**UNITED STATES AGENCY FOR INTERNATIONAL DEVELOPMENT**

**CFDA 98.007 FOOD FOR PEACE DEVELOPMENT ASSISTANCE PROGRAM**

**CFDA 98.008 FOOD FOR PEACE EMERGENCY PROGRAM**

**I. PROGRAM OBJECTIVES**

The United States Agency for International Development (USAID) donates
agricultural commodities to foreign countries under Title II of the
Agricultural Trade Development and Assistance Act of 1954 (Pub. L. 480,
Title II) (7 USC 1691 through 1738r). These programs include donated
commodities, monetization proceeds from the sale of commodities, and
cash assistance (referred to as Section 202(e) funding (7 USC 1722(e)),
and International Transportation, Storage and Handing (ITSH) funding (7
USC 1736 and 1736a).

**II. PROGRAM PROCEDURES**

**General Overview**

As the primary conduit of humanitarian assistance for USAID, the Bureau
for Democracy, Conflict and Humanitarian Assistance (DCHA) is charged
with the overall responsibility for USAID's response to humanitarian
crises, both natural and complex. The Office of Food for Peace (FFP)
manages Pub. L. 480, Title II (7 USC 1721 through 1726(b)) provision of
agricultural commodities channeled to foreign countries as food
assistance. Food assistance is also authorized and delivered under
Titles I and III of Pub. L. 480, as well as under other legislation.
This supplement covers only food assistance authorized and delivered
under Title II.

USAID may transfer agricultural commodities to address famine or other
urgent or extraordinary relief requirements; combat malnutrition,
especially in children and mothers; carry out activities that attempt to
alleviate the causes of hunger, mortality and morbidity; promote
economic and community development; promote sound environmental
practices; and carry out feeding programs. Agricultural commodities may
be provided to meet emergency food needs through foreign governments and
private or public organizations, including intergovernmental
organizations. Agricultural commodities also may be provided for
non-emergency assistance through private voluntary organizations or
cooperatives which are, to the extent practicable, registered with
USAID, and through intergovernmental organizations.

"Cooperating Sponsor" is the term used to define the organization
entering into an agreement with USAID for the use of agricultural
commodities or funds. Cooperating Sponsors may include governments and
public or private agencies, including intergovernmental organizations
such as the World Food Program, and non-governmental organizations.
Non-governmental Cooperating Sponsors include private voluntary
organizations and cooperatives. Title II assistance is provided to
Cooperating Sponsors for emergency and non-emergency programs.
Activities include direct distribution as well as food assistance for
programs that support smallholder agriculture, market liberalization
through policy change, nutrition and other child survival programs,
community development, such as water and sanitation and environmental
restoration, and small-scale infrastructure development. A portion of
Title II commodities can be monetized (sold to obtain cash for use in US
assistance programs) by Cooperating Sponsors to fund complementary
interventions to enhance the impact of food programs and contribute to
food security. Monetization of food aid under emergency programs occurs
to fund complementary activities such as distribution, repackaging, and
wet feeding in refugee camps.

**Program Operation**

*General*

Each Cooperating Sponsor is required to submit for USAID approval a
program description for each of the programs it proposes to implement.
The program description includes program purposes and goals; criteria
for measuring program effectiveness; a description of the activities for
which commodities, monetized proceeds, or program income will be
provided or used; and other specific provisions as required by USAID. If
a Cooperating Sponsor submits a multi-year Operational Plan that is
approved by USAID, the Operational Plan provided with an Annual Estimate
of Requirements (AER) each subsequent year will only cover those
components which require updating or the Cooperating Sponsor proposes to
change. Operational Plans are required for all non-governmental
Cooperating Sponsors' emergency programs along with the AER; however,
emergency situations may not permit the same degree of detail and
certainty of analysis that is expected in planning Title II development
programs (22 CFR section 211.5).

USAID uses Transfer Authorization to make an award for commodities and
supporting costs.

*Host Country Food for Peace Program Agreement (HCFFPA)*

Each non-governmental Cooperating Sponsor is required to enter into a
separate, written agreement with the foreign government of each country
for which Title II commodities are transferred to the Cooperating
Sponsor. The agreement must establish terms and condition needed by the
non-governmental Cooperating Sponsor to conduct a Title II program in
accordance with 22 CFR part 211. When this is not appropriate or
feasible, the USAID mission or diplomatic post may instead provide
assurance to FFP that the program can be effectively implemented in
compliance with 22 CFR part 211 without a HCFFPA (22 CFR section
211.3(b)).

*Recipient Agencies*

A Cooperating Sponsor may enter into agreements with Recipient Agencies
(e.g., schools, institutions, welfare agencies, disaster relief
organizations, and public or private agencies) for the delivery of
program services. Such an agreement must be in place prior to the
transfer of any commodities, monetized proceeds, or program income to
the recipient agency. The agreement must require the recipient agency to
compensate the Cooperating Sponsor for any assets generated by the
foregoing sources that are not used for purposes expressly provided for
in the agreement, or that are lost, damaged, or misused as the result of
the recipient agency's failure to exercise reasonable care (22 CFR
sections 211.2(s) and 211.3(c)).

*Monetization*

Monetization is a critical resource for Cooperating Sponsors. The
Cooperating Sponsor remains responsible for the commodities, monetized
proceeds, and program income in accordance with the Operational Plan or
Transfer Authorization (22 CFR section 211.3(c)(3)).

**Other Resources**

In addition to commodities (including ocean and inland freight costs)
and monetization proceeds, cash resources, known as 202(e) funds, are
made available to Cooperating Sponsors for establishing new programs and
meeting the specific administrative, management, and personnel costs of
programs (7 USC 1722 (e), as well as ITSH costs of the program pursuant
to (7 USC 1736(b) and 7 USC 1736a(c)).

**Source of Governing Requirements**

This program is authorized under Title II of the Agricultural Trade
Development and Assistance Act of 1954 (Pub. L. 480; 7 USC 1691 through
1738r). Implementing regulations are found at 22 CFR part 211.

**Availability of Other Program Information**

USAID maintains on the Internet a page with information on the "Food for
Peace" program, including laws, regulation and other information at
(<http://www.usaid.gov/our_work/humanitarian_assistance/ffp/>).

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed or Unallowed**

> 1\. *Use of Funds*
>
> a\. *General* - The Operational Plan and Transfer Authorization set
> forth the description of the activities for which commodities,
> monetized proceeds, or program income shall be used.
>
> b\. *Program Management (Section 202(e) Funds)* -- Cash resources
> provided by USAID under this provision of Title II may be used for
> activities including: (1) direct program costs of a Title II
> program---administrative, management, distribution, and other program
> implementation costs; (2) improving the impact of food
> aid---feasibility assessments, baseline studies and technical
> assistance; and (3) costs of implementing audit and evaluation
> recommendations (7 USC 1722 (e) and (f)).
>
> c\. *Internal Transportation, Storage and Handling* - Emergency and
> eligible non-emergency programs to cover ITSH costs (7 USC 1736 and 7
> USC 1736a(c)).
>
> 2\. *Use of Commodities and Monetization Proceeds*
>
> a\. Except as USAID may otherwise agree in writing, agricultural
> commodities donated by USAID shall not be distributed, handled, or
> allocated by any military forces (22 CFR section 211.5(e)).
>
> b\. Within the limits of the total amount of commodities, monetized
> proceeds, and program income as approved by USAID in the Operational
> Plan or Transfer Authorization, the Cooperating Sponsor may increase
> or decrease by not to exceed 10 percent the amount of commodities,
> monetized proceeds, or program income allocated to approved program
> categories or components of the Operational Plan (22 CFR section
> 211.5(a)).
>
> c\. A Cooperating Sponsor is required to provide proper storage, care,
> and handling of commodities. In determining whether there was a proper
> exercise of the Cooperating Sponsor's responsibility, USAID considers
> normal commercial practices in the country of distribution and the
> problems associated with carrying out programs in developing countries
> (22 CFR section 211.9(d)).
>
> d\. Cooperating Sponsors are not required to monitor, manage, report
> on, or account for the distribution or use of commodities after title
> to the commodities has passed to buyers or other third parties
> pursuant to a sale under a monetization program and all sales proceeds
> have been fully deposited in the special interest-bearing account
> established by the Cooperating Sponsor for monetized proceeds (22 CFR
> section 211.5 (j)).
>
> e\. Monetized proceeds may not be used to pay for the performance of
> abortions as a method of family planning or to motivate or coerce any
> person to practice abortions (22 CFR section 211.5 (k)(4)).

**J. Program Income**

> Program income means gross income earned by the Cooperating Sponsor
> from activities supported under the approved program during the
> program period, including, but not limited to, interest earned on
> deposits of monetized proceeds, revenue from income generating
> activities, funds accruing from the sale of containers and nominal
> voluntary contributions by recipients made on the basis of ability to
> pay. Monetized proceeds are not considered program income (22 CFR
> section211.2(s)).
>
> Program income may be used by Cooperating Sponsors for activities
> specified in 22 CFR section 211.5 (k), including the transport and
> distribution of the donated commodities; implementing
> income-generating community development, health, nutrition, and other
> developmental activities; making investments with USAID approval; and
> improving their financial and other management systems (22 CFR section
> 211.5 (k)).
>
> Program income may not be used to pay for the performance of abortions
> as a method of family planning or to motivate or coerce any person to
> practice abortions (22 CFR section 211.5 (k)(4)).

**L. Reporting**

> **1. Financial Reporting**
>
> a\. SF-269, *Financial Status Report* - Applicable
>
> b\. SF-270, *Request for Advance or Reimbursement* - Applicable
>
> c\. SF-271, *Outlay Report and Request for Reimbursement for
> Construction Programs* - Not Applicable
>
> d\. SF-272, *Federal Cash Transactions Report* - Applicable
>
> **2. Performance Reporting** - Not Applicable
>
> **3. Special Reporting** - Not Applicable

**N. Special Tests and Provisions**

> **1. Recipient Agencies**
>
> **Compliance Requirement** - Cooperating Sponsors are responsible for
> determining that Recipient Agencies to whom they distribute
> commodities are eligible in accordance with the Operational Plan or
> Transfer Authorization and 22 CFR section 211.
>
> Prior to the transfer of commodities, monetized proceeds or program
> income to a Recipient Agency, the Cooperating Sponsor is required to
> enter into a written agreement that (a) describes the approved uses of
> resources provided, (b) requires the Recipient Agency to pay the
> Cooperating Sponsor the value of any resources that are used for
> purposes not permitted under the agreement or that are lost, damaged
> or misused as a result of the Recipient Agency's failure to exercise
> reasonable care of transferred resources, and (c) incorporate by
> reference or otherwise the terms and conditions set forth in 22 CFR
> part 211 (22 CFR section 211.3(c)).
>
> In entering into agreements with Recipient Agencies for the transfer
> of commodities, monetized proceeds, or program income, the Cooperating
> Sponsor remains responsible for such resources transferred in
> accordance with the Operational Plan or Transfer Authorization and 22
> CFR part 211 (22 CFR section 211.3(c)(3)). In monitoring Recipient
> Agencies, the Cooperating Sponsor is required to provide adequate
> supervisory personnel for the efficient operation of the program,
> including personnel to (a) plan, organize, implement, control, and
> evaluate programs involving distribution of commodities or use of
> monetized proceeds and program income; (b) make warehouse inspections,
> physical inventories, and end-use checks of food or funds, and (c)
> review books and records maintained by Recipient Agencies that receive
> monetized proceeds and/or program income (22 CFR section 211.5(b)).
>
> **Audit Objective** - Determine whether: (1) the Cooperating Sponsor
> entered into written agreements with the Recipient Agencies; (2) the
> use of the Recipient Agencies was consistent with the Operational Plan
> and Transfer Authorization; and (3) the Cooperating Sponsor monitored
> the activities of Recipient Agencies to ensure proper performance of
> assigned activities and use of commodities, monetized proceeds, and
> program income.
>
> **Suggested Audit Procedures**
>
> Select a sample of Recipient Agencies and ascertain if:
>
> a\. The Cooperating Sponsor entered into a written agreement with the
> Recipient Agency.
>
> b\. The Cooperating Sponsor's use of the Recipient Agency was
> consistent with the Operational Plan and Transfer Authorization.
>
> c\. The Cooperating Sponsor appropriately monitored the activities of
> the Recipient Agency to ensure proper performance of assigned
> activities and use of commodities, monetized proceeds, and program
> income.

**IV. OTHER INFORMATION**

> USAID began issuing awards using CFDA 98.007 and 98.008 in mid-2005.
> Prior to that time, USAID did not have an assigned CFDA number.
> Therefore, for awards prior to 2005 and during the 2005 transition
> year, awards under the programs in this cluster may be shown as
> Foreign Food Donation Program without an associated CFDA number. When
> completing the Schedule of Expenditures of Federal Awards, recipients
> should record their expenditures using the CFDA number or program name
> shown on the notice of award for the period in which the funds were
> awarded.