscal years 2003 and 2005. Agency officials and implementing
partners told us that the uncertainty of whether, when, and at what
levels supplemental appropriations would be forthcoming hampers their
ability to plan both emergency and nonemergency food aid programs on a
consistent, long-term basis and to purchase food at the best price.
Although USAID and USDA instituted multiyear planning approaches in
recent years, uncertain supplemental funding has caused them to adjust
or redirect funds from prior commitments, according to agency
officials.
Figure 7: Funding for USAID Food Aid Programs from Fiscal Year 2002 to
Fiscal Year 2006:
[See PDF for image]
Source: GAO analysis based on USAID budget data.
[End of figure]
Agencies and implementing organizations also face uncertainty about the
availability of BEHT funds. As of January 2007, BEHT held about $107.2
million in cash and around 915,350 metric tons of wheat valued at
$133.9 million--a grain balance that could support two major
emergencies based on an existing authority to release up to 500,000
metric tons per fiscal year and another 500,000 of commodities that
could have been, but were not, released from previous fiscal years.
Although the Secretary of Agriculture and the USAID Administrator have
agreed that the $341 million combined value of commodity and cash
currently held in BEHT is more than adequate to cover expected usage
over the current authorization period, the authorization is scheduled
to expire on September 30, 2007. Resources have been drawn from BEHT on
12 occasions since 1984 (see fig. 8). For example, in fiscal year 2005,
$377 million from the trust was used to procure 700,000 metric tons of
commodities for Ethiopia, Eritrea, and Sudan. However, experts and
stakeholders with whom we met noted that the trust lacks an effective
replenishment mechanism--withdrawals from BEHT must be reimbursed by
the procuring agency or by direct appropriations for reimbursement, and
legislation establishing BEHT capped the annual amount of reimbursement
from P.L. 480 at $20 million.[Footnote 23]
Figure 8: Bill Emerson Humanitarian Trust Commodity Balances (1984 to
2006):
[See PDF for image]
Source: GAO based on USDA data.
[End of figure]
Inadequately planned food and transportation procurement reflects the
uncertainty of food aid funding. As previously discussed, KCCO
purchases the largest share of food aid tonnage during the last quarter
of each fiscal year. This bunching of procurement occurs in part
because USDA requires 6 months to approve programs and/or because funds
for both USDA and USAID programs may not be received until the middle
of a fiscal year (after OMB has approved budget apportionments for the
agencies) or through a supplemental appropriation. USAID officials
stated that they have reduced procurement bunching through improved
cash flow management.[Footnote 24] Although USAID has had 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. 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 25] Procurement bunching also stresses KCCO operations
and can result in costly and time-consuming congestion for ports,
railways, and trucking companies.
While agencies face challenges to improving procurement planning given
the uncertain nature of supplemental funding in particular,
stakeholders and experts emphasized the importance of such efforts. For
example, 11 of the 14 ocean carriers we interviewed stated that reduced
procurement bunching could greatly reduce transportation costs. When
asked about bunching, agency officials, stakeholders, and experts
suggested the following potential improvements:
* Improved communication and coordination. KCCO and WFP representatives
suggested that USAID and USDA improve coordination of purchases to
reduce bunching. KCCO has also established a web-based system for
agencies and implementing organizations to enter up to several years'
worth of commodity requests. However, implementing organizations are
currently only entering purchases for the next month. Additionally,
since the statute that established the Food Aid Consultative Group does
not specify including transportation stakeholders, DOT officials and
ocean carriers strongly recommended establishing a formal mechanism for
improving coordination and transportation planning.[Footnote 26]
* Increased flexibility in procurement schedules. USAID expressed
interest in an additional time slot each month for food aid purchases.
Several ocean carriers expressed interest in shipping food according to
cargo availability rather than through preset shipping windows that
begin 4 weeks and 6 weeks after each monthly purchase. Although KCCO
has established shipping windows to avoid port congestion, DOT
representatives believe that carriers should be able to manage their
own schedules within required delivery time frames.
* Increased use of historical analysis. DOT representatives, experts,
and stakeholders emphasized that USAID and USDA should increase their
use of historical analysis and forecasting to improve procurement.
USAID has examined historical trends to devise budget proposals
prepared 2 years in advance, and it is now beginning to use this
analysis to improve timing of procurement. However, neither USAID nor
USDA has used historical analysis to establish more efficient
transportation practices, such as the long-term agreements commonly
used by DOD.[Footnote 27] For example, WFP is now using forecasting to
improve purchasing patterns through advanced financing but is unable to
use this financing for U.S. food aid programs due to legal and
administrative constraints.
Text box: WFP and DOD Planning:
In 2003, WFP reviewed its business process and found that most delays
in food aid delivery occurred during the funding process. In
implementing a new business model, WFP is improving food aid delivery
with logistical planning tools and advanced financing mechanisms based
on historical analysis and forecasted contributions. Through several
pilot programs, WFP estimates that its new business model allows it to
reach about 20 to 30 percent more beneficiaries more rapidly and
economically. DOD has improved its logistics with long-term
transportation agreements. DOD‘s international agreement for liner
service, called the Universal Service Contract, has resulted in
significantly lower freight rates, according to DOD and DOT officials.
Transportation experts emphasize that long-term agreements include
incentives to improve carrier performance and do not reduce
competition. To meet the unique needs of food aid programs, long-term
agreements could include flexibility and be used for countries with
persistent food insecurity. For example, DOT found that 31 percent of
the countries receiving food aid from 1994 to 2003 received over 50
percent of U.S. food aid every year.WFP and DOD Planning
[End of text box]
Ocean Transportation Contracting Practices Increase Delivery Costs and
Contribute to Delays:
Ocean transportation contracting practices are a second factor
contributing to higher food aid costs. 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.[Footnote 28] Examples of costly contracting
practices include the following.
* Noncommercial and nonstandardized freight terms. Food aid contracts
often define freight terms differently than commercial contracts and
place increased liability on ocean carriers.[Footnote 29] For example,
many food aid contracts hold ocean carriers responsible for logistical
problems such as improperly filled containers that may occur at the
load port before they arrive. Many food aid contracts also hold ocean
carriers responsible for logistical problems, such as truck delays or
improper port documentation, that may occur at the discharge port after
they arrive. One carrier reported financial losses of around $1 million
for an instance where, to be able to deliver food aid to a port in
Madagascar, the carrier was required to wait almost 60 days for a
vessel already at port to finish unloading and to assist the government
in repairing port discharging equipment.[Footnote 30] Further, several
carriers reported that food aid contracts are not sufficiently
standardized. Although USDA and USAID created a standard contract for
nonbulk shipments,[Footnote 31] contracts for bulk shipments (which
accounted for 63 percent of total food aid tonnage in fiscal year 2006)
have not yet been standardized. To account for risks that are unknown
or outside their control, carriers told us that they charge higher
freight rates.[Footnote 32]
* Impractical time requirements. Food aid contracts may include
impractical time requirements, but agencies disagree on how frequently
this occurs. Although USAID officials reviewed contract time
requirements and described them as reasonable, they also indicated that
transportation delays often result from poor carrier performance and
the diminishing number of ocean carriers participating in food aid
programs.[Footnote 33] Several implementing organizations also
complained about inadequate carrier performance. WFP representatives,
for example, provided several examples of ocean shipments in 2005 and
2006 that were more than 20 days late. While acknowledging that
transportation delays occur, DOT officials indicated that these delays
often result from problems at a discharge port on the vessel's previous
food aid voyage. DOT officials also stated that although contract time
requirements are being made more reasonable, some contracts still
include requirements that are impossible for carriers to meet. For
example, one carrier complained about a contract that required the same
delivery date for four different ports. When carriers do not meet time
requirements, they must often pay costly penalties.[Footnote 34]
Carriers reported that they review contracts in advance and, where time
requirements are deemed implausible, factor the anticipated penalty
into the freight rate.[Footnote 35] While agencies do not
systematically collect data on time requirements and penalties
associated with food aid contracts, DOT officials examined a subset of
contracts from December 2005 to September 2006 and estimated that 13
percent of them included impractical time requirements. Assuming that
the anticipated penalties specified in the contracts analyzed were
included in freight rates, food aid costs may have increased by almost
$2 million (monies that could have been used to provide food to more
than 57,000 additional beneficiaries during a typical hungry season).
* Lengthy claims processes. Lengthy processes for resolving
transportation disputes discourage both carriers and implementing
organizations from filing claims. According to KCCO officials,
obtaining needed documentation for a claim can require several years,
and disputed claims must be resolved by the Department of Justice.
USAID's Inspector General reported that inadequate and irregular review
of claims by USAID and USDA has also contributed to delayed
resolution.[Footnote 36] Currently, KCCO has over $6 million in open
claims, some of which were filed prior to fiscal year 2001. For ocean
carriers, the process is burdensome and encourages them to factor
potential losses into freight rates rather than pursue claims.
Incentives for most implementing organizations are even weaker given
that monies recovered from claims reimburse the overall food aid budget
rather than the organization that experienced the loss.[Footnote 37]
According to KCCO and WFP officials, transportation claims are filed
for less than 2 percent of cargo. However, several experts and
implementing organizations suggested that actual losses are likely
higher. In 2003, KCCO proposed a new administrative appeals process for
ocean freight claims that would establish a hearing officer within USDA
and a 285-day time frame. While DOT and some carriers agreed that a
faster process was needed, DOT officials suggested that the claims
review process should include hearing officers outside of USDA to
ensure independent findings. To date, KCCO's proposed process has not
been implemented.
* Lengthy payment time frames and burdensome administration. Payment of
food aid contracts is slow and paperwork is insufficiently streamlined.
When carriers are not paid for several months, they incur large
interest costs that are factored into freight rates. While a new
electronic payment system has enabled USDA to provide freight payments
within a few weeks, several ocean carriers complained that USAID often
requires 2 to 4 months to provide payment, though USAID officials
dispute this claim. USAID officials also asserted that the electronic
payment system used by USDA is too expensive, and they are considering
other payment options.[Footnote 38] In addition to payment issues, a
few carriers suggested that paperwork in general needs streamlining and
modernization. The 2002 Farm Bill required both USDA and USAID to
pursue streamlining initiatives that the agencies are implementing.
KCCO officials indicated that they are updating food aid information
technology systems (to be in place in fiscal year 2009).
In structured interviews, ocean carriers confirmed the cost impact of
food aid transportation contracting practices. Figure 9 shows that
depending upon the practice, between 9 (60 percent) and 14 (100
percent) of the carriers reported increased costs, with "liabilities
outside the carriers' control" as the most significant factor. To
quantify the impact, two carriers estimated that nonstandardized
freight terms increase costs by about 5 percent (about $8 per metric
ton), while another carrier suggested that slow payment increases costs
by about 10 percent (about $15 per metric ton). Figure 9 also shows
that a large percentage of carriers strongly recommended actions to
address contracting practices.
Figure 9: Carriers Views on Costly Food Aid Ocean Transportation
Practices and Recommended Improvements:
[See PDF for image]
Source: GAO analysis of structured interviews with ocean carriers.
Note: GAO asked ocean carriers to rate (1) the extent to which various
transportation conditions increase costs and (2) how strongly they
would recommend various improvements based on each option's potential
to reduce costs. For this figure, we are illustrating those
transportation conditions that reflect contracting practices--and
improvements that are clearly linked with each condition.
[End of figure]
Legal Requirements Can Increase Delivery Costs and Time Frames:
Legal requirements governing food aid procurement are a third factor
that can 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
39] The total annual value of this cost differential between U.S.-and
foreign-flag carriers averaged $134 million from fiscal years 2001 to
2005 (see fig. 10). DOT reimbursements have varied from $126 million in
fiscal year 2002 to $153 million in fiscal year 2005.[Footnote 40]
However, USAID officials expressed concern that the OFD calculations do
not fully account for the costs of cargo preference or the
uncertainties regarding its application. For example, several U.S.
agency and port officials believe that cargo preference regulations
discourage foreign-flag participation in the program due to the small
percentage of cargo that can be shipped on foreign-flag vessels. OFD
reimbursements do not include shipments for which a foreign-flag vessel
has not submitted a bid or for the additional costs of shipping on U.S.-
flag vessels that are older than 25 years (about half of the
vessels).[Footnote 41] USAID officials estimated that for Title II
programs, the actual cost of cargo preference in fiscal year 2003
exceeded the total OFD cost by about $50 million due to these factors.
DOT officials estimated these additional costs for Title II at about
$34 million in fiscal year 2004 and about $56 million in fiscal year
2005. Finally, USAID and DOT officials have not yet agreed on whether
cargo preference applies to shipments from prepositioning sites.
Figure 10: Estimated Cargo Preference Ocean Freight Differential Costs
and Department of Transportation Reimbursements to Food Aid Programs:
[See PDF for image]
Source: GAO analysis of USAID and DOT data.
[A] DOT must finance any increased ocean freight charges resulting from
the 1985 increase in the cargo preference requirement from 50 percent
to 75 percent U.S.-flag. DOT must also finance the additional costs of
all ocean transportation that exceeds 20 percent of the total cost of
food aid commodities and ocean freight.
[End of figure]
Inadequate Coordination Limits Agency and Stakeholder Response to Food
Delivery Problems:
U.S. agencies and stakeholders do not coordinate adequately to respond
to food and delivery problems when they arise. USAID and USDA lack a
shared, coordinated system to systematically track and respond to food
quality complaints.[Footnote 42] Food quality concerns have been long-
standing issues for both food aid agencies and the U.S.
Congress.[Footnote 43] In 2003, for example, USAID's Inspector General
reported some Ethiopian warehouses in poor condition, with rodent
droppings near torn bags of corn soy blend (CSB), rainwater seepage,
pigeons flying into one warehouse, and holes in the roof of another.
Implementing organizations we spoke with also frequently complained
about receiving heavily infested and contaminated cargo. For example,
in Durban, South Africa, in October 2006, we saw 1,925 metric tons of
heavily infested cornmeal that arrived late in port after it had been
erroneously shipped to the wrong countries first. As shown in figure
11, we found live and dead insects in bags of cornmeal, along with
their nests. NGOs noted that some of the food had been in containers
for as long as 78 days. This food could have fed over 37,000 people
during a typical hungry season. When food arrives heavily infested,
NGOs hire a surveyor to (1) determine how much is salvageable for human
consumption or for use as animal feed and (2) destroy what is deemed
unfit.
Figure 11: Delays Led to Contamination of U.S. Food Aid in Durban,
South Africa:
[See PDF for image]
Source: GAO.
[End of figure]
U.S. agencies and food aid stakeholders face a variety of coordination
challenges in addressing such food delivery problems, including the
following:
* KCCO, USDA and USAID have disparate quality complaint tracking
mechanisms that monitor different levels of information. As a result,
they 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. Agencies and stakeholders have suggested that
food quality tracking and coordination could be improved if USAID and
USDA shared the same database and created an integrated food quality
complaint reporting system.
* Agency country offices are often unclear about their roles in
tracking food quality, creating gaps in monitoring and reporting. For
example, USAID found that some missions do not clearly understand their
responsibilities to independently verify claims stemming from food
spoilage and often rely on the implementing organization to research
the circumstances surrounding losses. One USAID country office also
noted that rather than tracking all food quality problems reported, it
only recorded and tracked commodity losses for which an official claim
had been filed. Further, in 2004, USAID's Inspector General found that
USAID country offices were not always adequately following up on
commodity loss claims to ensure that they were reviewed and resolved in
a timely manner. To improve food quality monitoring, agencies and
stakeholders have suggested updating regulations to include separate
guidance for complaints, as well as developing a secure Web site for
all agencies and their country offices to use to track both complaints
and claims.
* When food quality issues arise, there is no clear and coordinated
process to resolve problems. For example, WFP officials stated that
they experienced coordination issues with USAID in 2003 when they
received 4,200 metric tons of maize from USAID in Angola and found a
large quantity to be wet and moldy. Although USAID officials maintain
that their response was timely, WFP officials stated that USAID did not
provide timely guidance on how WFP would be reimbursed for testing and
destruction of cargo that was not fit for consumption and how USAID
would replace the quantity lost. WFP officials claim that WFP lost over
$640,000 in this case, including testing and destruction costs and the
value of the commodity, and no replacement cargo was provided by USAID.
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. Agencies and stakeholders have suggested that
providing a standard questionnaire to implementing organizations would
ensure more consistent reporting on food quality issues.
While Agencies Have Taken Steps to Improve Efficiency, Related Long-
term Costs and Benefits Have Not Yet Been Measured:
To improve timeliness in food aid delivery, USAID has been
prepositioning commodities in two locations and KCCO is implementing a
new transportation bid process. Prepositioning enabled USAID to respond
more rapidly to the 2004-2005 Asian tsunami emergency than would have
been possible otherwise. KCCO's bid process is also expected to reduce
delivery time frames and ocean freight rates. However, the long-term
cost-effectiveness of both initiatives has not yet been measured.
Prepositioning and Transportation Procurement Could Improve Timeliness:
Text Box: Prepositioning Alternatives:
WFP prepositions food aid by purchasing commodities and placing them on
the high seas, ’destination unknown.“ In this way, WFP uses ocean
vessels as floating warehouses that can be redirected as
necessary.Ethiopia‘s national grain reserve functions as a de facto
prepositioning site. The reserve stores about 400,000 metric tons of
food, capitalized by donors (including the United States)”enough to
feed about 5.4 million people for about 6 months, according to the
Ethiopian government‘s Emergency Food Security Reserve Administration.
Implementing organizations and WFP routinely draw down from the reserve
with the understanding that the commodities borrowed will be
replenished when U.S. food aid shipments arrive, usually within 6
months.
[End of text box]
USAID has prepositioned food aid on a limited basis to improve
timeliness in delivery.[Footnote 44] 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, and
it is now adding a third site in Djibouti, East Africa. USAID has used
prepositioned food to respond to recent emergencies in Lebanon,
Somalia, and Southeast Asia, among other areas. 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.[Footnote 45] When the 2004 Asian
tsunami struck, for example, USAID quickly provided 7,000 metric tons
of food to victims by diverting the carrier at sea, before it reached
the Dubai warehouse. According to USAID officials, prepositioning
warehouses also offer the opportunity to improve logistics when USAID
is able to begin the procurement process before an emergency occurs or
if it is able to implement long-term agreements with ocean carriers for
tonnage levels that are more certain.[Footnote 46]
Despite its potential for improved timeliness, USAID has not studied
the long-term cost-effectiveness of prepositioning. Table 1 shows that
over fiscal years 2005 and 2006, USAID purchased about 200,000 metric
tons of processed food for prepositioning (around 3 percent of total
food aid tonnage), diverted about 36,000 metric tons en route, and
incurred contract costs of about $1.5 million for food that reached the
warehouse (averaging around $10 per metric ton). In addition to
contract costs, ocean carriers generally charge higher freight rates
for prepositioned cargo to account for additional cargo loading or
unloading, additional days at port, and additional risk of damage
associated with cargo that has undergone extra handling. USAID
officials have suggested that average freight rates for prepositioned
cargo could be $20 per metric ton higher.
Table 1: USAID Tonnage and Costs for Prepositioning, Fiscal Years 2005
through 2006:
Tonnage purchased for prepositioning sites;
Lake Charles: 99,630 MT;
Dubai: 100,520 MT.
Tonnage shipped to prepositioning site;
Lake Charles: 99,630 MT;
Dubai: 64,606 MT.
Tonnage diverted before reaching prepositioning site;
Lake Charles: 0 MT;
Dubai: 35,644 MT.
Contract costs for storage and cargo handling services;
Lake Charles: $839,380;
Dubai: $715,668.
Source: USAID.
Legend: MT = metric ton:
[End of table]
In addition to the costs of prepositioning, agencies face several
challenges to their effective management of this program, including the
following:
* Food aid experts and stakeholders expressed mixed views on the
appropriateness of current prepositioning locations.[Footnote 47] Only
5 of the 14 ocean carriers we interviewed rated existing sites
positively, and most indicated interest in alternative sites. KCCO
officials and experts also expressed concern with the quality of the
Lake Charles warehouse and the lack of ocean carriers providing service
to that location. For example, many carriers must move cargo by truck
from Lake Charles to Houston before shipping it. Relative to other
ports, shipping out of the Lake Charles prepositioning site can add as
much as 21 days for delivery.
* Inadequate inventory management increases the risk of cargo
infestation. KCCO and port officials suggested that USAID had not
consistently shipped older cargo out of the warehouses first. USAID
officials emphasized that inventory management has been improving but
that limited monitoring and evaluation funds constrain their oversight
capacity.[Footnote 48] For example, the current USAID official
responsible for overseeing the Lake Charles prepositioning stock was
able to visit the site only once in fiscal year 2006--at his own
expense.
* Agencies have had difficulties ensuring phytosanitary certification
for prepositioned food because they do not know the country of final
destination when they request phytosanitary certification from
APHIS.[Footnote 49] According to USDA, since prepositioned food is not
imported directly from a U.S. port, it requires either a U.S.-reissued
phytosanitary certificate or a foreign-issued phytosanitary certificate
for re-export. USDA officials told us they do not think it is
appropriate to reissue these certificates--once a food aid shipment
leaves the United States, they cannot make any statements about the
phytosanitary status of the commodities, which may not meet the entry
requirements of the destination country. USDA officials are also
concerned that USAID will store commodities for a considerable period
of time during which their status may change, thus making their
certificate invalid. Although USDA and USAID officials are willing to
allow foreign government officials to issue these certificates, U.S.
inspection officials remain concerned that the foreign officials might
not have adequate resources for inspection or be willing to certify
these commodities. Without phytosanitary certificates, food aid
shipments could be rejected, turned away, or destroyed by recipient
country governments.
* Certain regulations applicable to food aid create challenges for
improving supply logistics. For example, food aid bags must include
various markings reflecting contract information, when the commodity
should be consumed, and whether the commodity is for sale or direct
distribution. Marking requirements vary by country (some require
markings in local languages), making it difficult for USAID to divert
cargo. Also, due to the small quantity of total food aid tonnage
(around 3 percent) allocated for the prepositioning program, USAID is
unable to use the program to consistently purchase large quantities of
food aid earlier in the fiscal year.
New Transportation Bid Process Could Reduce Procurement Time Frames:
In addition to prepositioning, KCCO is implementing a new
transportation bid process to reduce procurement time frames and
increase competition between ocean carriers. 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. KCCO expects the new system to cut 2 weeks from the
procurement process and provide potential annual savings of around $25
million. KCCO expects this new bid process to also reduce cargo
handling costs as cargo loading becomes more consolidated. When asked
about the new system, several carriers reported uncertainty about its
future impact and expressed concern that USDA's testing of the system
had not been sufficiently transparent.
Monetization Is an Inefficient Practice and the Lack of Electronic Data
Impedes Agencies' Ability to Monitor:
Despite efforts to improve the efficiency of the delivery of U.S. food
aid, the current use of food aid as a means to raise cash to fund
development projects--a practice known as monetization--is inherently
inefficient. Besides procurement and shipping costs, NGOs involved in
monetization programs often incur additional costs for marketing food
commodities in recipient countries. Furthermore, NGOs must maintain the
expertise necessary to sell and market food aid abroad, which diverts
resources from their core missions. The permissible use of monetization
revenues has expanded beyond its original intent over the years.
Although monetization was initially established to fund expenses
related to direct food aid delivery for humanitarian purposes, it now
funds projects ranging from rural financing to health services.
Additionally, U.S. agencies do not collect data electronically, and the
lack of such data impedes their ability to monitor the extent to which
monetization revenues can cover the costs.
Monetizing Food to Fund Development Projects Is Inherently Inefficient:
Monetizing food to fund development projects is an inherently
inefficient use of food aid. Monetization requires food to be procured,
shipped, and eventually sold--incurring costs at each step in the
process. Furthermore, although bulk products comprise a larger
proportion of monetized food aid, they have higher transportation costs
relative to their market price in recipient countries than nonbulk
(processed) products.[Footnote 50] For example, the ratio of
transportation cost to market price for bulk wheat is more than three
times that of vegetable oil.
In addition to shipping and handling costs, the process of generating
cash from selling food is inefficient because it also requires NGOs to
maintain the capacity necessary to sell and market food aid, diverting
them from their core missions. In its 2001 report to Congress on Food
Aid Monetization,[Footnote 51] USDA stated that the increasing
involvement of NGOs in implementing food aid programs has required
these organizations to seek expertise in all facets of commodity sales
and cope with price, exchange rate, and other uncertainties, which has
affected the way in which they operate. Noting that NGOs have differing
missions and backgrounds and vary in size and scope of operations, the
USDA report stated that some NGOs view the monetization process as
"inconvenient but necessary to generate program development funds."
However, some NGOs would prefer to end their involvement in
monetization. For example, CARE, one of the major NGOs engaged in the
practice, decided to transition out of it by 2009 partly because
"monetization requires intensive management and is fraught with risks.
Procurement, shipping, commodity management, and commercial
transactions are management intensive and costly. Experience has shown
that these transactions are also fraught with legal and financial
risks."[Footnote 52] Some participants at the GAO roundtable on food
aid stated that they recognize that monetization is not an efficient
way to raise development money, but they pointed out that it is the
only available resource to supplement food aid and enhance food
security and other development projects.
Permissible Use of Monetization Revenues Has Expanded:
The permissible use of monetization revenues and the minimum level of
monetization allowed by the law have expanded, contributing to an
increasing use of monetization as a means to generate cash for
development projects. While monetization was initially established to
pay for administrative costs related to direct food distribution,
monetization revenues now fund development activities beyond food
distribution that aim to improve food security. Examples include the
following.
* Title II monetization revenues can be used to implement income-
generating, community development, health, nutrition, cooperative
development, agricultural, and other development activities. Revenues
can also be invested, and any interest earned on such investments may
be used for the same purposes.
* Food for Progress monetization revenues can be used for private
sector agricultural development through improved agricultural
techniques, marketing systems, farmer education, and cooperative
development; enhanced food processing capacity; introduction of new
foods; or agricultural-related business growth.
Monetization has also been used on rare occasions to achieve objectives
that may be beyond the scope of direct food delivery. USAID officials
informed us of a case in which monetization was intentionally used to
help increase access to food for the urban poor in Zimbabwe. The
program involved subsidized sales of sorghum meal in poor areas of a
few selected cities. The main goal was not to generate revenue but to
provide affordable staple foods to households in urban areas where
conventional food aid distribution programs were not practical or
appropriate.[Footnote 53]
The monetization rate for Title II nonemergency food aid has far
exceeded the minimum requirement of 15 percent,[Footnote 54] reaching
close to 70 percent in 2001 but declining to about 50 percent in 2005.
This decline is due to both increasing demand for emergency food aid
and OMB's 2002 recommendation to decrease monetization, according to
USAID officials. OMB pointed out that monetization can impede U.S.
commercial exports, lower market prices, induce black market activity,
and thwart market development for U.S farm products. OMB also raised
questions about the economic efficiency of the practice. Furthermore,
in 2002 The President's Management Agenda[Footnote 55] suggested that
directly feeding the hungry, rather than providing food for
development, should be the primary goal of U.S. food aid programs.
Figure 12 shows the average share of nonemergency food aid funding
different programs used for monetization from fiscal years 2001 through
2006.
Figure 12: Use of Monetization by Program Authority:
[See PDF for image]
Source: GAO analysis of USAID and USDA data.
[A] Monetization percentage is based on data from fiscal years 2002
through 2005.
[End of figure]
Agencies' Ability to Adequately Monitor Monetization Cost Recovery
Impeded by Lack of Electronic Data:
U.S. agencies do not electronically collect data on monetization
revenues. Without such data, the agencies' ability to adequately
monitor the degree to which revenues cover costs is impeded. 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 agency was able to provide us
with data on the revenues generated through monetization. The 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. We have expressed similar concerns about the limited
oversight of monetization revenues in our 2002 review of the McGovern-
Dole Food for Education program.[Footnote 56]
USAID officials told us that they believe NGOs have incentives to
generate the maximum amount of resources possible from monetization
and, therefore, the officials are not concerned about monitoring
revenue data. However, some NGOs may not have sufficient expertise in
commodity trading to ensure that they are selling food at the best
possible price. In addition, due to insufficient market expertise or
delivery delays, monetization revenues can also be reduced when NGOs
sell the commodity at a time when market supplies have grown. For
example, selling Title I-and Title II-funded wheat simultaneously in
Mozambique in 2002 flooded the market and decreased food prices,
resulting in reduced monetization revenues.[Footnote 57]
Various Challenges Reduce the Effective Use of Food Aid:
A number of challenges reduce the effectiveness of food aid in
alleviating hunger. Since food aid is limited, it is important that
donors and implementers use it effectively by ensuring that it reaches
the most vulnerable populations and does not cause negative market
impact. However, a number of factors limit efforts to develop reliable
estimates of food needs and respond to crises in a timely manner. These
include challenging operating environments in recipient countries,
insufficient coordination among stakeholders and use of noncomparable
assessment methods, difficulties in identifying vulnerable groups (such
as chronic versus transitory food-insecure populations) and
understanding the causes of food insecurity, and resource constraints
that adversely affect the quality of assessments and quantity of food
and other assistance. Consequently, estimates of food needs have
differed significantly and, in some cases, have resulted in delays in
appropriately responding to crises with sufficient food and
complementary assistance. Furthermore, some impediments to improving
the nutrition quality of U.S. food aid, including the lack of
interagency coordination to update 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.
Ensuring That Food Aid Reaches the Most Vulnerable Populations Is
Critical to Enhancing Its Effectiveness and Avoiding Negative Market
Impact:
U.S. food aid assists only about 11 percent of the estimated hungry
population worldwide. In light of the significant need for food aid, it
is critical that this assistance be used effectively by ensuring that
the right food reaches the right people at the right time. Generally,
the most food-insecure populations include poor households with elderly
people, young children (especially those under 5 years of age),
pregnant and lactating women, and the chronically sick (e.g., people
with HIV/AIDS). To provide food to these vulnerable populations,
agencies and stakeholders target food aid resources. Targeting involves
assessments of needs, program planning to reach vulnerable households
with adequate food, implementing the distribution of food, and
monitoring these programs. (Figure 13 illustrates these elements of the
targeting process). The timing of food delivery is a key factor that
impacts targeting effectiveness. Timely provision of food aid will not
only save lives during an emergency, but also help to avert crises that
may result from increasing vulnerability. To focus on the vulnerability
of food insecure populations, USAID discussed the concept of
development relief in its Food Security Strategic Plan for 2006-2010,
whereby programs dealing with emergencies would also address the
underlying causes of emergencies and development programs would help
vulnerable people improve their ability to prevent and cope with future
emergencies. Enhancements to early warning systems, such as the USAID-
funded Famine Early Warning System Network, and efforts to better
understand the livelihoods of vulnerable populations have contributed
to improved information on the needs of vulnerable populations,
according to officials from implementing organizations and USAID.
Figure 13: Targeting Process to Ensure That Food Reaches the Most
Vulnerable Populations:
[See PDF for image]
Sources: GAO analysis, adapted from WFP information; GAO (photos).
[End of figure]
In addition to ensuring effective use of food aid resources, accurate
targeting can reduce the potential adverse impact of food aid on
recipient country markets.[Footnote 58] (See app. III for more
information on the impact of food aid on local markets.) When food aid
is distributed during a food shortfall to people who would not
otherwise be able to purchase food, markets may remain unaffected. In
the case of food shortfalls, food aid may actually serve to bring
supply back to levels that would have occurred in the absence of the
shortage and help limit price increases. However, when food aid is sent
in response to a food shortfall but arrives while food is readily
available--such as after the hungry season--and is distributed to
people who can otherwise purchase food, it increases total food
supplies above normal market levels. Additionally, in such cases, the
food aid may decrease market prices and the incomes of food producers
in recipient countries.[Footnote 59] These low prices could decrease
agricultural investments and reduce the return on labor allocated to
agriculture.[Footnote 60] While food aid may lower prices, it may also
increase income for recipients. For example, according to one study,
distribution of food aid to households in northern Ethiopia during the
hungry season actually increased household purchasing power and
contributed to increased agricultural productivity.[Footnote 61]
Various Factors Limit the Effectiveness of Efforts to Provide Food Aid
to the Most Vulnerable Populations:
Various factors limit the ability of U.S. agencies to ensure that food
aid is directed to the most vulnerable populations. First, challenging
operating environments, characterized by poor infrastructure and
concerns about physical safety and security, have limited access to
vulnerable groups and caused delays in providing food aid. Inadequate
recipient government participation and human resource constraints also
contribute to insufficient assistance to vulnerable people. Second,
weak in-country coordination among key stakeholders and the use of
noncomparable methods in assessing food needs have resulted in
significantly different estimates and delays in donor assistance.
Additionally, assessments have not been used sufficiently to inform
food aid programs. Third, difficulties in identifying vulnerable
populations and understanding the causes of their food insecurity
contributed to the lack of timely and appropriate response in some
instances. For example, it has been challenging for implementing
organizations to determine the causes of chronic food insecurity and
provide appropriate assistance. Fourth, resource constraints have
affected the quality and timeliness of assessments as well as the
quantity of food and other related assistance provided to vulnerable
populations.
Challenging Operating Environments in Recipient Countries Have
Restricted Access to Vulnerable Populations and Caused Delays:
Difficult operating environments characterized by poor infrastructure
and physical safety, as well as the limited participation and capacity
of recipient governments, have impeded access to and the timely
delivery of food aid to the most vulnerable populations. In 2003, we
reported on the southern Africa food crisis, noting that long-standing
weaknesses in transportation infrastructure across the region hampered
timely delivery of food aid where it was needed.[Footnote 62] Access to
intended recipients in villages was further hindered during the rainy
seasons when many village roads became impassable. Due to concerns
about physical safety and security, the timely provision of food aid to
recipients has been especially difficult in regions experiencing war
and conflict. We recently reported that frequent violence and continued
conflict 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, such as 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 still did not
receive food aid in August 2006, according to UN sources.[Footnote 63]
Limited recipient government participation has contributed to
insufficient coverage of vulnerable populations. In late 2006, while
donors were providing assistance to support the food needs of Zambians,
the government continued to hold large quantities of its food stocks--
approximately 350,000 metric tons--in its emergency reserve, according
to Zambian officials. Even in cases where recipient governments are
participating, lack of human resources and financial capacity can limit
overall efforts to target vulnerable populations. For example, while
the governments of Ethiopia and Kenya are involved in coordinating the
food aid efforts of donors and implementers, several implementing
organizations expressed concerns about the governments' human resource
capacity at the district and village level to effectively contribute to
planning and implementing food aid programs. According to a number of
USAID-approved proposals for Ethiopia, a lack of government staffing
and skills combined with high turnover rates posed a significant
challenge to implementing food aid projects. USAID officials
acknowledged these concerns and noted that the government of Ethiopia
is addressing these deficiencies by providing training to staff at all
levels of the government. Additionally, all Title II-funded NGOs in
Ethiopia have received resources for capacity building and training as
part of their agreements with USAID.
Weak Coordination on Assessments and the Use of Noncomparable Methods
Have Led to Different Estimates of Food Needs:
Insufficient coordination among key stakeholders and the use of
noncomparable methods has resulted in disparate assessments of food
needs and numbers of recipients, although some efforts are under way to
improve coordination. Officials of various implementing organizations
we interviewed in Ethiopia, Kenya, Zambia, and South Africa identified
lack of coordination on assessments, especially with recipient
governments, as one of the key challenges to accurately assessing the
needs of vulnerable populations. 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.
Some recipient governments have increased their efforts to ensure
coordination on assessments between stakeholders; however, estimates of
food needs have sometimes differed significantly because the
stakeholders use different methods and estimating assumptions. For
example, although the Ethiopian government's Disaster Prevention and
Preparedness Agency coordinates with donors and implementing
organizations in conducting assessments of food needs, their
assessments varied significantly in 2004. Specifically, WFP estimated
that 1.8 people would need food assistance, while the government of
Ethiopia estimated that 700,000 fewer people (1.1 million) would need
assistance. Donors we interviewed in Ethiopia stated that the host
government has tended to lower food need estimates based on its view of
what donors are likely to fund. They noted that an earlier assessment
in 2006, which was led by the government but involved other
stakeholders, underestimated the number of potential beneficiaries by 1
million people. This significant underestimation created a humanitarian
crisis, according to a senior UN official, and more emergency food was
eventually requested. Implementing organizations have had to resort to
measures, such as reducing ration size or shortening the duration of
assistance, to provide food aid to a larger than estimated number of
vulnerable households.
Various implementing organizations have attributed a proliferation of
assessment methods and approaches to a lack of coordination that can
result in different estimates and delay donor response, especially
during emergencies. Although USAID and NGOs have noted that multiple
assessment methods and approaches are required to respond to different
circumstances, noncomparable methods have resulted in disparate food
need estimates.[Footnote 64] Donors and implementing organizations do
not agree on definitions and common approaches to conducting
assessments; according to USAID officials, this has resulted in
inconsistent estimates that prevent timely donor responses, especially
during emergencies. WFP's Strengthening Emergency Needs Assessment
Capacity (SENAC) initiative, launched in 2004, is aimed at addressing
some of these concerns by developing better methods and guidance for
assessments conducted during emergencies.[Footnote 65] However, USAID
and other officials have expressed concerns about the limited
involvement of NGOs in the SENAC process and its implementation in
selected countries. Moreover, there is a lack of coordination among
various NGOs, which tend to assess food needs differently, according to
U.S. government officials. Some GAO roundtable participants stated that
peer learning and information-sharing among implementing organizations
had been further hampered by the dissolution in 2004 of Food Aid
Management (FAM), a USAID-funded NGO that facilitated information
sharing and development of food aid standards.[Footnote 66]
Additionally, assessments have not been used sufficiently to inform
food aid programs. According to WFP and NGO officials, estimates
resulting from needs assessments have not, in many cases, driven donor
response to impending or existing crises. Other factors--such as
donors' foreign policy objectives or media attention to a crisis--tend
to determine the timing and level of donor assistance, according to
these officials. However, donors and GAO roundtable participants have
expressed concerns about the independence of assessors, because
organizations such as WFP and NGOs generally conduct assessments and
also implement programs based on their results. According to GAO
roundtable participants, NGOs generally conduct assessments and propose
projects in areas where they are already operating, which may introduce
geographical gaps in the delivery of assistance and prevent food aid
from reaching the most vulnerable areas. According to a USAID-funded
study on Title II development food aid programs in 2002, although
program assessments had advanced considerably and proposals described
critical country-level food security problems, quantitative data
collection and analysis at the local level were deficient.[Footnote 67]
Our review of USAID-and USDA-approved proposals indicates that some
proposed programs were based on assessments that identified specific
criteria to target food aid, whereas other proposals justified programs
based on general statements of need. For example, while proposals for a
nationwide safety net program in Ethiopia generally identified
districts based on high levels of chronic vulnerability, proposals for
some other countries did not include adequate assessment information on
the extent or severity of needs in areas proposed for food aid
programs.
Difficulties in Identifying Vulnerable Populations Have Limited
Effective Targeting:
Accurately identifying various types of 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. 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.
Insufficient understanding of the causes of malnutrition and chronic
food insecurity, as well as the role of local markets, has in some
cases resulted in inaccurate assessment of and response to
crises.[Footnote 68] According to WFP and USAID, assessments have
focused too narrowly on food availability (such as food production in
vulnerable countries) and not enough on factors that determine access
to food (such as food prices in local markets) and effective use of
food (such as health and sanitation practices). The 2005 food crisis in
Niger, where about 1.8 million people received food aid, illustrated
such a limitation in focus. According to WFP's evaluation, donors as
well as implementers focused too narrowly on food production and
deficits and analyzed the causes of malnutrition
insufficiently.[Footnote 69] As a result, the cause of the crisis was
misdiagnosed as lack of food availability, when in fact it was caused
by factors affecting the effective use of food, such as health and
sanitation problems and poor water quality, according to a USAID
analysis. Donors did not respond until May 2005, 3 months after the
crisis reached emergency proportions in February 2005. Moreover,
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. As a result, the request for aid was revised
seven times in the next 3 months, from May to August, and recipients
finally received food in August 2005.
Difficulties in the targeting process related to determining
eligibility of recipients and appropriate food distribution activities
have also been exacerbated because implementers have not developed or
optimally used best practices and institutional knowledge. According to
USAID officials in Kenya, there has been very limited analysis of which
targeting approaches and activities are more appropriate to provide
food aid in certain situations and how long these should be
used.[Footnote 70] (See app. IV for food distribution activities to
target different vulnerable groups.) According to a WFP evaluation of
its targeting practices during emergency and relief operations, a more
systematic analysis of WFP's experience in targeting recipients is
necessary to resolve recurring issues and improve this practice.
Furthermore, WFP's targeting approaches tend to depend on individual
staff experience rather than organizationwide experience, according to
the review. In part, this is because WFP had not yet developed a
consolidated policy[Footnote 71] and comprehensive guidance material on
targeting.
Despite these limitations, there is some evidence that with experience,
accuracy in providing food to intended recipients has generally
improved at the country and program level.[Footnote 72] For example,
according to several implementing organization officials in Ethiopia,
during the first year of implementing a nationwide food and cash
assistance program, targeting the most vulnerable populations was
challenging because implementers did not adequately understand the
eligibility criteria for recipients and selected better-off people in
many cases.[Footnote 73] In the second year, however, targeting
improved as program goals were more clearly communicated to
implementers, who applied the recipient selection criteria more
accurately.
Resource Constraints Have Adversely Affected Assessments and Adequate
Coverage of Vulnerable Populations:
Limitations on the amount and use of resources have adversely affected
the quality and timing of assessments, particularly for Title II-funded
programs. According to USAID, NGO, and WFP officials we interviewed in
the field, lack of sufficient resources is one of the main constraints
to conducting accurate and reliable assessments. The U.S. agencies
provide very limited or no resources to conduct assessments prior to
the implementing organizations' submission of proposals requesting food
aid.[Footnote 74] 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.
Due to such constraints, U.S. agencies have not provided financial
assistance for WFP's major initiative to improve needs assessments,
although they have provided technical assistance. According to WFP
officials we spoke with in South Africa, this lack of adequate
financial support for assessments diminishes U.S. influence and input
on how assessments are conducted.[Footnote 75] USAID officials stated
that they would like to fund assessments using P.L.480 Title II
resources, but they are unable to do so because of legal restrictions
related to such use of these funds.
In addition to their impact on assessments, resource constraints have
also limited the quantity of food and other complementary assistance
that is provided to intended recipients.[Footnote 76] 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 77] During our
fieldwork, 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
lacked other assistance or income. Similarly, Somali and Sudanese
refugees in Kenya sold approximately 4 percent of their food rations to
buy basic items (such as fuel, cooking utensils, and clothes) or
supplementary foods, according to a 2004 food consumption survey by WFP
and the UN High Commission for Refugees. These refugees suffered from
poor nutrition as a result of insufficient food consumption and other
factors, such as poor hygiene.
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 78] 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.
Despite Efforts to Improve Nutrition, Challenges Remain with Quality
Control and Interagency Coordination:
Text box: Why Nutrition Matters: The Impact of Title II Nutrition
Programs on the Nutritional Status of Children:
In 2004, USAID conducted a review of Title II maternal and child health
and nutrition programs and found them successful in improving the
nutritional status of children under the age of 2 and their mothers. A
majority of the programs documented reductions in the prevalence of
stunted and underweight children.
[End of text box]
Although U.S. agencies have made efforts to improve the nutritional
quality of food aid, challenges remain with nutrition quality control
mechanisms and interagency coordination on these issues. Past
micronutrient assessments of U.S. food aid have also found that
commodities are produced containing low and inconsistent levels of
micronutrients, and gaps exist in nutrition quality control
procedures.[Footnote 79] According to the World Health Organization,
deficiencies in iron, vitamin A, and zinc rank among the top 10 leading
causes of death from disease in developing countries, and micronutrient
fortification of food aid is considered one of the most cost-effective
approaches to addressing widespread deficiencies.
Despite efforts to update food aid nutritional quality control
mechanisms, the quality of U.S. food aid and U.S. agencies' readiness
to address quality issues remains uncertain. USDA attempted to improve
its quality control procedures by introducing a Total Quality Systems
Audit (TQSA)[Footnote 80] program to verify a supplier's capability of
producing products that meet program requirements. The TQSA program is
responsible for examining commodity suppliers' quality control
mechanisms, such as management processes and procedures for food aid
production, to ensure that they are operating according to U.S. food
aid standards. However, the TQSA program is not responsible for
overseeing the nutritional quality of the product itself. It was only
recently given more funding in this area in response to a 2005 incident
involving CSB food aid that was found to be overfortified with iron.
Because food with iron overfortification can be toxic when consumed by
vulnerable groups in large quantities, USAID and USDA suspended
distribution of 1,100 metric tons of CSB food aid donations while WFP
suspended distribution of 16,000 tons of U.S.-donated CSB to Ethiopia.
It was not until after this incident that the TQSA program was provided
with funding to test CSB fortification, but it was given only enough
resources to cover the costs of sampling and testing CSB and no other
processed commodities. USDA has recently requested additional funding
to develop quality sampling and testing protocols for each blended or
processed food aid product, but this proposal has yet to be approved.
USDA officials have stated that they are still struggling to verify the
nutritional quality of U.S. food aid.
Insufficient coordination also limits agencies' abilities to improve
the nutritional quality of food aid commodities. First, existing food
aid commodity working groups have not resolved interagency coordination
problems. While U.S. government agencies have begun to jointly discuss
ways to improve nutrition issues in the FACG's Commodity Working Group,
the group has yet to implement any of their suggested improvements. And
while interagency forums such as the Commodity Working Group exist,
coordination problems still occur. For example, USAID approached USDA
officials to collaborate on exploring ways to deliver fortified and
enriched food aid commodities to beneficiaries at a competitive cost.
USDA's Agriculture Research Service declined, citing its mission to
address problems for U.S. agriculture and food supply and its lack of
authority to study nutritional needs in other countries. Second, USAID
and USDA do not have a central interagency mechanism to update products
and their specifications. As a result, food aid recipients 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. Examples include the following:
* Although USDA has taken some steps to improve its food aid product
specifications, there is still no central system in place to ensure
that the product specifications are consistently updated. USDA recently
made fortification improvements and updated the specifications to
comply with Federal Acquisition Regulations and also requested
resources to review the specifications. However, commodity suppliers
complain that food aid product specifications are not as clear and
consistent as in the commercial sector and that some requirements for
food aid commodities are outdated and no longer necessary. One
commodity supplier questioned the need for a current requirement of 50
ash for all USDA food aid flour purchases, noting that other countries
have different ash specifications or none at all.[Footnote 81]
* KCCO officials have stated that most of the food aid products in use
today were first developed in the 1960s and that they do not have a
system in place to evaluate and update them. Therefore, KCCO officials
may not be using the most cost-effective products to address food aid
nutrition needs. One commodity supplier noted that products should be
updated every 5 to 6 years and that it would be more cost-effective for
the U.S. government to update products as technology develops.
* U.S. government agencies are currently attempting to discuss
recipients' nutritional needs in the Commodity Working Group and have
started to explore the introduction of new food aid products that
address health issues related to HIV/AIDS in young children and
nutritional deficiencies in young mothers. USDA has also recently
requested resources to conduct a long-term study on the present
composition and use of food aid commodities. However, the agencies have
yet to (1) agree on what products to update and (2) implement a central
system to ensure that such updates are put into practice when they do
reach an agreement.
* USDA and USAID disagree on a proposed update to product
specifications. USDA reviewed micronutrient fortification and
enrichment of Title II commodities in 1994 and recommended that
tricalcium phosphate (TCP) be reduced by 25 percent. According to USDA,
this reduction would result in an annual savings of over $1.5 million,
which would increase funds available for Title II program commodities
without compromising their nutritional value. However, USAID did not
agree with the recommended reduction and chose not to reduce TCP in any
Title II commodities due to its concern about the effect of the
reduction on malnourished food aid recipients. The agencies have
disagreed about the nutritional effect of TCP reductions since 2004 and
have yet to reach an agreement.
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.
USAID and USDA require NGOs and WFP to regularly monitor food aid
programs.[Footnote 82] USAID Title II guidance for multiyear programs
requires implementing organizations to provide a monitoring plan, which
includes information such as the percentage of the target population
reached and midterm and final evaluations of program impact. USDA
requires implementing organizations to report semiannually on commodity
logistics and the use of food. According to WFP's agreement with the
U.S. government, WFP field staff should undertake periodic monitoring
at food distribution sites to ensure that commodities are distributed
according to an agreed-upon plan. Additionally, WFP is to provide
annual reports for each of its U.S.-funded programs.
In addition to monitoring by implementing organizations, agency
monitoring is important to ensure that targeting of food aid is
adjusted to changes in conditions as they occur and to modify programs
to improve their effectiveness, according to USAID officials. However,
various USAID and USDA Inspectors General reports have cited problems
with agencies' monitoring of programs. For example, according to
various USAID Inspector General reports on nonemergency programs in
2003, food aid was generally delivered to intended recipients, but
USAID officials did not conduct regular and systematic
monitoring.[Footnote 83] One assessment of direct distribution programs
in Madagascar, for example, noted that as a result of insufficient and
ad hoc site visits, USAID officials were unable to detect an NGO
reallocation of significant quantities of food aid to a different
district; combined with the late arrival of U.S. food aid, this
resulted in severe shortages of food aid for recipients in a USAID-
approved district. The Inspector General's assessment of food aid
programs in Ghana stated that the USAID mission's annual report
included data, such as the number of recipients, that were directly
reported by implementing organizations without any procedures to review
the completeness and accuracy of this information over a 3-year period.
As a result, the Inspector General concluded, the mission had no
assurance as to the quality and accuracy of this data.
Limited staff and other demands in USAID missions and regional offices
have constrained their field-level monitoring of food aid
programs.[Footnote 84] 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 85] For example, USAID's Zambia mission had only
one Title-II funded foreign national and one U.S. national staff member
to oversee $4.6 million in U.S. food aid funding in fiscal year 2006.
Moreover, the U.S. national staff member spent only about one-third of
his time on food aid activities and two-thirds on the President's
Emergency Plan for AIDS Relief program.
USAID regional offices' monitoring of food aid programs has also been
limited. These offices oversee programs in multiple countries,
especially where USAID missions lack human resource capacity. For
example, USAID's East Africa regional office, which is located in
Kenya, is responsible for oversight in 13 countries in East and Central
Africa, of which 6 had limited or no capacity to monitor food aid
activities, according to USAID officials.[Footnote 86] This regional
office, rather than USAID's Kenya mission, provided monitoring staff to
oversee about $100 million in U.S. food aid to Kenya in fiscal year
2006.[Footnote 87] While officials from the regional office reported
that their program officers monitor food aid programs, an implementing
organization official we interviewed told us that USAID officials have
visited the project site only three times in 1 year. USAID officials
told us that they may be responsible for multiple project sites in a
given country and may monitor selected sites based on factors such as
severity of need and level of funding. Monitoring food aid programs in
the Democratic Republic of Congo (DRC) from the USAID regional office
had been difficult due to poor transportation and communication
infrastructure, according to USAID officials. Therefore, USAID decided
to station one full-time employee in the capital of the DRC to monitor
U.S. food aid programs that cost about $51 million in fiscal year 2006.
Field-level monitoring is also constrained by limited resources and
restrictions on their use. Title II resources provide only part of the
funding for USAID's food aid monitoring activities, and there are legal
restrictions on the use of these funds for nonemergency programs. Other
funds, such as those from the agency's overall operations expense and
development assistance accounts, are also to be used for food aid
activities, such as monitoring. However, these additional resources are
limited due to competing priorities, and their use is based on
agencywide allocation decisions, according to USAID officials. As a
result, resources available to hire food aid monitors are limited. For
example, about five U.S. national and five foreign national staff are
responsible for monitoring all food aid programs in seven countries in
southern Africa, according to a USAID food aid regional coordinator.
Moreover, because its operations expense budget is limited and Title II
funding allows food monitors only for emergency programs, USAID relies
significantly on personal services contractors (PSC)--both U.S.
national and foreign national hires--to monitor and manage food aid
programs in the field.[Footnote 88] For example, while PSCs can use
emergency food aid project funds for travel, USAID's General Schedule
staff cannot. Restrictions on the use of Title II resources for
monitoring nonemergency programs further reduce USAID's monitoring of
these programs.
USDA administers a smaller proportion of food aid programs than USAID
and its field-level monitoring of food aid programs is more limited. In
March 2006, USDA's Inspector General reported that USDA's Foreign
Agricultural Service (FAS) had not implemented a number of
recommendations made in a March 1999 report on NGO monitoring.
Furthermore, several NGOs informed us that the quality of USDA
oversight from Washington, D.C., is generally more limited than
USAID's. USDA has fewer overseas staff, and they are usually focused on
monitoring agricultural trade issues and foreign market development.
For example, the agency assigns a field attaché--with multiple
responsibilities in addition to food aid monitoring--to the U.S.
mission in some countries. However, FAS officials informed us that in
response to past USDA Inspector General and GAO recommendations, a new
monitoring and evaluation unit was recently established with an
increased staffing level to monitor the semiannual reports, conduct
site visits, and evaluate programs.
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 in such areas as logistical
planning and transportation contracting remain. Inadequate coordination
among food aid stakeholders has hampered ongoing efforts to address
some of these logistical challenges. Furthermore, inefficiencies
inherent in current monetization practices best illustrate the complex
challenges that face U.S. food aid programs today. In addition, the
lack of comparable and reliable needs assessments, insufficient
complementary assistance, and impediments to improving the nutritional
quality of food aid commodities raise questions about the effectiveness
of the use of food aid. Finally, U.S. agencies' lack of sufficient
monitoring leaves U.S. food aid programs vulnerable to wasting
increasingly limited resources, not putting them to their most
effective use, or not reaching the most vulnerable populations on a
timely basis.
Recommendations for Executive Action:
To improve the efficiency of U.S. food aid--in terms of its amount,
timeliness, and quality--we recommend that the Administrator of USAID
and the Secretaries of Agriculture and Transportation take the
following five actions:
* improve food aid logistical planning through cost-benefit analysis of
(1) supply-management options, such as long-term transportation
agreements, and (2) prepositioning, including consideration of
alternative methods, such as those used by WFP;
* work together and with stakeholders to modernize ocean transportation
and contracting practices to include, to the extent possible,
commercial principles of shared risks, streamlined administration, and
expedited payment and claims resolution;
* 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, such
as prepositioning, and potential costs associated with older vessels or
limited foreign-flag participation;
* establish a coordinated system for tracking and resolving food
quality complaints; and:
* develop an information collection system to track monetization
transactions.
To improve the effective use of food aid, we recommend that the
Administrator of USAID and the Secretary of Agriculture take the
following four actions:
* 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;
* determine ways to provide adequate nonfood resources in situations
where there is sufficient evidence that such assistance will enhance
the effectiveness of food aid;
* develop a coordinated interagency mechanism to update food aid
specifications and products to improve food quality and nutritional
standards; and:
* improve monitoring of food aid programs to ensure proper management
and implementation.
Agency Comments and Our Evaluation:
DOT, USAID, and USDA--the three U.S. agencies to whom we direct our
recommendations--provided comments on a draft of our report. We have
reprinted their comments in appendixes V, VI, and VII, respectively,
along with our responses to specific points. These agencies--along with
DOD, State, FAO, and WFP--also provided technical comments and updated
information, which we have incorporated throughout this report as
appropriate.
DOT stated that it strongly supports the transportation initiatives
highlighted in the draft report and that full and effective
implementation of these initiatives--in particular, modernizing
transportation and contracting practices and updating reimbursement
methodologies--offers the potential to reduce costs for ocean
transportation. DOT commented that legal requirements (such as cargo
preference) that increase delivery costs are not borne by food aid
programs and have minimal impact on the amount of food available for
distribution. While we recognize that DOT reimbursements have improved,
the impact of cargo preference on the amount of food aid tonnage
provided depends on the sufficiency of reimbursements to cover cargo
preference costs. Our analysis shows that compared with the estimated
costs of cargo preference, the level of DOT reimbursements varied--
falling short in fiscal years 2001 through 2004 when taking into
account the costs included in the current reimbursement formula and the
additional costs associated with older vessels and shipments where
there was no foreign-flag vessel bid.
USAID's comments suggest that we did not adequately address some of the
challenges facing U.S. food aid programs or take into account the
considerable improvements USAID has made in a number of areas, such as
transportation and contracting practices. USAID raised two key
overarching points: (1) the crucial relationship between emergencies
and development and the need to address the linkages between chronic
and acute vulnerabilities discussed in the new USAID Food Security
Strategic Plan for 2006-2010 and (2) the need for additional analysis
of the magnitude and perspective of the recommendations in relation to
program size and the number of beneficiaries reached. While we
recognize the important linkages between emergencies and development
programs, these issues primarily relate to food security, which was not
a research objective of this study. However, we used the strategic plan
to provide contextual information, particularly in our discussion of
the effective use of food aid. We also provided information throughout
this report to indicate the potential magnitude and impact of savings
from efficiency improvements in food aid delivery.
USDA took issue with a number of our findings and conclusions and
expressed two overarching concerns. First, USDA believes that we did
not fully articulate the challenges inherent in achieving an ideal
first world performance when implementing programs in difficult third
world environments and that critical nutritional needs are routinely
met in a timely manner. Second, USDA believes that we lacked hard
analysis to support many of the weaknesses that we identified and
suggested that our conclusions are based upon anecdotal incidents
reported by various constituencies with their own interests and
viewpoints. We recognize the difficult operating environments in
developing countries and agencies' efforts to provide U.S. food aid on
a timely basis with minimal commodity losses. However, during our
fieldwork in three recipient countries, many implementing organizations
we met with complained about the lack of timeliness in food aid
delivery, particularly to meet emergency needs. The example of the
Ethiopian grain reserve illustrates how local food aid stakeholders
adapted ways to provide food aid in a timely manner even when U.S.
shipments were late. As described in our scope and methodology (app.
I), this report is 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. To ensure accuracy and independence in our findings, we
assessed the reliability of data we used for our analysis and compared
information from stakeholders who have different points of view and are
involved in different stages of food aid programs. We discussed our
preliminary findings with a roundtable of food aid experts and
practitioners. We reviewed and incorporated, where appropriate, agency
oral, technical, and official comments. We use anecdotal examples in
our report to illustrate findings that are based on our broader work.
We are sending copies of this report to interested members of Congress,
the Administrator of USAID and the Secretaries of Agriculture, State,
and Transportation. We will also make copies available to others upon
request. In addition, this report will be available at no charge on the
GAO Web site at http://www.gao.gov.
If you or your staffs have any questions about this report, please
contact me at (202) 512-9601 or melitot@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made major contributions to
this report are listed in appendix VIII.
Signed by:
Thomas Melito:
Director, International Affairs and Trade:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
Our objectives were to examine some key challenges to the (1)
efficiency of U.S. food aid programs and (2) effective use of U.S. food
aid.
To examine key challenges to the efficiency of the delivery of U.S.
food aid programs, we analyzed (1) food aid procurement and ocean
transportation data provided by the Kansas City Commodity Office
(KCCO)[Footnote 89] and (2) total food aid budget and monetization cost
data provided by the U.S. Agency for International Development (USAID),
the U.S. Department of Agriculture (USDA), and the World Food Program
(WFP). We did not assess the reliability of the data that we used for
background purposes or that WFP reported for transportation costs. We
examined the KCCO data for their reliability and appropriateness for
our purposes through electronic testing of the data, verification of
the data against other sources, and interviews with agency officials
that manage the data. We found the data to be sufficiently reliable to
represent trends in food aid tonnage, required time frames for
delivery, and commodity versus noncommodity costs. We also conducted
structured interviews of the 14 U.S.-and foreign-flag ocean carriers
that transport over 80 percent of U.S. food aid tonnage. While
information from these interviews may not be generalized to all ocean
carriers, we supplemented the structured interviews with information
from several other ocean carriers, shipping agents, and transportation
experts. To examine key challenges to the sale of food to generate cash
(monetization), we reviewed monetization data from USAID and USDA for
all food aid programs to determine the commodity and noncommodity (such
as shipping and other transportation) costs. We tested the data for
internal consistency, interviewed USAID and USDA officials to clarify
data definitions, and corroborated our classification of bulk
commodities with them. We determined that the data were sufficiently
reliable to represent the level, cost breakdown, and bulk versus
nonbulk breakdown of monetization. We were not able to determine to
what extent the costs of monetization are recovered through sales
proceeds because neither USAID nor USDA systematically collect the
data, which we point out as a finding in this report. We reviewed
program authorities and regulations to determine their impact on food
aid transportation; the nature of food aid transportation contracts;
and the allowable use of monetization proceeds, 202(e) funding, and
Internal Transportation, Storage, and Handling (ITSH) costs.
To examine key challenges to the effectiveness of the use of food aid,
we reviewed numerous U.S. government documents, including all USDA-
approved proposals and approximately half of all USAID-approved
proposals from fiscal years 2002 through 2006 for food aid programs
each agency administers in the countries we visited. We reviewed
several WFP internal evaluations, including those related to needs
assessments and targeting, and some external studies, such as those
conducted by the Washington, D.C.-based International Food Policy
Research Institute. We also incorporated information from our past
audits as appropriate. Additionally, we interviewed officials from WFP,
nongovernmental organizations (NGO), recipient governments, the U.S.
government, and food aid recipients in the field and obtained relevant
documentation from them. To assess food quality and nutrition issues,
we conducted interviews with and reviewed reports by commodity
suppliers, trade associations, and officials from NGOs, WFP, KCCO,
USAID, and Animal and Plant Health Inspection Service (APHIS). We also
reviewed U.S. agency food aid product specifications, rules and
regulations, commodity complaint logs, and quality control guidelines;
USAID audit reports; and internal agency correspondence and draft
documents concerning food quality and nutrition issues. To assess U.S.
agencies' monitoring of food aid programs, we reviewed agencies'
inspectors general reports, guidance for implementing organizations,
and staffing data. Lastly, we reviewed economic literature on the
impact of food aid on local markets and recent reports, studies, and
papers issued on U.S. and international food aid programs.
In Washington, D.C., we interviewed officials from USAID; USDA; the
Departments of State (State) and Defense (DOD); the Department of
Transportation Maritime Administration (DOT/MARAD); and the Office of
Management and Budget (OMB). We also met with a number of officials
representing NGOs, including 8 of the top 10 recipients of Title II
food aid between fiscal years 2002 to 2005, that serve as implementing
partners to USAID and USDA in carrying out U.S. food aid programs
overseas; freight forwarding companies; and agricultural commodity
groups. In Rome, we met with officials from the U.S. Mission to the
United Nations (UN) Food and Agriculture Agencies, the WFP
headquarters, and the Food and Agriculture Organization. We also
conducted fieldwork in three countries that are recipients of food aid-
-Ethiopia, Kenya, and Zambia--and met with officials from over 40
organizations representing U.S. missions, implementing organizations,
and relevant host government agencies. We visited a port in Texas from
which food is shipped; two food destination ports in South Africa and
Kenya; and two sites in Louisiana and Dubai where U.S. food may be
stocked prior to shipment to destination ports. Finally, in January
2007, we convened a roundtable of experts and practitioners--including
15 representatives from academia, think tanks, implementing
organizations, the maritime industry, and agricultural commodity
groups--to further delineate, based on our initial work, some key
challenges to the efficient delivery and effective use of U.S. food aid
and to explore options for improvement. We took the roundtable
participants' views into account as we finalized our analysis of these
challenges and options.
We conducted our work between May 2006 and March 2007 in accordance
with generally accepted government auditing standards.
[End of section]
Appendix II: Program Authorities and Congressional Mandates:
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 2 provides a summary of these food aid programs by
program authority.
Table 2: U.S. Food Aid by Program Authority:
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;
Food 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]
In addition to these programs, resources for U.S. food aid can be
provided through other sources, which include the following:
* The International Disaster and Famine Assistance Fund, which provides
funding for famine prevention and relief, as well as mitigation of the
effects of famine by addressing its root causes. Over the past 3 years,
USAID has programmed $73.8 million in famine prevention funds. Most of
the funds have been programmed in the Horn of Africa, where USAID
officials told us that famine is now endemic. According to USAID
officials, experience to date demonstrates that these funds have the
advantage of enabling USAID to combine emergency responses with
development approaches to address the threat of famine. Approaches need
to be innovative and catalytic while providing flexibility in assisting
famine-prone countries or regions. Famine prevention assistance funds
should generally be programmed for no more than 1 year and seek to
achieve significant and measurable results during that time period.
Funding decisions are made jointly by USAID's regional bureaus and its
Bureau for Democracy, Conflict, and Humanitarian Assistance and are
subject to OMB concurrence and congressional consultations. In fiscal
year 2006, USAID programmed $19.8 million to address the chronic
failure of the pastoralist livelihood system in the Mandera Triangle--
a large, arid region encompassing parts of Ethiopia, Somalia, and Kenya
that was the epicenter of that year's hunger crisis in the Horn of
Africa. In fiscal year 2005, USAID received $34.2 million in famine
prevention funds for activities in Ethiopia and six Great Lakes
countries in Africa. The activities in Ethiopia enabled USAID to
intervene early enough in the 2005 drought cycle to protect the
livelihoods--as well as the lives--of pastoralist populations in the
Somali region, which were not yet protected by Ethiopia's Productive
Safety Net program. In fiscal year 2004, the USAID mission in Ethiopia
received $19.8 million in famine prevention funds to enhance and
diversify the livelihoods of the chronically food insecure.
* State's Bureau of Population, Refugees, and Migration (PRM), which
provides limited amounts of cash to WFP to purchase food locally and
globally to remedy shortages in refugee feeding pipeline breaks. In
these situations, PRM generally provides about 1 month's worth of
refugee feeding needs and will not usually provide funds unless USAID's
resources have been exhausted. Funding from year to year varies. In
fiscal year 2006, PRM's cash assistance to WFP to fund operations in 14
countries totaled about $15 million, including $1.45 million for
humanitarian air service. In addition, PRM also funds food aid and food
security programs for Burmese refugees in Thailand. In fiscal year
2006, PRM provided $7 million in emergency supplemental funds to the
Thailand-Burma Border Consortium, most of which supported food-related
programs. PRM officials told us that they coordinate efforts with USAID
as needed.
Table 3 lists congressional mandates for the P.L. 480 food aid programs
and the targets for fiscal year 2006.
Table 3: Congressional Mandates for P.L. 480:
Mandate: Minimum;
Description: Total approved metric tons programmed under Title II;
FY 2006 target: 2.500 million metric tons;
Actual status September 2006: 2.714 million metric tons.
Mandate: Subminimum;
Description: Metric tons for approved nonemergency programs;
FY 2006 target: 1.875 million metric tons;
Actual status September 2006: 744,781 metric tons.
Mandate: Monetization;
Description: Percentage of approved nonemergency Title II programs that
are monetization programs;
FY 2006 target: 15 percent;
Actual status September 2006: 69 percent.
Mandate: Value-added;
Description: Percentage of approved nonemergency program commodities
that are processed, fortified, or bagged;
FY 2006 target: 75 percent;
Actual status September 2006: 44.9 percent.
Mandate: Bagged in the United States;
Description: Percentage of approved nonemergency whole grain
commodities that are bagged in the United States;
FY 2006 target: 50 percent;
Actual status September 2006: 49.5 percent.
Source: GAO analysis, based on USAID data.
[End of table]
[End of section]
Appendix III: Ensuring Food Aid Reaches Intended Recipients Is
Important to Avoid Market Distorting Effect of Food Aid:
The impact of food aid on local markets can be assessed by analyzing
its impact on supply and demand and on expectations of market
participants regarding future market stability. A number of factors
affect the impact of food aid on the markets of recipient countries. In
general, in-kind food aid affects recipient markets by increasing
supply. In the case of food shortfalls, food aid may actually serve to
bring supply back to what the levels would have been in the absence of
the shortage and would not be thought to cause a distortion. Under
these circumstances, food aid would help stop the rise in prices caused
by the shortage-induced decreased supply. To the extent that food aid
prevents major losses in physical and human capital, it may help assure
growth in subsequent periods. In addition, if food aid is distributed
free of charge to people who are desperately poor and have no
purchasing power, the transaction can be "off line" to the market--not
leading to changes in market prices.
To the extent that food aid increases supply beyond what it would have
been in the absence of shortage, it can have a potentially adverse
effect on the market. These effects would include downward pressure on
prices. The extent of this decrease would depend on (1) the amount of
food aid relative to the total volume handled in the market and (2) the
sensitivity of demand to changes in the quantities supplied to the
market (price elasticity of demand). Declines in market prices provide
disincentives to local production and could also affect the allocation
of inputs to production by reducing the value of labor--for example,
causing households to reallocate labor away from agricultural
production. The impact of food aid could extend to other sectors of the
market by affecting the prices for substitute and complementary foods.
The general characteristics of the recipient market--such as the extent
to which the local market is integrated into broader national,
regional, and global markets--can also influence the impact of food
aid. Market integration measures the degree to which changes in market
conditions in one market affect those in other markets (separated by
time or space). It is typically the result of traders moving products
across markets when it makes economic sense to do so--when the price
differential between those markets exceeds the cost of moving the
product. If markets are well integrated, injecting aid in one area can
strongly affect market conditions in related areas. In well integrated
markets, food aid shocks are short term and dissipate quickly. In
poorly functioning markets, food aid impact could be more long term,
and price movements can be dramatic. In addition, the increase in
supply due to food aid may result in less need for commercial sales or
imports.
Adverse market impacts resulting from food aid can be alleviated
through the timing and targeting of food aid delivery. For example,
timing the delivery of food aid to occur when it is needed, such as in
the "hungry season," would alleviate adverse market effects by bringing
market supply to what the levels would have been in the absence of
supply shortfalls. In this case food aid might be effective in capping
what might otherwise be a very sharp spike in prices. In addition, it
would reduce the longer term effects of the food shortages by
alleviating the need for recipients to liquidate high return assets,
such as livestock and tools, or incur high levels of debt to meet short-
term requirements for food, thus reducing their future capacity to
produce. Conversely, food aid that arrives at harvest time, when prices
are already falling due to increased supply, can plunge prices below
what it costs farmers to produce and distribute the commodity, thereby
discouraging them from future production.
Targeting food aid by making sure it goes to the people who need it the
most and excluding those who can obtain the food in other ways is also
important. This assures that the supply arrives where the demand is
greatest. In addition, according to some of the studies we
reviewed[Footnote 90] and economic principles, the very poor tend to
spend a greater proportion of income on food (high income-elasticity)
and are responsive to prices when income is available (high price-
elasticity of demand). When food aid is targeted to this group, the
combined price and income effects lead to proportionately more
purchases of food, checking overall price declines.[Footnote 91]
The actual impact of food aid on markets is an empirical question.
Studies have been inconclusive regarding disincentives and other
effects of food aid. In the case of emergency food aid distributions,
there is less evidence of negative effects than for nonemergency aid,
the effects of which tend to persist over longer time periods.
[End of section]
Appendix IV: Food Distribution Activities to Target Recipients of Food
Aid:
Figure 14 describes the food distribution activities used to target
different groups of food and recipients.
Figure 14: Food Distribution Activities to Target Recipients of Food
Aid:
[See PDF for image]
Source: GAO analysis based on USAID Commodity Reference Guide.
[End of figure]
[End of section]
Appendix V: Comments from the U.S. Department of Transportation:
Note: GAO comment supplementing those in the report text appear at the
end of this appendix.
U.S. Department of Transportation:
400 Seventh St., S.W.
Washington, D.C. 20590:
Office of the Secretary of Transportation:
March 29, 2007:
Mr. Thomas Melito:
Director, International Affairs and Trade:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, DC, 20458:
The U.S. Department of Transportation's Maritime Administration
(MARAD), which has responsibility for administering the Cargo
Preference program, strongly supports the transportation-related
initiatives highlighted in the draft report. If fully and effectively
implemented, they offer the potential to achieve efficiencies and
potentially reduce costs for ocean transport of food aid. In
particular, MARAD agrees with GAO's findings that the transport
contracts written by the food agencies must utilize modern
transportation contracting practices and updated reimbursement
methodologies. Reducing costs associated with these contracts will be
possible if they begin using commercial principles of shared risks,
supply chain partnerships, streamlined administration methods, and
expedited payment and claims resolution, as recommended. MARAD has
previously sought to open discussions with the food agencies to assist
them in achieving potentially substantial efficiencies and cost
reductions for the ocean transit portion of the food aid programs.
MARAD stands ready to assist in achieving this objective.
The inefficient and burdensome procurement and contracting practices
utilized for shipping food aid produce higher shipping costs. These
practices, such as bunching shipments during peak season, placing
increased liability on carriers beyond the terms expected within
commercial shipping, placing impractical time requirements on the
shipments, burdensome ineffective processes for resolving
transportation related disputes, and slow payments, all end up built
into the fees charged by carriers. For example, GAO's data show that
two of these terms alone - nonstandard freight terms and slow payment -
could account for about one third of the difference in rates between
food aid and commercial cargo.[Footnote 90]
Finally, while the draft report states that legal requirements such as
cargo preference can increase delivery costs, it is critical to
understand that these costs are not borne by the food programs, and
have minimal if any impact on the amount of food aid available. As
required by the Food Security Act of 1985, MARAD makes payments to the
food agencies intended to cover the differential costs for shipping
food aid on US flag carriers under cargo preference. In response to
concerns expressed by food agencies, in 2004, the Department and its
Office of Inspector General reviewed the formula used to calculate the
differential payment. As a result of this review, MARAD implemented a
revised formula and improved processing, in an effort to ensure the
food agencies are appropriately and expeditiously compensated for the
cost of cargo preference. As a result of these efforts, our
calculations using USDA data show that over the past few years, the
food agencies are receiving compensation that should cover the cost of
cargo preference.
We appreciate the opportunity to offer comments on the draft report.
Please contact Martin Gertel, Director of Audit Relations, on 202-366-
5145 with any questions.
Sincerely,
Signed by:
Linda J. Washington:
Acting Assistant Secretary for Administration:
The following is GAO's comment on the U.S. Department of
Transportation's (DOT) letter dated March 29, 2007.
GAO Comment:
1. We recognize that processing of DOT reimbursements has improved.
However, the impact of cargo preference on the amount of food aid
tonnage provided depends on the sufficiency of reimbursements to cover
cargo preference costs--both those that are included in the
reimbursement calculation as well as those associated with shipments
where no foreign-flag vessel has submitted a bid and where the vessel's
age is 25 years or older. Figure 10 in out report illustrates how DOT
reimbursements compare with the estimated costs of cargo preference
(ocean freight differential (OFD) costs) included in the reimbursement
calculation. As shown in the figure, DOT reimbursements fell short of
OFD costs in fiscal years 2001 through 2003 and exceeded OFD costs in
fiscal years 2004 and 2005. Including the estimated additional costs
for Title II programs only that were associated with older vessels and
shipments where there was no foreign-flag vessel bid (about $50 million
in fiscal year 2003, about $34 million in fiscal year 2004, and about
$56 million in fiscal year 2005), DOT reimbursements would have
exceeded total cargo preference costs in fiscal year 2005 only.
Finally, while we acknowledge that DOT revised the reimbursement
formula in 2004 to provide more timely payments, the current
methodology has not been updated to include these additional costs of
cargo preference or to promote new supply practices, such as
prepositioning.
[End of section]
Appendix VI: Comments from the U.S. Agency for International
Development:
Note: GAO comments supplementing those in the report text appear at the
end of this appendix.
USAID:
From The American People:
Mar 29 2007:
Mr. Thomas Melito:
Director, International Affairs and Trade:
U.S. Government Accountability Office:
441 G Street, N.W.
Washington, DC 20548:
Dear Mr. Melito:
I am pleased to provide the U.S. Agency for International Development's
(USAID) formal response to the draft GAO report entitled, "Foreign
Assistance: Various Challenges Impede the Efficiency and Effectiveness
of U.S. Food Aid" [GAO-07-560].
USAID has made a considerable effort to improve both the efficiency and
effectiveness of U.S. food aid. We were surprised that the GAO did not
make reference to the new USAID Food Security Strategic Plan for 2006-
2010. This new Strategy specifically addresses the dynamically changing
challenges which face the P.L. 480 Title II food aid program. We have
also taken note of the numerous challenges that limit the effective use
of food aid, which is especially important in light of limited
resources and increasing emergencies needs. Several key examples of
these challenges and the subsequent improvements that USAID has made
are discussed in the enclosure to this letter.
Thank you for the opportunity to respond to the GAO draft report and
for the courtesies extended by your staff in the conduct of this
review.
Sincerely,
Signed by:
Mosina H. Jordan:
Counselor to the Agency:
Enclosure: a/s:
U.S. Agency for International Development:
1300 Pennsylvania Avenue, NW:
Washington, DC 20523:
wwww.usaid.gov:
USAID Comments To Draft GAO 07-560:
The new USAID Food Security Strategic Plan for 2006-2010 explicitly
recognizes the crucial relationship between emergencies and development
and the need to address the linkages between chronic and acute
vulnerabilities, and how USAID and its partners are improving targeting
criteria to ensure that food resources reach the most vulnerable
countries and populations.
As recognized in the Strategy, USAID is working in close cooperation
and consultation with regional bureaus, USAID missions, cooperating
sponsors, other donors and the private sector to focus its staff time
and attention on the most strategic set of countries for multi-year
programs to support country-specific strategies for enhancing the
programs' impact on reducing food insecurity. These challenges are what
led USAID and its partners to the strategic decision to focus Title II
resources on reducing risk and vulnerability in vulnerable populations.
In addition, the draft report did not take into consideration the 2002
Report of the Food Aid and Food Security Assessment: A Review of the
Title II Development Food Aid Program Achievements and Constraints in
Management and Implementation of Title II. As noted in this report,
"...over the past 6 years, (cooperating sponsors) have made
considerable progress in program assessment, program design, resource
integration, partnering and capacity-building, while facing some
significant constraints. Program assessments have advanced considerably
as the technical sophistication of (cooperating sponsors) has
increased, although gaps remain. Review of DAP proposals submitted over
time shows significant improvement in identifying and describing
critical country-level food security problems; most assessments
incorporate a participatory methodology."
Moreover, USAID notes that the GAO draft report would have been
strengthened by additional analysis of the magnitude and perspective of
recommendations in terms of the size of the program and the number of
beneficiaries reached. For example, while the report notes that "every
$10 per metric ton reduction in freight rates could feed about 1.2
million more people during an average hungry season," USAID would like
to underscore that no hungry season is "average" and that actual saving
would represent less than two percent of the FY2006 program.
USAID has taken note of the numerous challenges that limit the
effective use of food aid, which is especially important in light of
limited resources and increasing emergencies needs. Several key
examples of these challenges and the subsequent improvements that USAID
has made are discussed in this letter.
In terms of the commodity procurement, USAID has joined with the U.S.
Department of Agriculture (USDA) in a consultative process to
significantly improve the U.S. food aid supply chain management.
Starting in 1999, USAID has investigated and inaugurated pre-
positioning facilities, first in Lake Charles, Louisiana, and then
Dubai, United Arab Emirates (UAE). These programs have succeeded in
reducing the time it takes for commodities to arrive for the recipients
of food emergencies, by eliminating the ordering process and, in the
case of Dubai, reducing the shipping time as the commodities are placed
half way around the world. At this time, USAID has awarded a third pre-
positioned site in Djibouti and will award a domestic warehouse
contract in the next few days. In addition, USAID is seeking to
establish appropriate management of the expanding system of sites.
The GAO draft report implies that USAID unilaterally selects pre-
positioned sites rather than using Federal Acquisition Regulations. The
award of pre-positioning facilities is through a fair, open, and
competitive process. Award is made to the best bidder in response to a
solicitation. Since the award cannot go to a facility that did not or
will not make an offer, we can only award to the best bidder under a
particular solicitation. These solicitations are regularly competed
through fair and open procedures to ensure that the USG retains the
best service providers. Our pre-positioning contractors are
additionally responsible for helping to ensure that commodities are
rotated on or near a first-in, first out (FIFO) basis.
USAID emergency food aid allocations demand considerable effort and
analysis. This task is made even more difficult by the rapidly changing
circumstances and budgetary uncertainties. A number of relevant factors
come into play, including:
* Overall need, as measured by objective assessments of required
rations and tonnage;
* Severity of the need, as measured by malnutrition rates and other
critical factors;
* Ability of affected populations to cope with the emergency using
resources at their disposal;
* Resource levels that other donors are planning or are likely to
provide; and:
* Ability of aid organizations, e.g., cooperating sponsors, World Food
Programme (WFP), etc., to reach those most in need and to monitor
distributions, both of which may be hampered by insecurity, government
actions, logistical constraints and other factors.
Within the constraints of existing legislative mandates, USAID works to
introduce competitive commercial principles in all of its contracting
and procurement arrangements. Transportation and contracting practices
must protect the U.S. government's interests while including, to the
greatest extent practicable, commercial principles of shared risks,
streamlined administration, and expedited payment and claims
resolution. GAO has recommended improvements in transportation
contracting, but did not include information on the process involved in
developing the "Food Aid Booking Note." This Booking Note is the
uniform contract that is used in both USAID and USDA food aid programs
and is the direct result of the recommendations of a committee that
included carriers, cooperating sponsors and their freight forwarders,
and U.S. government representatives from USAID, USDA and DOT. This
committee was formed in 2002 and met quarterly for approximately two
years before the final product was presented. The terms and conditions
of the Booking Note were fully vetted with all the major carriers and
the cooperating sponsors prior to acceptance.
USAID has explored different payment methods as well as considered
longer term transportation arrangements. While in a normal commercial,
competitive environment, these types of improvements would most
certainly yield reduced rates and lower transportation costs, USAID
recognizes that the myriad of cargo preference laws in the Title II
program do not reflect a commercial, competitive environment. USAID has
undertaken numerous initiatives to strike an appropriate balance
between risk and costs, while taking into account the non-commercial
nature of the cargo preference requirements and their impact on
competition.
USAID is interested in formally updating the ocean freight
reimbursement methodologies to take into account the new electronic
freight bidding procedures implemented in February 2007. However, DOT
has stated that they must publish updated cargo preference regulations
before any inter-agency agreement can be finalized. USAID has
investigated options as it relates to long-term transportation
agreements as well as different payment methods that would speed up
ocean transportation payments. While the costs for those particular
tools would far exceed the benefits, USAID will continue to seek
alternatives that would improve transportation services and reduce
costs so that more food successfully reaches the most food insecure.
USAID has already expanded its use of tendering for multiple discharge
port options in ocean contracts, for example, similar to the World Food
Programme's (WFP) operations, so that flexibility is enhanced without
incurring the steep premiums of high seas diversion.
USAID works closely with USDA and members of the Food Aid Consultative
Group (FACG) to coordinate, track and resolve food quality complaints.
Nevertheless, USAID recognizes that the system could be strengthened.
We support the work of the FACG's commodity management working group to
investigate improved processes and procedures among the cooperating
sponsors, USAID and USDA to resolve food aid quality complaints through
a more streamlined, consolidated approach. Finally, USAID is
investigating ways to use its Quarterly Web Interfaced Commodity
Reporting (QWICR) system to also track quality issues and complaints so
that stakeholders can more quickly become aware of quality issues.
Overtime, USAID anticipates that QWICR will also have the capability to
track and analyze monetization transactions.
USAID recognizes that both the quality and formulation of food aid
products are crucial to delivering safe, wholesome products to
undernourished populations, particularly vulnerable groups including
infants and young children, women of child-bearing age and people
living with HIV/AIDS. Along with USDA, USAID is reviewing options to
review the nutritional quality and cost-effectiveness of commodities
being provided as food assistance. Our goal will be to have
consultations with nutritionists, scientists, commodity associations
and our partners to make sure all viewpoints are heard. USAID wants to
ensure that the food aid we provide is of the highest quality to meet
the nutritional requirements necessary to address chronic hunger.
To address these concerns, along with USDA, USAID is taking the
initiative to do an in-depth review of the types and quality of food
products used in the administration of U.S. food aid programs and will
also continue its efforts of reviewing the existing contract
specifications used to obtain food aid commodities, and improving our
post-production commodity sampling and testing regime based upon sound
scientific standards.
The GAO draft report highlights the importance of enhancing the
reliability and applications of needs assessments for new and existing
food aid programs through better coordination among implementing
organizations, which can learn from past targeting experiences.
Assessment is a USAID priority. Good early warning intelligence is the
most effective tool we have to develop and confirm reliable needs
assessments. It is for this reason that, over the last several years,
there has been an expansion of the reach and improvements in the
techniques of the USAID-funded Famine Early Warning System (FEWS). This
year, USAID has been working with FEWS to improve tools to be able to
report on potential food crises with six months anticipation. USAID is
developing ways to apply FEWS as a framework for donor information
sharing and coordination. In addition, USAID utilizes its available
monitoring resources as effectively as possible to ensure proper
targeting, management and implementation. As food aid alone cannot
achieve food security, USAID seeks to coordinate with other donors to
ensure that the needed non-food resources are made available to
reinforce the food resources.
Monitoring of all grant programs is not only allowed, it is required.
All implementers are under legal obligations to monitor and report
their findings to USAID. In addition, USAID staff, more than 65 of whom
are based in the field, and more than 30 in Washington, monitor and
oversee the food aid programs. However, USAID may only bring personal
service contractors on board to monitor emergency work, although some
portion of their time can be directed to development projects.
USAID evaluates every proposed monetization activity and approves only
those which use monetization proceeds to address the underlying causes
of food insecurity, without disrupting local production or markets. For
each commodity to be monetized, USAID's policy request that the
cooperating sponsors set a sales price which: (1) represents the
reasonable market price of the commodity in the country (or region) in
which it is being sold; (2) does not depress the price of locally
produced commodities in accordance with the 1977 Bellmon Amendment; (3)
does not disrupt normal commercial practices, i.e. UMR considerations
and (4) is acceptable to the USAID Field Mission (or Regional mission
for non-presence countries). For all planned monetization, cooperating
sponsors estimate anticipated sales prices based upon local market
analysis and provide the background and basis of that estimate for
review by the USAID.
Although beyond the GAO audit's mandate, which is to limit its review
to existing programs, with regard to efforts to improve the
effectiveness of food aid programs, especially its emergency response
capabilities, it is important to note that the Administration is
seeking the authority to apply up to 25 percent of the P.L. 480 Title
II funds to procure food commodities in local and regional markets.
This authority is requested as in certain circumstances, local
procurement could accelerate the delivery of critically needed food to
emergency victims.
Finally, USAID works closely with other U.S. agencies and donor
partners in the fight against global hunger by increasing G8 action on
implementing the New Partnership for Africa's Development's (NEPAD)
Comprehensive African Agricultural Development Plan (CAADP), which is
now a viable framework for improving the effectiveness of development
assistance in achieving food security and broad-based economic growth
in Africa; and, to highlight the need for ongoing G-8 commitment to
reducing hunger, preventing famine and meeting emergency humanitarian
needs in Africa, particularly in the Horn and Sudan.
The following are GAO's comments on the U.S. Agency for International
Development's letter dated March 29, 2007.
GAO Comments:
1. We incorporated contextual information from USAID's Food Security
Strategic Plan for 2006-2010 in the background and in the discussion on
the effectiveness of the use of food aid. We also added a direct
reference in the text to the strategic plan. While we recognize the
importance of the linkages between emergencies and development
programs, these issues primarily relate to food security, which was not
a research objective of this study.
2. We added information from the specific study cited. While this study
mentioned that proposals had improved in identifying and describing
critical country-level food security problems, it also noted that
quantitative data collection and analysis at the local level were
deficient. Additionally, according to this study, USAID's policy
guidance has been insufficient, and there has been friction between
USAID and implementing organizations regarding the transparency and
timeliness of the program management by the Office of Food for Peace.
3. We have provided available information throughout this report to
indicate the potential magnitude and impact of savings from improving
the efficiency of food aid delivery. In our view, even a savings of
less than 2 percent of the fiscal year 2006 program funding could have
a significant impact by enabling the United States to feed almost
850,000 additional people for 90 days.
4. We have included additional information regarding the selection
process for prepositioning warehouses.
5. We recognize that uncertainties in funding processes, combined with
reactive and insufficiently planned procurement, increase food aid
delivery costs and time frames. Further, we noted that difficult
operating environments contribute to various challenges that impede the
effective use of food aid. Despite these constraints, we noted that
enhancements, such as better planning and improved coordination in
conducting assessments, can improve the efficiency and effectiveness of
U.S. food aid programs.
6. We reference the standard booking note that USAID and USDA created
with input from the booking note committee. We have included additional
information regarding members of this committee. However, in structured
interviews, all 14 ocean carriers indicated that further improvements
are needed to standardize freight terms and to further include, to the
extent possible, commercial principles for the allocation of risk.
7. More timely payment of food aid contracts is not a competitiveness
issue and would reduce costs for both U.S.-and foreign-flag carriers.
DOD and DOT officials have also reported that long-term transportation
agreements have produced savings for DOD and could provide savings for
food aid programs. As DOD is also subject to cargo preference
regulations, legal requirements governing food aid may not necessarily
prevent the agencies from achieving savings with long-term
transportation agreements. To determine potential savings, we are
recommending that USAID, USDA, and DOT work together to conduct further
cost-benefit analyses of supply-management options.
8. We recognize that USAID asked DOD several years ago to calculate the
cost for a sample set of shipments using long-term transportation
agreements managed by DOD, and that this analysis indicated a lack of
potential savings. However, as discussed in this report, DOD and DOT
officials subsequently found that the analysis contained flaws and both
agencies recommend that a new analysis be conducted. For example, DOT
officials indicated that cost savings could be realized if USAID were
to manage its own contracts, and they have offered to assist USAID in
doing so. Regarding USAID's use of multiple port discharge options, we
have included additional language in our report to reflect this
information.
9. While food quality issues may be discussed in the Food Aid
Consultative Group, there is still no shared, coordinated system in
place that USDA, KCCO, and USAID can use to track and respond to
complaints. Additionally, while we acknowledge that USAID has developed
the Quarterly Web-Interfaced Commodity Reporting (QWICR) system to
assist in tracking food aid commodities, this system is currently
utilized only by some Food for Peace programs and NGOs in Africa and is
not shared with USDA and KCCO. We also point out the need for better
monitoring and tracking of monetization transactions, including
tracking of revenues generated by monetization. At this point, it is
not clear whether QWICR will be able to accommodate this need for both
USAID and USDA.
10. We note that USAID recognizes that the quality and formulation of
food aid products are crucial for undernourished populations and that
the Director of the Office of Food for Peace highlighted the need to
improve the quality of food aid commodities in his statement before the
Senate Committee on Agriculture, Nutrition, and Forestry on March 21,
2007. We also note that USAID, along with USDA, plans to do an in-depth
review of the types and quality of food products used in U.S. food aid
programs and will continue its efforts to review existing contract
specifications and improve commodity sampling and testing. However,
these planned reviews and improvements have not yet been implemented.
11. USAID recognizes that enhancing assessments is a priority. Our
recommendation to improve needs assessments was also endorsed by the
Director of USAID's Office of Food for Peace in his statement before
the Senate Committee on Agriculture, Nutrition, and Forestry on March
21, 2007.
12. Based on USAID's technical comments, we have added a footnote
stating that implementing organizations are required to monitor food
aid programs according to OMB Circular A-110 as well as USAID
regulations (22 C.F.R. 226.51). While noting the implementing
organizations' monitoring responsibilities, we maintain that U.S.
agencies still need to adequately monitor programs to ensure
independence and provide assurance that food aid resources are used
optimally. In its official comments, USAID states that it has over 65
staff in the field and over 30 staff in Washington, D.C., to monitor
and oversee food aid programs. However, as noted in our report, there
are only 23 Title II-funded staff in the field, and non-Title II funded
staff often have other responsibilities in addition to monitoring food
aid programs. Further, the Director of the Office of Food for Peace, in
his statement before the Senate Committee on Agriculture, Nutrition,
and Forestry on March 21, 2007, supported our recommendation on the
need for increased monitoring.
13. We agree that it is important to carefully review the monetization
proposals in order to minimize the disruption to local production and
markets. However, even when the proposals satisfy all the criteria
USAID considers, monetization is still an inherently inefficient
practice because converting food to cash in order to fund development
projects is costly.
[End of section]
Appendix VII: Comments from the U.S. Department of Agriculture:
Note: GAO comments supplementing those in the report text appear at the
end of this appendix.
United States Department of Agriculture:
Farm and Foreign Agricultural Services:
Foreign Agricultural Service:
1400 Independence Ave, SW:
Stop 1060:
Washington, DC 20250-1060:
Mar 3 0 2007:
Mr. Thomas Melito:
Director, International Affairs and Trade:
United States Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548:
Dear Mr. Melito:
The U.S. Department of Agriculture (USDA) sincerely appreciates the
efforts of the Government Accountability Office (GAO) to allow USDA an
opportunity to provide a substantive response to the comprehensive GAO
draft report and accompanying testimony on "Foreign Assistance: Various
Challenges Impede the Efficiency and Effectiveness of US Food Aid" (GAO-
07-560). USDA's comments are based on GAO's draft report provided to
USDA on March 8, 2007. Some issues raised in the draft report are not
reflected in the recommendations, and USDA does not address these due
to our already lengthy comments and the limited time to respond. USDA
believes that the release of the final report represents the
beginning --not the end --of the discussion on this complex topic, and
that all sides will have further opportunities to explore and
understand the several complicating factors in food aid.
USDA agrees that improvements in efficiency and effectiveness are
possible in the procurement, planning, monitoring, and quality of food
aid. However, despite the title GAO gave the report, USDA believes that
in some cases GAO fails to fully articulate the inherent challenges in
achieving an ideal first-world performance when implementing the
programs in difficult third-world environments. These written comments
will address some of these challenges. USDA notes that despite these
complications, critical nutritional needs all around the world
routinely are met in a timely fashion, and all available data indicates
that U.S. commodity losses for non-World Food Programme food aid are
limited to one percent or less.
USDA also does not find where any hard analysis was undertaken by GAO
to support many of the weaknesses that the draft report identifies.
Instead, GAO appears to have drawn broad conclusions based upon various
anecdotal incidents as reported by assorted constituencies, each with
their own interests and points of view. Many of the examples GAO cited
to illustrate the points in the draft report are unique or presented
out of context, resulting in misleading statements or flawed
conclusions. Obviously USDA cannot address each instance here, but the
Department's overall comments should be read with that in mind.
For example, although the majority of food aid shipments consist of
relatively stable bulk commodities, most of GAO's conclusions and
recommendations regarding transportation appear to involve the shipment
of higher risk packaged products. In 2006, overall food aid shipments
totaled approximately three million metric tons, with bulk shipments
representing approximately 62 percent by quantity (and approximately 52
percent by freight dollars). So while the report is presented as
addressing all food aid, in truth much of the report is focused on just
over one-third of all food aid shipped.
USDA also is very proud of the Department's ability to adapt and
respond appropriately in emergency situations. For example, after the
Indian Ocean Tsunami, USDA quickly responded with the diversion of
15,000 metric tons of rice, with almost 5,000 metric tons arriving in
Indonesia only 13 days after the event. In Lebanon, 25,000 metric tons
of USDA diverted wheat arrived in Beirut just 18 days after the
decision was made to provide emergency assistance.
USDA is aware of the past bunching of shipments and continues to take
steps which already have markedly alleviated this issue. Over the past
two years USDA has introduced more flexibility into shipping periods.
Commodity and freight procurement that once was compressed into the
October-December timeframe now can be shipped anytime from October
through March, therefore spreading out food aid procurements and
resulting in a more balanced procurement process.
The Department also recently published the final rule on a one-step
procurement process for packaged products, which allows USDA to procure
commodity and freight with bids that are received at the same time. An
electronic bid system for packaged commodity and freight now is in
operation as well. This process allows commodity suppliers and carriers
to respond to government proposals more efficiently, and also provides
a platform for the consolidation of cargo, which USDA believes will
result in long term cost savings. Further, this one-step process will
reduce the time to deliver commodities to the U.S. port, thus reducing
the delivery time to the ultimate recipient. The U.S. Agency for
International Development (USAID), USDA, and the U.S. Maritime
Administration (MARAD) are in discussions to revise MARAD's cargo
preference regulations to allow greater flexibility and efficiencies in
utilizing U.S. flag carriers.
USDA agrees that a greater acceptance of multi-year food aid agreements
may offer opportunities to improve program planning and logistics, and
may provide increased flexibility in purchasing and shipping periods.
The Department actually is receiving a higher number of multi-year
proposals for the Food for Progress (FFP) and the McGovern-Dole Food
for Education (FFE) programs, and is doing its best to approve more of
them. We believe that the FFE under present operating guidelines is an
example of an effective and efficient program. In FY 2006, commodity
purchases made up 54 percent of expenditures, transportation to the
destination made up 21 percent, administrative costs of implementing
organizations and inland transportation made up 12 percent, and cash
for teacher training and other such activities made up 13 percent.
However, an increased demand for these programs, coupled with the
currently high commodity and freight costs, is limiting the number of
multi-year proposals that can be accepted.
USDA has greater concern with the draft report's discussion on
modernizing food aid transportation contracting practices. We again
believe that GAO oversimplifies the issue and that its recommendations
are too general. For example, the draft report is misleading in that it
does not make distinctions between the different transportation
contracts that make up the logistical operations of food aid. Contract
terms, risks, and overall challenges are not the same for marine
transportation contracts as for foreign inland cargo movements.
Reviewing all cargo transportation movements collectively (from vendor
to village) caused the findings in the draft report to be inaccurate.
These contracts must be reviewed separately if the overall issues are
to be properly understood.
USDA is open to talking with the shipping industry, USAID, and MARAD to
discuss potential improvements, but the Department believes that its
contracts already are both clear and consistent with commercial
practices. Any confusion on the point might arise from the fact that
food aid programs often mandate shipment to difficult locations and
less-commercial port environments. Carriers which are inexperienced in
this type of work may not price into their bid adequate protection for
the increased risks that they assume as a result.
USDA shares in those risks, but believes that in most cases the carrier
is the more capable party to avoid or handle the foreseeable risks
involving any logistical problems that arise. The contracts clearly set
out the complete responsibilities of each party and the foreseeable
risks through the entire transaction, and particularly the financial
responsibilities in the event that logistical problems (such as limited
infrastructure or corruption) do occur. As in any commercial exchange,
the very first risk a bidder takes is in understanding what his
contracted responsibilities will be, and in pricing his bid
accordingly.
GAO limits its draft report discussion on cargo preference to trying to
minimize the cost of implementation. USDA shares the desire to limit
the impact of cargo preference on the food aid programs, but believes
that the draft report is misleading in suggesting that substantial
savings which could be used to increase the tonnage of food aid shipped
under the programs are possible. This is largely because GAO failed to
adequately examine the ramifications of reimbursements received from
MARAD under Sections 901d(a) and 901 d(b) of the Merchant Marine Act.
Any discussion of the cost of cargo preference and its impact on the
food assistance programs must contain a thorough review of the
financing provisions and reimbursements received from MARAD. Section
901d(a) requires MARAD to finance the additional cost in ocean freight
charges in moving from a requirement of 50 percent U.S. flag vessel
participation to 75 percent U.S. flag vessel participation. Section
901d(b) reimburses the food aid agencies for all ocean freight costs
whenever the ocean freight costs exceed 20 percent of the total
commodity cost. For Fiscal Years 2003, 2004, and 2005, all but one of
the food aid grant programs received significant reimbursements under
Section 901d(b). The single exception was the Section 416(b) program,
which did not qualify since it was utilized primarily for the export of
nonfat dry milk, the very high cost of which prevented it from meeting
the 20 percent qualification.
Food aid programs that reach this 20 percent threshold under Section
901 d(b) have their ocean freight costs effectively capped, with all
ocean freight costs above that point --regardless of vessel age or flag
--being reimbursed by MARAD. With MARAD reimbursements to the USDA and
USAID food aid programs totaling approximately $100 million annually
under this provision, food aid agencies would have to seek efficiencies
in transportation operations exceeding that amount before any cost
savings would be available to procure additional food. USDA does not
understand how the transportation changes alluded to in the draft
report would capture these types of savings. An examination of any
significant savings ultimately would have to involve a general
discussion of cargo preference, which the draft report does not do.
However, USDA always has been aware of the financial cost of
transportation in food aid programs, whether reimbursed by MARAD or
not. Because of this concern, the Department has instituted procedures
such as automated payment processes to increase efficiency.
USDA will carefully review GAO's final recommendation regarding the
establishment of a coordinated system for tracking and resolving food
quality complaints, and will coordinate with USAID in addressing the
issue. In many cases, commodities for USDA and USAID programs share
space on the same ship, so we already learn together of any problems
regarding a ship or its cargo. In addition, USDA and USAID routinely
share information on substantial known quality problems. However, as
previously indicated, commodity losses due to shipping problems or
infestation are extraordinarily low. Nevertheless, USDA continues to
work with USAID to consider a more formal structure to share and record
food quality or contamination information, and to review different ways
to procure or ship commodities that may improve or preserve quality.
As an example, the recent development of the Containerization Aid
Product Improvement Team (CAPIT) was the result of collaboration
between USDA and USAID, along with carriers and commodity suppliers.
CAPIT made operational recommendations which were adopted by the food
aid agencies to resolve issues specific to commodity losses of corn and
beans during the containerized movement of these food aid cargos. In
addition, over a decade ago USDA created a rapid response team
comprised of operational experts that travel worldwide to respond to
loss complaints from food aid recipients. This team has been very
successful in addressing large loss situations and has saved millions
of dollars for the food aid programs by effectively mitigating
commodity losses.
USDA and USAID continue to take steps to review the products used in
food aid and to ensure that we are shipping quality products that meet
the needs of the recipients. We are taking a three-pronged approach
that involves the agencies, the food industry and nutritionists, and
the organizations that deliver the food aid in country. First, USDA is
taking steps to improve its contracting for food aid by increasing the
enforcement of standards in the contracts that would be included in
future procurements. Second, USDA will work with experts to identify
and reinforce laboratory testing standards and manufacturing processes.
Third, a longer-term study will be undertaken to help identify new
products or improved products that could be provided through food aid.
USDA and USAID will work closely with Congress and the private sector
during this process.
USDA is developing an information system to improve the monitoring and
evaluation of food aid programs. The Food Aid Information System (FAIS)
currently is in development, and when completed will capture
implementing organizations' reports electronically and automate the
tracking of both report delinquency and completion. Most importantly,
the system will allow the quick and easy comparison of agreement
objectives and progress criteria against program outputs and outcomes
through improved reporting formats and performance metric tools. The
FAIS is scheduled for completion in 2009, assuming no additional
constraints in funding.
In discussing ways to provide adequate non-food resources in situations
where such assistance will enhance the effectiveness of food aid, GAO
neglected to address the significant non-food resources that are
provided regularly in both the FFP and HE programs. FFP projects, both
with governments and those with private voluntary organizations, often
include non-food resources. In fact, the use of monetized proceeds to
support the proper storage, handling, and processing of foods are
common elements of FFP agreements and are encouraged where appropriate,
while funds monetized through the FFE program also are used to support
school repair and construction, to purchase educational materials, and
for other such non-food resources. This flexibility to provide support
for food aid effectiveness by using monetized proceeds is one of the
outstanding, positive features of monetization that was not included in
the draft report. Of course, all non-food utilization of monetization
proceeds entails a dollar-for-dollar reduction in the amount available
for commodity procurement.
Finally, as GAO noted, USDA already is taking additional steps to
address the monitoring of food aid programs. During the recent
reorganization of the Foreign Agricultural Service (FAS), the agency
established a Monitoring and Evaluation unit which will have
responsibility for the evaluation of the development programs. FAS
hopes that adequate funding will be made available to enable the unit
to carry out the full reporting, evaluation, and site visit duties
assigned to it. This joins with the FAIS in representing USDA's renewed
commitment to improving the monitoring of food aid programs in order to
ensure their proper management and implementation.
Again, we commend GAO for providing this most useful report. USDA looks
forward to taking part in the ongoing discussion of U.S. food aid that
it already has helped initiate.
Sincerely,
Signed by:
Michael W Yost:
Administrator:
Foreign Agricultural Service:
Signed by:
Teresa C. Lasseter:
Administrator:
Farm Service Agency:
The following are GAO's comments on the U.S. Department of
Agriculture's letter dated March 30, 2007.
GAO Comments:
1. We recognize (1) the challenges of providing food aid in developing
countries and (2) agency efforts to provide U.S. food aid on a timely
basis with minimal commodity losses. However, multiple implementing
organizations we met with expressed concern regarding the lack of
timeliness in food aid delivery, particularly to meet emergency needs.
The Ethiopian grain reserve example illustrates how food aid
stakeholders have adapted strategies to provide food aid in a timely
manner even when U.S. shipments are late. Although commodity losses for
non-WFP programs are reported at less than 1 percent, KCCO is unable to
determine the extent of commodity losses for WFP programs, which
account for approximately 60 percent of U.S. food aid shipments.
Additionally, various factors suggest that actual commodity losses may
exceed those reported in the data.
2. We provide a detailed description of our scope and methodology in
appendix I. Each of our report findings and recommendations is 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. To ensure accuracy and
independence in our findings, we assessed the reliability of data used
for our analysis and compared information from stakeholders who have
different points of view and are involved in different stages of food
aid programs. We discussed our preliminary findings with a roundtable
of food aid experts and practitioners. We reviewed and incorporated,
where appropriate, agency oral, technical, and official comments. We
include anecdotal examples in our report to illustrate findings that
are based on our broader work.
3. While it is likely that the risks of transporting packaged cargo are
higher than those for bulk cargo, all of our transportation
recommendations are intended to improve the delivery of both types of
food aid. Improving food aid logistical planning could decrease
procurement bunching (and the higher prices that result) for both
packaged and bulk food shipments. Modernizing transportation
contracting practices, including standardizing bulk cargo contracts and
improving claims processes, could likewise decrease ocean freight rates
for both bulk and packaged shipments. Finally, since cargo preference
regulations apply to shipments of both bulk and packaged cargoes and
food quality complaints may occur for all food aid shipments, our
remaining two recommendations to improve the efficiency of delivery are
aimed at the entire food aid program.
4. KCCO officials told us that USDA needs to improve procurement
planning in order to reduce the continued bunching of purchases that
stresses its operations and those of its food suppliers. KCCO data and
a recent KCCO study confirmed that bunching of procurement has occurred
through fiscal year 2006--findings that were confirmed by a broad
representation of other food aid stakeholders and experts we
interviewed.
5. To determine the length of time required to provide U.S. food aid,
we examined the delivery process from vendor to village. Our analysis
of transportation contracting practices refers to ocean transportation
contracts only, and we have added language in the report to reflect
this scope. We did not systematically examine transportation contracts
for foreign inland cargo since U.S. agencies do not collect uniform
contract data for these shipments. KCCO does not include these costs
when determining lowest cost providers for food aid delivery, and DOT
cargo preference reimbursement methodologies pertain to ocean
transportation only.
6. We have added language to the report to reflect that USDA ships bulk
cargoes using contract terms that incorporate more shared risk.
However, contracts for bulk shipments have not yet been standardized,
and the standard booking note used by both USAID and USDA for packaged
cargoes defines freight terms differently than commercial contracts.
Other areas where USDA transportation contracting practices differ from
commercial practices include lengthy claims processes and
insufficiently streamlined administration and paperwork.
7. We have added language to the report to indicate that the net cost
impact of shifting risk from ocean carriers to other food aid
stakeholders, such as commodity suppliers and implementing
organizations has not been studied. However, savings could arise
through aligning the fiduciary responsibility for food delivery risks
with those stakeholders that could better assess and manage those
risks. Under the current approach, ocean carriers are held responsible
for certain food delivery risks that they have no direct ability to
manage. Ocean carriers generally insure themselves against these risks
by increasing their freight rates for all deliveries. Moreover, by
realigning the cost of risk to those who manage it during each step of
the process, food aid stakeholders would have additional incentives to
make sure the process goes right.
8. Figure 10 in our report compares DOT reimbursements with the
estimated costs of cargo preference. DOT reimbursements include the
incremental ocean freight rate differential and the additional costs of
ocean transportation exceeding 20 percent of the total cost of food aid
commodities and ocean freight (Sections 901d(a) and 901d(b) of the
Merchant Marine Act). As shown in the figure, DOT reimbursements fell
short of OFD costs in fiscal years 2001 through 2003 and exceeded OFD
costs in fiscal years 2004 and 2005. However, the estimated OFD costs
in figure 10 do not include costs associated with shipments where no
foreign-flag vessel submitted a bid and where the vessel's age was 25
years or older. USAID and DOT officials separately estimated the
additional costs associated with these two factors for past Title II
shipments. Agency estimates amounted to about $50 million in fiscal
year 2003, about $34 million in fiscal year 2004, and about $56 million
in fiscal year 2005. Including additional estimated costs, DOT
reimbursements would only have exceeded total cargo preference costs in
fiscal year 2005.
9. While we acknowledge that USAID and USDA do have some means of
sharing information on quality problems and that commodity and storage-
specific initiatives like the Containerization Aid Product Improvement
Team are helpful in addressing quality issues , both agencies still do
not have a shared, coordinated system to track and respond
systematically to food quality complaints for all of their commodities.
And as stated in comment 1, agency officials are unable to track the
quality of food aid for approximately 60 percent of food aid shipments,
and commodity losses may exceed those reported in the data. We also
acknowledge that USDA has a rapid response team, but KCCO officials
have told us that the team is limited in its ability to respond to all
of the complaints on food quality that it receives. USDA officials have
also stated that food quality inspection officials like USDA's Federal
Grain Inspection Service do not have responsibilities overseas and are
limited to inspecting only some food aid commodities and that while
those officials can be hired to conduct overseas inspections, it would
be expensive to do so.
10. Limitations in the availability and use of nonfood resources to
conduct credible assessments and to use these assessments to inform
program proposals apply both to USAID-and USDA-administered programs.
However, we specifically note in response to agency comments that some
limitations, such as legal restrictions on the use of funding, apply
specifically to Title II-funded programs. As indicated by USDA, the
McGovern-Dole Food for Education and Child Nutrition program has a cash
component of 13 percent, as indicated by USDA, which is higher than the
upper limit of 10 percent cash allowed as 202(e) funding to
implementing organizations for USAID Title-II funded programs. However,
Food for Education accounts for only 4 percent of U.S. food aid
funding; therefore, our overall finding about limited complementary
nonfood resources still applies broadly to U.S. food aid programs.
Additionally, the majority of Food for Progress commodities are
monetized rather than used for direct distribution to beneficiaries, as
shown in figure 12 in our report. Therefore, the need for nonfood
resources to enhance the effectiveness of the use of food aid is less
relevant in the case of Food for Progress. Moreover, as we note in our
report, the use of monetization to generate funds for development
projects is an inefficient use of food aid resources in general.
[End of section]
Appendix VIII: GAO Contact and Staff Acknowledgments:
GAO Contact:
Thomas Melito, Director, (202) 512-9601:
Acknowledgments:
In addition to the person named above, Phillip J. 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 made key contributions to this
report.
[End of section]
Related GAO Products:
Darfur Crisis: Progress in Aid and Peace Monitoring Threatened by
Ongoing Violence and Operational Challenges, GAO-07-9. Washington,
D.C.: Nov. 9, 2006.
Darfur Crisis: Death Estimates Demonstrate Severity of Crisis, but
Their Accuracy and Credibility Could Be Enhanced, GAO-07-24.
Washington, D.C.: Nov. 9, 2006.
Maritime Security Fleet: Many Factors Determine Impact of Potential
Limits on Food Aid Shipments, GAO-04-1065. Washington, D.C.: Sept. 13,
2004.
Foreign Assistance: Lack of Strategic Focus and Obstacles to
Agricultural Recovery Threaten Afghanistan's Stability, GAO-03-607.
Washington, D.C.: June 30, 2003.
Foreign Assistance: Sustained Efforts Needed to Help Southern Africa
Recover from Food Crisis, GAO-03-644. Washington, D.C.: June 25, 2003.
Food Aid: Experience of U.S. Programs Suggest Opportunities for
Improvement, GAO-02-801T. Washington, D.C.: June 4, 2002.
Foreign Assistance: Global Food for Education Initiative Faces
Challenges for Successful Implementation, GAO-02-328. Washington, D.C.:
Feb. 28, 2002.
Foreign Assistance: U.S. Food Aid Program to Russia Had Weak Internal
Controls, GAO/NSIAD/AIMD-00-329. Washington, D.C.: Sept. 29, 2000.
Foreign Assistance: U.S. Bilateral Food Assistance to North Korea Had
Mixed Results, GAO/NSIAD-00-175. Washington, D.C.: June 15, 2000.
Foreign Assistance: Donation of U.S. Planting Seed to Russia in 1999
Had Weaknesses, GAO/NSIAD-00-91. Washington, D.C.: Mar. 9, 2000.
Foreign Assistance: North Korean Constraints Limit Food Aid Monitoring,
GAO/T-NSIAD-00-47. Washington, D.C.: Oct. 27, 1999.
Foreign Assistance: North Korea Restricts Food Aid Monitoring, GAO-
NSIAD-00-35. Washington, D.C.: Oct. 8, 1999.
Food Security: Preparations for the 1996 World Food Summit, GAO/NSIAD-
97-44. Washington, D.C.: Nov. 1996.
Food Security: Factors That Could Affect Progress Toward Meeting World
Food Summit Goals, GAO/NSIAD-99-15. Washington, D.C.: Mar. 1999.
International Relations: Food Security in Africa, GAO/T-NSIAD-96-217.
Washington, D.C.: Jul. 31, 1996.
Food Aid: Competing Goals and Requirements Hinder Title I Program
Results, GAO/GGD-95-68. Washington, D.C.: June 26, 1995.
Foreign Aid: Actions Taken to Improve Food Aid Management, GAO/NSIAD-
95-74. Washington, D.C.: Mar. 23, 1995.
Maritime Industry: Cargo Preference Laws Estimated Costs and Effects,
GAO/RCED-95-34. Washington, D.C.: Nov. 30, 1994.
Private Voluntary Organizations' Role in Distributing Food Aid, GAO/
NSIAD-95-35. Washington, D.C.: Nov. 23, 1994.
Cargo Preference Requirements: Objectives Not Met When Applied to Food
Aid Programs, GAO/GGD-94-215. Washington, D.C.: Sept. 29, 1994:
Public Law 480 Title I: Economic and Market Development Objectives Not
Met, GAO/T-GGD-94-191. Washington, D.C.: Aug. 3, 1994.
Multilateral Assistance: Accountability for U.S. Contributions to the
World Food Program, GAO/ T-NSIAD-94-174. Washington, D.C.: May 5, 1994.
Foreign Assistance: Inadequate Accountability for U.S. Donations to the
World Food Program, GAO/NSIAD-94-29. Washington, D.C.: Jan. 28, 1994.
Foreign Assistance: U.S. Participation in FAO's Technical Cooperation
Program, GAO/NSIAD-94-32. Washington, D.C.: Jan. 11, 1994.
Food Aid: Management Improvements Are Needed to Achieve Program
Objectives, GAO/NSIAD-93-168. Washington, D.C.: July 23, 1993.
Cargo Preference Requirements: Their Impact on U.S. Food Aid Programs
and the U.S. Merchant Marine, GAO/NSIAD-90-174. Washington, D.C.: June
19, 1990.
Status Report on GAO's Reviews on P.L. 480 Food Aid Programs, GAO/T-
NSIAD-90-23. Washington, D.C.: Mar. 21, 1990.
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] We define efficiency as the extent to which a program is acquiring,
protecting, and using its resources in the most productive manner--in
terms of the cost, time, and quality of food aid. We define
effectiveness as the extent to which U.S. food aid programs achieve
their goals and objectives.
[4] USDA administers Public Law (P.L.) 480 Title I, Food for Progress,
Section 416(b), and the McGovern-Dole International Food for Education
and Child Nutrition programs. USAID administers P.L. 480 Title II.
[5] Food security exists when all people at all times have both
physical and economic access to sufficient food to meet their dietary
needs for a productive and healthy life.
[6] 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).
[7] 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.
[8] WFP defines emergencies as "urgent situations in which there is
clear evidence that an event or series of events has occurred which
causes human suffering or imminently threatens human lives or
livelihoods and which the government concerned has not the means to
remedy; and it is a demonstrably abnormal event or series of events
which produces dislocation in the life of a community on an exceptional
scale."
[9] 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). Funding
sources for U.S. international food assistance other than these six
USAID-and USDA-administered food aid programs include (1) the
International Disaster and Famine Assistance fund and (2) State's
Bureau of Population, Refugees, and Migration. (See app. II for a
description of these sources of funding.)
[10] See GAO, Food Aid: Experience of U.S. Programs Suggests
Opportunities for Improvement, GAO-02-801T (Washington, D.C.: June 4,
2002).
[11] 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).
[12] Due to increasing emergency food aid needs, the USAID
Administrator has requested that Congress waive this subminimum
requirement; as a result, this mandate has not been met since 1995.
[13] The Bill Emerson Humanitarian Trust, a reserve of up to 4 million
metric tons of grain, can be used to help fulfill P.L. 480 food aid
commitments to meet unanticipated emergency needs in developing
countries or when U.S. domestic supplies are short. The Secretary of
Agriculture authorizes the use of the trust in consultation with the
Food Assistance Policy Council, which includes senior USAID
representatives. The trust, as presently constituted, was enacted in
the 1998 Africa Seeds of Hope Act (P.L. 105-385) and replaced the Food
Security Wheat Reserve of 1980.
[14] See 7 U.S.C. 1725.
[15] If U.S. food aid programs were to provide the same level of
tonnage in fiscal year 2006 as they did in fiscal year 2002, they could
have fed over 35 million more people during a typical peak hungry
season lasting 3 months. Our estimates of additional beneficiaries
served with potential savings use USAID's estimate that 1 metric ton
can feed approximately 1,740 people per day.
[16] Costs to transport food to the U.S. port for export are included
in commodity and ocean transportation contracts.
[17] In addition to rising fuel prices and greater global demand for
shipping, one factor contributing to the rise in freight rates is the
rising share of U.S. tonnage sent to Africa, which had a slightly
higher average cost of $180 per metric ton in 2006.
[18] World Food Program, WFP in Statistics (Rome, Italy: July 2006) and
Review of Indirect Support Costs Rate, WFP/EB/A/2006/6-C/1 (Rome,
Italy: May 2006).
[19] Based on USAID and USDA data, the fiscal year 2006 average
commodity and transportation cost for 1 metric ton of food aid was
$670. If that average cost had been reduced by $10 per metric ton
through a reduction in ocean transportation freight rates or any other
cost factor, the fiscal year 2006 food-aid budget could have funded an
additional 43,900 metric tons--enough to feed almost 850,00 people
during a peak hungry season, which typically lasts 3 months.
[20] KCCO data suggest that there is some variation in the time
required from the contract award date until the commodity reaches a
U.S. port for export. For example, for fiscal years 2002 through 2006,
this time period varied from less than 30 days for several shipments to
more than 90 days for several others.
[21] Ocean transportation time frames may include loading and unloading
of vessels.
[22] GAO has previously reported on the poor timing of food aid
delivery. See Famine in Africa: Improving U.S. Response Time for
Emergency Relief, GAO/NSIAD-86-56 (Washington, D.C.: Apr. 3, 1986).
[23] Additionally, Congress can appropriate funds to augment BEHT. The
Emergency Wartime Supplemental Appropriations Act, 2003 (P. L. 108-11)
appropriated $69 million for that purpose.
[24] USAID has taken steps to improve its management of (1) committed
and anticipated cash outflows for development and emergency programs,
prepositioning, and other accounts and (2) anticipated cash inflows
from annual and supplemental budgets, DOT reimbursements, and other
carryover accounts. According to a KCCO study, while both USDA and
USAID experience an upsurge in purchasing at the end of the year
(particularly in September), USDA's is more pronounced.
[25] These figures exclude prices for nonfat dry milk and vegetable
oil.
[26] To improve coordination on transportation, DOT officials and ocean
carriers suggested that food aid programs include groups similar to
DOD's Expert Working Group and Joint Planning Advisory Group.
[27] Several years ago, USAID asked DOD to calculate the cost for a
sample set of food aid shipments using long-term transportation
agreements managed by DOD. This analysis indicated a lack of potential
savings. However, DOD and DOT officials subsequently found that the
analysis contained flaws and recommend that a new analysis be
conducted. DOD officials suggested that USAID conduct a pilot program
using DOD's Universal Service Contract. DOT officials indicated that
cost savings could be realized if USAID were to manage its own
contracts and that they had offered to assist USAID in doing so. DOT
also provided examples of contracts that would not discourage cargo
consolidation or reduce competition.
[28] While various factors distinguish food aid shipments from
commercial shipments, including cargo preference and the percentage of
cargo that is shipped bulk or packaged, KCCO data suggest that food aid
freight rates from the Gulf of Mexico to Djibouti, East Africa averaged
over $150 per ton in 2006. Commercial freight rates from the Gulf of
Mexico to Djibouti in 2006 averaged around one-third the price at $55
per ton.
[29] International commercial (InCo) terms are internationally accepted
terms defining responsibilities of exporters and importers in
shipments. For example, InCo terms define free alongside ship (FAS) as
a contract where cargo is placed at the load port under the seller's
responsibility and any vessel loading charges, freight, and other costs
incurred, including "detention and demurrage" (costs for detaining a
vessel or equipment at a discharge port longer than specified in the
contract), are the buyer's responsibility. For both USAID and USDA food
aid programs that ship packaged cargo, FAS contracts specify that cargo
is loaded and discharged at the carrier's time, risk, and expense. When
USDA ships bulk cargo, however, contracts include a prenegotiated
demurrage rate.
[30] The vessel that was delivering food aid to Madagascar was carrying
one shipment for a USDA program and one shipment for a USAID program.
Estimated financial losses reported by this carrier were for the USAID
program shipment, for which its contract did not allow demurrage or
detention.
[31] This standard contract is called the Food Aid Booking Note and is
based on recommendations from a booking note committee that included
agency officials, ocean carriers, implementing organizations, and
freight forwarders.
[32] The net cost impact of shifting risk from ocean carriers to other
food aid stakeholders, such as commodity suppliers or implementing
organizations, has not been studied. However, savings could potentially
arise through aligning the fiduciary responsibility for food delivery
risks with those stakeholders that can better assess and manage those
risks. Under the current approach, ocean carriers are held responsible
for certain food delivery risks that they have no direct ability to
manage. Ocean carriers generally insure themselves against these risks
by increasing their freight rates for all deliveries. Moreover, by
realigning the cost of risk to those who manage it during each step of
the process, food aid stakeholders would have additional incentives to
make sure the process goes right.
[33] The number of vessels participating in food aid programs varies
over time due to global market opportunities. We reported in 2004 that
between fiscal years 1999 and 2003, an annual average of 108 U.S.-flag
vessels participated in U.S. food aid programs (see GAO-04-1065).
According to DOT estimates, 87 U.S.-flag vessels participated in food
aid programs in fiscal year 2006. Due to fleet changes, USAID officials
estimate that there are now even fewer U.S.-flag vessels available to
carry U.S. food aid.
[34] Contracts for USDA programs rarely include penalties for delayed
delivery. Such penalties are included in contracts for USAID programs.
[35] Various stakeholders questioned whether penalties are effective.
USAID officials emphasized that penalties are their most practical tool
to compel ocean carrier performance because Federal Acquisition
Regulations make it very difficult to suspend carriers from
participating in food aid programs if they perform poorly.
[36] See USAID, Office of Inspector General Report No. 4-663-04-002-P
(Washington, D.C.: Nov. 21, 2003).
[37] WFP handles food aid claims independently through an insurance
program.
[38] This system is entitled PowerTrack and is also currently used by
DOD and State. According to DOD and DOT, PowerTrack has provided the
government with visibility of payment history and has reduced
administrative and handling costs and expedited vendor payments.
However, ocean carriers are responsible for paying transaction fees and
USAID officials believe these fees---which are a percentage (seven-
tenths of 1 percent) of the contract value--may be too expensive for
large contracts. They are researching whether they can find a similar
service with a flat transaction fee.
[39] 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.
[40] 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. According to DOT officials, the OFD cost was relatively
low in fiscal year 2005 due to high global demand for freight services
and relatively high foreign-flag freight rates. These factors raised
ocean transport costs as a percentage of program costs, so that DOT's
total reimbursement was higher as well.
[41] USAID and USDA are required to apply cargo preference regulations
for vessels of any age. However, total OFD costs are based on an
average OFD for vessels that are 25 years or older or have been rebuilt
within the past 5 years and are certified by the Secretary of
Transportation as having a useful life of at least 5 years after that
rebuilding. USAID officials argue that the cost difference between U.S.-
flag and foreign-flag rates is larger for older vessels. Further, since
opportunities for foreign-flag participation are limited, USAID argues
that it is not reimbursed for the higher cost of shipping on a U.S.-
flag vessel when foreign-flag bids are not received. Using KCCO data,
we found that 14 percent of food aid commodity requests in fiscal year
2005 received no foreign-flag bid.
[42] 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.
[43] In the Senate report accompanying H.R. 5522, the 2007 Department
of State, Foreign Operations, and Related Programs Appropriations Act,
the Senate Foreign Relations Committee stated its concern about reports
that food aid distribution overseas had been disrupted, suspended, and
in some instances rejected due to quality concerns and indicated its
support of efforts by USAID and other agencies to investigate these
concerns. (S. Rept. 109-277, 61). GAO has also reported on food quality
issues. See Foreign Assistance: U.S. Food Aid Program to Russia Had
Weak Internal Controls, GAO/NSIAD/AIMD-00-329 (Washington, D.C.: Sept.
29, 2000).
[44] 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.
[45] Purchases for the Lake Charles prepositioning site must reach the
warehouse and may not be diverted in advance.
[46] USAID representatives said they might consider pursuing a long-
term transportation agreement for prepositioned tonnage to Djibouti.
KCCO officials suggested that as part of such a program, reduced
bunching of purchases could also reduce commodity prices. In addition
to considering long-term transportation agreements, USAID officials
stated that they are expanding their practice of specifying
transportation contracts that include multiple discharge port options
in order to reduce costs associated with high-seas diversions.
[47] USAID awards these contracts based on three factors: (1) storage
and warehouse costs; (2) technical criteria such as the port's plan of
operations, port personnel capacity, and the frequency of service
provided by ocean carriers; and (3) past performance.
[48] USAID is considering building inventory management into warehouse
contracts and establishing standard operating procedures.
[49] A phytosanitary certificate is a document required by many states
and foreign countries for the import of nonprocessed plant products. As
specified by the importing country or state, exported products must
meet various plant health requirements pertaining to pests, plant
diseases, chemical treatments and weeds.
[50] From 1996 to 2005, processed, fortified, or bagged commodities
accounted for less than 20 percent of Title II monetization--much less
than the requirement that 75 percent of food aid be value-added.
[51] USDA, Foreign Agricultural Service, Report to Congress on Food Aid
Monetization, (Washington, D.C.: Aug. 10, 2001).
[52] CARE USA,White Paper on Food Aid Policy (June 6, 2006).
[53] Because of this objective, sales prices were deliberately set at
less than market values. Participating retailers were required to sell
at predetermined prices that allowed them a reasonable margin and were
considered generally affordable to most low-income consumers.
[54] 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.
[55] OMB, The President's Management Agenda, Fiscal Year 2002,
[Hyperlink, http://www.whitehouse.gov/omb/budget/fy2002/mgmt.pdf].
[56] GAO, Foreign Assistance: Global Food for Education Initiative
Faces Challenges for Successful Implementation, GAO-02-328 (Washington,
D.C.: Feb. 28, 2002).
[57] A USDA official told us that the coordination between USAID and
USDA in Mozambique has improved since then.
[58] Studies investigating the impact of food aid on markets have been
largely inconclusive, according to a number of reviews that have
examined empirical studies on market impact. In part, this is because
the effect of food aid on the production, prices, and consumption of
food depends on factors specific to particular situations.
[59] For example, according to one study, the poorly timed arrival of
maize food aid close to the harvest season in Mozambique resulted in a
drop in the market prices of maize. D. Tschirly, C. Donovan, and M. T.
Weber, "Food Aid and Food Markets, Lessons from Mozambique," Food
Policy, Vol. 21, No. 1 (1996), 189-209.
[60] The impact of food aid on recipient country markets also depends
on the extent to which local markets are integrated into national,
regional, and global markets. For well integrated markets, the effects
of any one food aid distribution may dissipate quickly.
[61] Christopher B. Barrett, Food Aid's Unintended Consequences, ESA
Working Paper No. 06-05, FAO (May 2006).
[62] GAO, Foreign Assistance: Sustained Efforts Needed to Help Southern
Africa Recover from Food Crisis, GAO-03-644 (Washington, D.C.: June
2003).
[63] 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).
[64] WFP and the FAO's Crop and Food Supply Assessment Missions focus
on both macro-level conditions, such as the national food balance, and
household data on food insecurity, including food consumption and
dietary diversity of households in selected areas. WFP's Vulnerability
Analysis and Mapping--as well as various methods used by NGOs such as
CARE, Save the Children, and Catholic Relief Services--also focus on
livelihood areas and household-level assessments.
[65] The SENAC initiative aims to improve the accuracy and credibility
of assessments by (1) enhancing their transparency, (2) developing
better methods and guidance, (3) improving the availability of
precrisis information in countries exposed to repeated emergencies, and
(4) strengthening WFP's field capacity by deploying assessment
specialists in its six regional bureaus.
[66] According to USAID officials, originally FAM received funding as
part of an implementing organization's grant agreement with USAID. This
organization also contributed some resources towards FAM's operations.
Subsequently, FAM received funding through highly competitive
institutional capacity-building grants. The decision to stop funding
FAM was made after a detailed technical review of the FAM proposal,
which was competing with 19 other proposals and was ranked low among
the proposals seeking renewed funding. Additionally, according to
USAID, the implementing organizations did not adequately explain their
reasons for not funding FAM on their own.
[67] Bonnard, Patricia, Patricia Haggerty and Anne Swindale, Report of
the Food Aid and Food Security Assessment: A Review of the Title II
Development Food Aid Program, Food and Nutrition Technical Assistance
(Washington D.C.: March 2002).
[68] Chronic vulnerability to food insecurity refers to the risk of
experiencing persistent food shortages over a long period of time. This
condition is strongly associated with structural disadvantages that are
difficult to reverse quickly. On the other hand, transitory
vulnerability to food insecurity involves a temporary inability to meet
food needs or smooth consumption levels. This condition is primarily
due to seasonal income fluctuations, adverse price movements, and
temporary shocks. (Timothy R. Frankenberger, Nancy Mock, and Paul Jere,
Vulnerability Assessment Methodology Review, a report prepared by TANGO
International, Inc., for the Southern Africa Development Community:
Food, Agriculture, and Natural Resources, Regional Vulnerability
Assessment Committee, October 2005.)
[69] Cross-border trade between Nigeria and Niger also exacerbated food
shortages in Niger, according to WFP and USAID assessments, because the
large market in Nigeria created incentives to grow commercial crops
rather than food crops for Niger's bordering areas. The indebtedness of
households in this area also increased because laborers often took
loans of grain from traders during the hungry season, when the monetary
value of grain was at its highest, and repaid them at the same monetary
value after the harvest, when grain tended to be much cheaper,
according to the USAID assessment. To better understand the role of
local and regional markets, WFP has begun to examine ways to
incorporate information on local and regional markets into needs
assessments as part of its SENAC initiative. Since households depend on
markets for their livelihoods and needs, improved understanding of the
effect of emergencies and food aid on markets is important to assess
needs and determine appropriate responses to crises.
[70] According to this WFP evaluation, WFP operations tend to use
multiple targeting modalities or mechanisms as a matter of practice
rather than assessing the need and effectiveness of these mechanisms to
address a given situation. According to this study, indiscriminate use
of multiple targeting mechanisms can result in double coverage of
populations and place excessive administrative demands on WFP and its
partners.
[71] In response to a joint statement by 11 donors, including the
United States, WFP's Executive Board issued a draft policy on targeting
in emergencies in February 2006.
[72] See Assessing the Effectiveness of Community-Based Targeting of
Emergency Food Aid in Bangladesh, Ethiopia, and Malawi, International
Food Policy Research Institute and World Food Program Brief
(Washington, D.C., 2005).
[73] The Ethiopian government-led Productive Safety Net Program
provides food and cash assistance to chronically vulnerable people. In
2005, its first year of operation, the program provided assistance to
about 5 million people. By 2006, the program had expanded to cover 7.2
million people.
[74] 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. For example, the USAID mission in Ethiopia provided
almost $20 million to build capacity and conduct baseline surveys to
inform assessments of the Disaster Prevention and Preparedness Agency's
Livelihood Integration Unit.
[75] According to WFP officials, the European Commission's Humanitarian
Office provided about $20 million for the SENAC project. WFP South
Africa officials noted that other donors, such as the United Kingdom's
Department for International Development, are funding assessments in
the region.
[76] 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.
[77] GAO, Foreign Assistance: Lack of Strategic Focus and Obstacles to
Agricultural Recovery Threaten Afghanistan's Stability, GAO-03-607
(Washington, D.C.: June 2003).
[78] 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.
[79] Micronutrient assessments are important to determine the levels of
fortificants used in different commodities and different contexts as
different formulas are needed to target the nutritional needs of
various recipients--i.e., children under 5 years of age and people with
HIV/AIDS.
[80] TQSA is a method implemented by USDA's Farm Service Agency to
verify suppliers' established quality management systems for providing
commodities and other products that meet USDA specifications. Using
TQSA's checklist and guidelines, auditors review and assess a firm's
documented quality management system and assign it a numerical rating.
A minimum TQSA score, set by KCCO, is required for a commodity supplier
to be considered for a bid on a food aid contract.
[81] Ash refers to the ash mass that remains after a sample of flour is
incinerated in a laboratory oven. This is an easy way to verify the
fraction of the whole grain that ended up in the flour.
[82] According to USAID, NGOs are required to undertake monitoring to
comply with OMB Circular A-110 and USAID regulations (22 C.F.R.
226.51).
[83] USAID Inspector General, Audit of USAID/Madagascar's Distribution
of P.L. 480 Title II Non-Emergency Assistance in Support of its Direct
Food Aid Distribution Program (Washington, D.C., September 2003). See
also Audit of USAID/Ghana's Distribution of P.L. 480 Title II Non-
Emergency Assistance in Support of Its Direct Food Aid Distribution
Program (Dakar, Senegal: October 2003); and Audit of USAID/Ethiopia's
Distribution of P.L. 480 Title II Non-Emergency Assistance in Support
of Its Direct Food Aid Distribution Program (Pretoria, South Africa:
November 2003).
[84] As part of the 2002 Farm Bill, the Congress directed USAID to
streamline program management as well as procedures and guidelines,
including "information collection and reporting systems by identifying
critical information that needs to be monitored and reported on by
eligible organizations." In its report to the Congress in 2003, USAID
identified actions to help achieve legislative directives, which
included a re-examination of its staffing and human resources
requirements to ensure timeliness and efficiency, especially due to the
workload imposed by the $1.4 billion Title II program. However, USAID
did not systematically assess the workload and staffing requirements of
the Office of Food for Peace to determine appropriate levels required
to monitor its operations in over 50 countries.
[85] 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.
[86] In 2005, USAID's East Africa regional office had oversight
responsibilities for $1.3 billion in food aid distributed in the
region, including about $377 million from the Bill Emerson Humanitarian
Trust, to meet emergency needs in Ethiopia, Eritrea, and Sudan.
[87] In contrast, while USAID's mission in Ethiopia also comes under
the purview of USAID's East Africa regional office, it has its own
staff to monitor its food aid programs. Specifically, two U.S. national
and four foreign national staff manage and monitor U.S. food aid
programs in Ethiopia, funded at $143 million in fiscal year 2006.
[88] USAID hires foreign nationals and U.S. citizens under personal
service contracts to complement its workforce of U.S. foreign service
and civil service personnel. These PSCs serve in USAID's overseas
offices or missions and are generally considered to be more cost-
effective by the agency.
[89] We did not systematically examine transportation contracts for
foreign inland cargo given that U.S. agencies do not collect uniform
contract data for these shipments, KCCO does not include these costs
when determining lowest-cost providers for food-aid delivery, and DOT
cargo preference reimbursement methodologies pertain to ocean
transportation only.
[90] Cynthia Donovan, Megan McGlinchy, John Staatz, and David
Tschirley, Emergency Needs Assessment and the Impact of Food Aid on
Local Markets, MSU International Development Working Paper #87, 2007;
Christopher B. Barrett, Food Aid's Intended and Unintended
Consequences, ESA Working Paper No. 06-05, FAO (May 2006).
[91] Overall demand may remain inelastic, however, because the very
poor may represent a very small part of the total market.
[92] Note the comparison on page 17 of the draft report between
commercial and food aid cargoes may not be fully comparable, as much of
the food aid is shipped as bag cargo and requires substantially more
handling than the bulk cargo shipped under commercial terms. As a
result, these terms may actually account for a larger proportion of the
difference in rates.
[93] DOT must finance any increased ocean freight charges resulting
from the 1985 increase in the cargo preference requirement from 50
percent to 75 percent U.S.-flag.
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 (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 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: 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:
Paul Anderson, Managing Director, AndersonP1@gao.gov (202) 512-4800
U.S. Government Accountability Office, 441 G Street NW, Room 7149
Washington, D.C. 20548:
