Number range CHAPTER**UNITED STATES AGENCY FOR INTERNATIONAL
DEVELOPMENT**

**None** **FOREIGN FOOD AID DONATION 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 1722). This program includes donated commodities,
monetization from the sale of commodities, and payments referred to as
Section 202(e) grants (7 USC 1722(e)).

**II. PROGRAM PROCEDURES**

**General Overview**

As the primary conduit of humanitarian assistance for USAID, the Bureau
of Humanitarian Response (BHR) 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 (Title II) provisions for agricultural commodities food
assistance that is channeled to foreign countries. 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 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. Non-governmental Cooperating Sponsors include
private voluntary organizations, cooperatives, or public agencies. Title
II assistance is provided to U.S.-based Cooperating Sponsors for (a)
development programs, and (b) emergency programs. Activities under
development programs include pilot programs for smallholder agriculture,
supporting market liberalization through policy change, nutrition and
other child survival programs, community development, such as water and
sanitation and environmental restoration, or small-scale infrastructure
development. A portion of Title II commodities can be monetized by
Cooperating Sponsors to fund complementary development interventions to
enhance the impact of food programs and contribute to food security.
Emergency programs include direct feeding activities to respond to
short-term, unanticipated food shortages. 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 to USAID for approval an
Operational Plan which includes a description of each of the programs it
sponsors or proposes to sponsor. This plan 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.

*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 (the selling of agricultural commodities to obtain foreign
currency for use in U.S. assistance programs) 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 grants are made available to Cooperating
Sponsors for establishing new programs and meeting the specific
administrative, management, personnel, and Internal Transportation,
Storage and Handling (ITSH) costs of the program. These costs are
commonly referred to as Section 202(e) grants (7 USC 1722 (e)).

**Source of Governing Requirements**

This program is authorized under Title II of the Agricultural Trade
Development and Assistance Act of 1954 (Pub. L. 480, Title II) (7 USC
1722). Implementing regulations are found at 22 CFR part 211.

**Availability of Other Program Information**

USAID maintains on the Internet a page titled "Food for Peace"
(<http://www.usaid.gov/our_work/humanitarian_assistance/ffp/>) which
provides program laws, regulations, and other general information.

**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\. *Section 202(e) Grants* - Funds 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---baseline studies and technical assistance;
> and (3) costs of implementing audit and evaluation recommendations.
>
> c\. *Internal Transportation, Storage and Handling* - Emergency
> programs to cover ITSH costs (7 USC 1736).
>
> 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
> sections 211.2(o) and 211.2(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.