INTERNATIONAL 

FOOD ASSISTANCE

USAID Has Controls 

for Implementation 

and Support Costs but 

Should Strengthen 

Financial Oversight

Report to the Chairman, Committee on 

Agriculture, House of Representatives

March 2017

GAO-17-224

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-17-224, a report to the 

Chairman, Committee on Agriculture, House of 

Representatives

March 2017

INTERNATIONAL FOOD ASSISTANCE

USAID Has Controls for Implementation and 

Support Costs but Should Strengthen

Financial Oversight

What GAO Found

The U.S. Agency for International Development (USAID) has used most of the 

2014 Farm Bill’s increase in authorized funding for section 202(e) of the Food for 

Peace Act to provide cash transfers, food vouchers, and locally or regionally 

procured food—modalities not previously supported through Title II. Of the 

additional authorized funding that the agency utilized, USAID obligated 75 

percent in fiscal year 2014 and 96 percent in fiscal year 2015 for these 

modalities. In addition, to better meet beneficiaries’ needs, USAID has 

increasingly used funds from accounts authorized by the Foreign Assistance Act,

along with 202(e) funding, to implement and support projects—costs that 202(e) 

funding has typically covered. Also, in some cases, USAID has used funds from 

those accounts along with 202(e) funding to provide cash transfers, food 

vouchers, or local or regional procurement in a single project.

Warehouse Workers Packaging Food Aid for Beneficiaries in Haiti

USAID and its partners have various controls for financial oversight of Title II 

funding used for implementation and support costs; however, GAO found certain 

deficiencies in USAID’s oversight. USAID reviews partners’ detailed planned 

budgets for these costs and high-level quarterly financial reports, according to 

USAID officials, but it generally has not conducted systematic, targeted financial 

reviews of partners’ actual spending on these costs. While GAO found that 

partners’ internal controls generally included policies and procedures to help 

ensure proper use of funds, GAO’s limited, nongeneralizable financial 

transactions testing identified instances of misspending, such as charging a 

202(e) cost to one project that should have been charged to another. Also, 

USAID has not obtained key monitoring data from partners related to these costs 

that could identify areas needing additional financial oversight. Moreover, USAID 

does not require partners to conduct comprehensive assessments of financial 

and fraud risks for cash transfers and food vouchers in development projects, 

although it requires risk assessments for emergency projects. GAO found that 

partners for selected development projects provided broad discussions of risk to 

USAID but did not provide comprehensive risk assessments. As a result, USAID 

is limited in its ability to ensure that partners are spending funds as planned.

View GAO-17-224. For more information, 

contact Thomas Melito at (202)512-9601 or 

MelitoT@gao.gov

Why GAO Did This Study

In recent years, USAID has awarded 

about $1.4 billion annually for 

international food assistance projects 

under Title II of the Food for Peace Act

(Title II). This funding has traditionally 

been used to provide U.S.-purchased 

commodities to food-insecure 

beneficiaries overseas. Section 202(e) 

of the Food for Peace Act authorizes 

USAID to also provide funding to cover 

project implementation costs, which 

have typically included administrative 

expenses such as implementing 

partner staff salaries. The Agricultural 

Act of 2014 (2014 Farm Bill) increased

the amount of 202(e) funding USAID 

can use for implementation costs from 

13 to 20 percent of the annual Title II 

appropriation and also expanded the

eligible uses of these funds. USAID’s 

utilization of these new authorities 

presents potential oversight 

challenges.

GAO was asked to review Title II 

implementation costs. This report 

examines (1) any changes in USAID’s 

use of Title II funding to implement and 

support projects since the 2014 Farm 

Bill and (2) USAID’s financial oversight 

of this funding for selected projects. 

GAO analyzed USAID funding data for 

fiscal years 2012 through 2015 (the 

most recent available), reviewed 

USAID and partner documents, and 

interviewed officials. GAO conducted 

financial reviews of a nongeneralizable 

sample of seven Title II projects, 

selected on the basis of project funding 

and implemented modalities. 

What GAO Recommends

GAO is making five recommendations

to USAID—for example, to conduct 

financial reviews, collect monitoring 

data, and assess risks. USAID 

concurred with the recommendations.
Page i GAO-17-224 International Food Assistance

Letter 1

Background 4

USAID Used Most of 202(e) Funding Increase for Cash Transfers, 

Food Vouchers, and Local and Regional Procurement and 

Used Multiple Funding Sources with Title II 12

USAID Has Various Controls for Financial Oversight of Title II 

Implementation and Support Costs, but Its Oversight Has 

Certain Deficiencies 23

Conclusions 36

Recommendations for Executive Action 37

Agency Comments and Our Evaluation 38

Appendix I Objectives, Scope, and Methodology 40

Appendix II USAID Internal Transportation, Storage, and Handling Funding 44

Appendix III Selected Title II Projects 47

Appendix IV Financial Oversight of Title II Funding to Implement and Support WFP 

Emergency Food Assistance Projects 54

Appendix V Comments from the U.S. Agency for International Development 57

Appendix VI GAO Contact and Staff Acknowledgments 61

Tables

Table 1: USAID Title II Appropriations, Farm Bill Spending Limits, 

and 202(e) Obligations, Fiscal Years 2014-2015 14

Table 2: USAID Obligations of 202(e) Funding for Cash Transfers, 

Food Vouchers, and Locally and Regionally Procured 

Commodities in Title II Projects, Fiscal Years 2014-2015 16

Contents
Page ii GAO-17-224 International Food Assistance

Table 3: USAID Monetization in Title II Development Projects, 

Fiscal Years 2012-2015 17

Table 4: USAID Obligations from Development Assistance 

Account in Support of Title II Development Projects, Fiscal 

Years 2013-2015 20

Table 5: USAID Title II ITSH Obligations, Fiscal Years 2012-2015 45

Table 6: USAID Obligations for Development Project in Ethiopia, 

Fiscal Years 2014-2015 47

Table 7: USAID Obligations for Development Project in Haiti, 

Fiscal Years 2014-2015 48

Table 8: USAID Obligations for Development Project in Malawi, 

Fiscal Year 2015 49

Table 9: USAID Obligations for Emergency Project in Malawi, 

Fiscal Years 2014-2015 50

Table 10: USAID Obligations for Emergency Project in South 

Sudan, Fiscal Years 2014-2015 51

Table 11: USAID Obligations for Development Project in 

Zimbabwe, Fiscal Years 2014-2015 52

Table 12: USAID Obligations for Emergency Project in Zimbabwe, 

Fiscal Years 2014-2015 53

Figures

Figure 1: Title II International Food Assistance Projects, Fiscal 

Years 2012–2015 5

Figure 2: Warehouse Workers Packaging Food Aid for 

Beneficiaries in Haiti 7

Figure 3: USAID Title II Obligated Funding, Fiscal Years 2012–

2015 8

Figure 4: Components of Internal Control Framework Prescribed 

for Federal Agencies and Widely Used by International 

Organizations 12

Figure 5: USAID Title II 202(e) Obligations to Implement and 

Support Various Assistance Modalities, Relative to 

Legislated Spending Limits, Fiscal Years 2012-2015 15

Figure 6: Development Assistance Activity Supported with 202(e) 

Funding in Zimbabwe 18

Figure 7: Locations of USAID Food Assistance Projects That 

Received Both Title II Funding and Funding Authorized 

by the Foreign Assistance Act in Fiscal Years 2014 or

2015 19
Page iii GAO-17-224 International Food Assistance

Figure 8: Title II Development Project Providing Tree Seedlings for 

Erosion Control, Malawi 21

Figure 9: USAID Title II Development and Emergency Projects’ 

ITSH Obligations, Fiscal Years 2012-2015 46

Abbreviations 

202(e) Section 202(e) in Title II of the Food for Peace Act

ADS Automated Directives System

COSO Committee of Sponsoring Organizations of the Treadway

Commission

EFSP Emergency Food Security Program

FFP Office of Food for Peace 

IDA International Disaster Assistance account

ITSH internal transportation, storage, and handling

NGO nongovernmental organization

OIG Office of Inspector General 

OMB Office of Management and Budget

PIO public international organization

SF-425 Federal Financial Report, Standard Form 425

UN United Nations

USAID U.S. Agency for International Development

WFP World Food Program

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Page 1 GAO-17-224 International Food Assistance

441 G St. N.W.

Washington, DC 20548

March 9, 2017

The Honorable Mike Conaway

Chairman

Committee on Agriculture

House of Representatives

Dear Mr. Chairman:

The United States is the world’s largest donor of international food 

assistance, spending about $2.5 billion annually to serve beneficiaries 

through various programs across the globe. The U.S. Agency for 

International Development (USAID) provides much of this assistance—

about $1.5 billion worth in fiscal year 2016—through its Title II Food for 

Peace program (Title II).1 USAID generally has used Title II funds to 

provide U.S. in-kind food aid (i.e., food commodities purchased in the 

United States and transported overseas) through development assistance 

projects meant to address long-term chronic hunger and through 

emergency projects intended to address the food needs of vulnerable 

populations affected by conflicts or natural disasters, such as droughts 

and floods. To implement Title II projects, USAID enters into cooperative 

agreements with implementing partners that design and implement food 

aid activities and distribute the food aid. Nongovernmental organizations 

(NGO) implement Title II development projects, and the World Food 

Program (WFP)—a United Nations (UN) agency and the largest 

humanitarian organization combating hunger—implements most Title II 

emergency projects.2

Under the Food for Peace Act, USAID is authorized to spend some of the 

funds appropriated annually to Title II on various costs associated with 

 1

Title II of the Food for Peace Act authorizes USAID’s provision of Title II food aid. Title II 

expenditures are reauthorized through the Farm Bill approximately every 5 years and are 

funded through a U.S. Department of Agriculture appropriation. Section 3001 of Pub. L. 

No. 110-246, the Food, Conservation, and Energy Act of 2008, changed the title of the 

underlying legislation from the Agriculture Trade Development Assistance Act of 1954, 

also known as P.L. 480, to the Food for Peace Act. Title II of the Food for Peace Act, 

administered by USAID, addresses the provision of U.S. agricultural commodities for 

humanitarian and development purposes. In addition to providing food aid through Title II, 

USAID funds food assistance projects and activities from accounts authorized by the 

Foreign Assistance Act of 1961, as amended. 

2

In this report, “implementing partners” refers to NGOs and WFP. 

Letter
Page 2 GAO-17-224 International Food Assistance

the administration, implementation, and support of both development and 

emergency food assistance. Specifically, USAID is authorized to provide 

Title II funds to implementing partners to cover internal transportation, 

storage, and handling (ITSH) costs incurred in both carrying out food 

assistance activities and storing and distributing U.S. in-kind food aid after 

it arrives in the destination countries.3 In addition, pursuant to Section 

202(e) of the Food for Peace Act, USAID is authorized to spend a 

proportion of Title II funds—in this report, “202(e) funding”—to cover the 

costs its partners incur while administering activities, such as staff 

salaries and project materials necessary to implement Title II projects.4

The Agricultural Act of 2014 (2014 Farm Bill), enacted in February 2014,

increased the proportion of the annual Title II appropriation that USAID is 

authorized to spend as 202(e) funding from 13 percent—about $191 

million—to 20 percent—about $293 million in fiscal year 2016—and 

expanded the eligible uses of 202(e) funding from those allowed by the 

2008 Farm Bill.5

You asked us to review USAID’s use and oversight of Title II funding, in 

light of the 2014 Farm Bill’s increase of 202(e) funding and expansion of 

authority for USAID to spend this funding to implement and support Title 

II. This report examines (1) any changes in USAID’s use of Title II funding 

to implement and support projects since the enactment of the 2014 Farm 

Bill and (2) USAID’s financial oversight of Title II funding used to 

implement and support selected projects.

To address these objectives, we reviewed USAID data, policies, 

guidance, and procedures as well as implementing partners’ application 

and award documentation for selected projects, including project 

budgets.6 We interviewed USAID and partner officials both in 

Washington, D.C., and during fieldwork in Haiti, Malawi, and Zimbabwe. 

 3

All emergency projects are eligible for ITSH funding; however, only development projects 

in least developed countries that meet the poverty and other eligibility criteria established 

by the International Bank for Reconstruction and Development for financing under the 

International Development Association qualify for ITSH funding.

4

See 7 U.S.C. § 1722(e). In this report, “project” refers to individual grants or cooperative 

agreements made by USAID to implementing partners. 

5

Specifically, the 2014 Farm Bill authorized USAID to use 202(e) funds to support 

implementing partners, not only by assisting them in establishing Food for Peace Act 

programs as had been previously authorized, but also in enhancing such programs. Pub. 

L. No. 113-79. § 3002.

6

App. III provides additional information on our selected Title II projects. 
Page 3 GAO-17-224 International Food Assistance

To examine any changes in USAID’s use of Title II funding to implement 

and support projects since the 2014 Farm Bill, we reviewed USAID 

development and emergency Title II funding data for fiscal years 2012 

through 2015—the most recent available data at the time of our review—

as well as implementing partner award documents for selected projects. 

We analyzed these data and documents to determine the amount of 

202(e) funding USAID has provided for costs to implement and support 

Title II projects; the amount of funding and number of projects distributing 

cash transfers, food vouchers, or locally or regionally procured food since 

the 2014 Farm Bill was enacted; and the most common types of 

assistance modalities. We also reviewed other funding sources, such as 

foreign assistance funding from the Development Assistance and 

International Disaster Assistance (IDA) accounts, to identify countries and 

projects receiving funding from multiple sources. To assess the reliability 

of these data, we reviewed documentation and interviewed USAID 

officials to identify and rectify any missing or erroneous data. We 

determined that the data and information were sufficiently reliable to 

compare project funding obligations and amounts (metric tonnage) of 

food assistance provided.

In addition, to examine USAID’s financial oversight of funding to 

implement and support selected projects, we reviewed USAID’s policies, 

guidance, and procedures for financial oversight and monitoring of 202(e) 

and ITSH funding, including funding for cash transfers, food vouchers, 

and locally or regionally procured food. We selected seven projects for 

more in-depth review—four development and three emergency projects—

and fieldwork locations on the basis of factors such as level of Title II 

funding, region, and types of assistance implemented with 202(e) funding 

since fiscal year 2014. Because we judgmentally selected projects and 

locations for fieldwork, our findings cannot be generalized. For the 

selected development projects, we reviewed and compared funding data 

and information provided in applications, award agreements, approved 

annual budgets, quarterly and annual reports, expenditure reports (known 

as SF-425s), and relevant audits, among other documentation, to identify 

any significant issues or discrepancies in implementing partners’ financial 

oversight and monitoring of 202(e) and ITSH spending. We reviewed 

selected implementing partners’ internal controls, disbursement 

processes, and support documentation such as invoices and receipts for 
Page 4 GAO-17-224 International Food Assistance

a judgmental sample of transactions.7 For selected WFP emergency 

projects, we reviewed WFP policies, procedures, and guidance related to 

financial oversight and monitoring of food assistance projects; WFP’s 

external and internal audits; and project documentation.

We conducted this performance audit from October 2015 to March 2017 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives. Appendix I provides a detailed 

discussion of our objectives, scope, and methodology.

Through its Title II program, USAID has traditionally provided its 

implementing partners with U.S. in-kind food aid, which its partners 

distribute to beneficiaries in need overseas.8 Figure 1 shows the locations 

of projects that received Title II funding in fiscal years 2012 through 2015.

 7

To identify any internal controls and financial management issues, we reviewed a 

nongeneralizable sample of 80 transactions from financial information provided by 

implementing partners for four selected Title II development projects. Specifically, we 

performed detailed transaction testing of expenditures of 202(e) or ITSH funds, using 

samples of approximately 20 transactions for each project for fiscal years 2014 and 2015, 

including a mixture of larger and smaller transactions for traditional implementation costs 

as well as cash transfers, food vouchers, and local and regional procurement. We tested 

each selected transaction to determine whether the costs were (1) accurate, (2) allowable, 

(3) reasonable, (4) approved, (5) adequately reviewed, and (6) supported by sufficient 

documentation. App. I provides additional details on our objectives, scope, and 

methodology. 

8

The Food for Peace Act defines the term “agricultural commodity” as any agricultural 

commodity, or products thereof, produced in the United States. See 7 U.S.C. § 1732(2). 

Background

USAID International Food 

Assistance
Page 5 GAO-17-224 International Food Assistance

Figure 1: Locations of International Food Assistance Projects Funded through Title II of the Food for Peace Act, Fiscal Years 

2012-2015
Page 6 GAO-17-224 International Food Assistance

Congress has historically amended or reauthorized Title II program 

authorizations through farm bills enacted about every 5 years. To cover 

the costs associated with carrying out Title II projects, Congress 

authorizes USAID to provide implementing partners 202(e) and ITSH 

funding, with certain restrictions. Specifically, the 2014 Farm Bill 

increased the total amount of 202(e) funding USAID can provide from 13 

percent to 20 percent of funds made available to implement Title II of the 

Food for Peace Act. The 2014 Farm Bill continued to allow USAID to use 

202(e) funding to cover administrative-type costs but expanded the 

eligible uses of this funding beyond those authorized by the 2008 Farm 

Bill or previous farm bills, allowing the use of 202(e) funding to enhance 

existing projects. According to USAID, this provision permits the agency 

to use 202(e) funding to implement cash transfers, food vouchers, and 

local or regional procurement9 in Title II projects.10 Title II also authorizes 

USAID to use ITSH funding to cover costs that partners incur while 

moving and storing U.S. in-kind food aid after it reaches a destination 

country.11 (Fig. 2 shows images from a video depicting examples of 

USAID’s uses of 202(e) and ITSH funding for Title II projects.)

 9

According to USAID, cash transfers provide money that beneficiaries can use to 

purchase food, while food vouchers can be redeemed for food. Local procurement is the 

purchase of commodities sourced in the country where they will be distributed, and 

regional procurement is the purchase of commodities sourced in the same continent as 

the country where they will be distributed. Authority to engage in local and regional 

procurement is also provided under 7 U.S.C. 1726c. In this report, local procurement 

includes “twinning”—that is, according to WFP, the matching of in-kind food aid from one 

donor with a cash contribution from another donor to cover the costs associated with 

distributing the in-kind food. 

10According to USAID, both before and after the 2014 Farm Bill, the agency has also used 

a portion of 202(e) funds to implement certain development activities in food aid projects, 

such as irrigation systems and school construction. 

11See app. II for more information on ITSH obligations. 
Page 7 GAO-17-224 International Food Assistance

Figure 2: Warehouse Workers Packaging Food Aid for Beneficiaries in Haiti

Note: The images shown are from a video about implementation and support costs associated with 

the U.S. Agency for International Development’s (USAID) provision of food aid through the Food for 

Peace program. To view the video, go to www.gao.gov/products/GAO-17-224.

In fiscal years 2012 through 2015, USAID obligated about $5.567 billion 

in Title II funding for its development and emergency projects. As figure 3 

shows, USAID obligated about 44 percent of total Title II funding to 202(e) 

and ITSH during that period to cover the costs of implementing and

supporting these projects. These obligations comprised about $889 

million of 202(e) funding (16 percent of total Title II funding) and about 

$1.575 billion of ITSH funding (28 percent of Title II funding).12 USAID 

data for fiscal years 2012 through 2015 show that the agency provided 

about 4.5 million metric tons of food commodities. USAID obligated the 

remainder of Title II funding to cover the costs of

 12In addition to obligating these amounts, USAID obligated about $24.1 million in 202(e) 

funding and about $180.1 million in ITSH funding from the Bill Emerson Humanitarian 

Trust in fiscal years 2014–2015. As reauthorized by the 2014 Farm Bill, this trust is an 

authority that allows USAID’s Office of Food for Peace to respond to unanticipated food 

crises abroad when other Title II resources are not available.
Page 8 GAO-17-224 International Food Assistance

• purchasing the commodities in the United States (37 percent),

• transporting the commodities from the United States as ocean freight 

(12 percent), and

• transporting the commodities inland from the foreign port of entry to 

their destination in the country or to the border of another, landlocked 

country (7 percent).

Figure 3: USAID Title II Obligated Funding, Fiscal Years 2012-2015

Notes: ITSH funding is provided to cover the costs of transporting, storing, and handling U.S. 

commodities in the destination country. Section 202(e) funding is provided under Section 202(e) of 

the Food for Peace Act to support eligible organizations in the provision of Title II agricultural 

commodities.

In addition to obligating the amounts shown for Section 202(e) and ITSH funding, the U.S. Agency for 

International Development (USAID) obligated about $24.1 million in 202(e) funding and about $180.1 

million in ITSH funding to support commodity distributions received from the Bill Emerson 

Humanitarian Trust in fiscal years 2014–2015. As reauthorized by the 2014 Farm Bill, this trust is an 

authority that allows USAID’s Office of Food for Peace to meet emergency humanitarian food needs 

in developing countries when other Title II resources are not available.
Page 9 GAO-17-224 International Food Assistance

Title II also authorizes USAID to allow its implementing partners to 

monetize U.S.-sourced in-kind food aid—that is, to sell U.S.-donated 

commodities in local markets to generate funds for implementing the 

projects. However, according to USAID officials, it generally no longer 

encourages its implementing partners to monetize.13 Instead, according to 

USAID, it provides 202(e) funding, as authorized by the 2014 Farm Bill,

and funding authorized by the Foreign Assistance Act of 1961 directly to 

its implementing partners to offset the revenue partners previously 

received from monetizing commodities.

USAID uses funding from accounts authorized by the Foreign Assistance 

Act to operate multiple programs to combat food insecurity in 

development and emergency situations worldwide.

• Development Assistance funding. According to USAID 

documentation, the agency draws on its Development Assistance 

account—as authorized under section 103 of the Foreign Assistance 

Act of 1961, as amended—for community-level development activities 

to complement Title II projects and to reduce the need for 

monetization. According to USAID officials, these funds can be used 

alongside Title II funding and may fund many of the same types of 

items and activities covered by Title II 202(e) and ITSH. USAID 

provided about $62 million from its Development Assistance account 

in fiscal year 2015 to complement Title II projects.

• International Disaster Assistance funding. USAID’s Office of Food for 

Peace uses the agency’s IDA account, authorized by the Foreign 

Assistance Act of 1961, as amended, to fund the Emergency Food 

Security Program (EFSP). According to USAID, it provides most of its 

assistance for cash transfers, food vouchers, and local and regional 

purchases of food through EFSP to assist beneficiaries facing 

immediate food insecurity. According to USAID, it provided about 

$1.01 billion in fiscal year 2015 on EFSP projects implementing cash 

 13According to USAID, the agency allows monetization in one country, Bangladesh, to 

fulfill its statutory requirement that a minimum of 15 percent of the aggregate value in 

tonnage of development Title II commodities be made available annually for monetization 

by implementing partners. We have previously reported on the inefficiencies and adverse 

market impacts of monetization. See GAO, International Food Assistance: Funding 

Development Projects through the Purchase, Shipment, and Sale of U.S. Commodities Is 

Inefficient and Can Cause Adverse Market Impacts, GAO-11-636 (Washington, D.C.: June 

23, 2011). 
Page 10 GAO-17-224 International Food Assistance

transfer, food voucher, local and regional procurement, and other 

activities.14

In 2014, USAID issued an information bulletin to its implementing 

partners outlining the 2014 Farm Bill’s changes to 202(e) and USAID’s 

policy regarding eligible and ineligible uses of 202(e) and ITSH funding.

15

The bulletin states that 202(e) funding may be used for activities to 

establish and enhance Title II projects, including cash transfers, food 

vouchers, and local and regional procurement of food—modalities 

previously not authorized for Title II projects—as well as for traditional 

implementation costs such as the partner’s staff salaries, project 

overhead, project materials, and equipment, among others. USAID also 

instructs partners that ITSH funding is available only for in-country costs 

directly associated with the storage, movement, and distribution of U.S. 

in-kind commodities. In addition to outlining the eligible and ineligible uses 

for 202(e) and ITSH funding, and consistent with U.S. government-wide 

guidance issued by the Office of Management and Budget (OMB) 

concerning federal awards outlined in 2 C.F.R. § 200, the bulletin 

instructs partners that these funds must be reasonable and allocable.

Food assistance projects are subject to numerous financial risks,

including risks associated with costs to implement and support projects 

providing food commodities, cash transfers, or food vouchers.16 USAID 

requires its partners ensure that aid reaches its intended beneficiaries 

 14According to USAID, IDA/EFSP funds are sometimes used when USAID’s in-kind food 

aid cannot arrive in time or other forms of assistance are more appropriate due to local 

market conditions. EFSP’s goal is to reinforce market linkages in recipient and 

neighboring countries and to support private sector capacity to meet the needs of 

beneficiaries For more information on EFSP, see GAO, International Cash-Based 

Assistance: USAID Has Developed Processes for Initial Project Approval but Should 

Strengthen Financial Oversight, GAO-15-328 (Washington, D.C.: Mar. 26, 2015) and 

GAO, International Cash-Based Assistance: USAID Has Established Processes to Monitor 

Cash and Voucher Projects, but Data Limitations Impede Evaluation, GAO-16-819 

(Washington, D.C.: Sept. 20, 2016). 

15Food for Peace Information Bulletin 14-01 (Aug. 15, 2014). Congress did not provide 

new authorities for the use of ITSH funding in the 2014 Farm Bill. See app. II for additional 

information on USAID’s use of Title II funding for ITSH costs in fiscal years 2012 through 

2015.

16Commodity assistance includes both in-kind and locally or regionally procured food. 

USAID Guidance on 

Eligible Uses of 202(e) 

and ITSH Funds

Financial Risks and 

Oversight for International 

Food Assistance
Page 11 GAO-17-224 International Food Assistance

and that costs are reasonable, necessary, and allowable.

17 Financial 

oversight of international food assistance projects includes managing 

program funds to ensure they are spent in accordance with award 

agreements by, among other things, assessing financial risks and 

implementing controls to mitigate those risks.

The internal controls framework prescribed for federal agencies and 

widely used by international organizations comprises five components 

(see fig. 4).18 These controls apply to the tracking of costs to implement 

and support projects providing commodities, cash transfers, or food 

vouchers. For projects that include cash transfers and food vouchers,

controls may include steps to prevent the negative impact on market 

prices as well as to prevent theft and diversion of cash or counterfeiting of 

vouchers.

 17In this report, “award” refers to an assistance mechanism through which USAID 

transfers funds to an implementing partner. According to USAID, awards include both 

grants and cooperative agreements.

18GAO’s Standards for Internal Control in the Federal Government provides the overall 

framework for establishing and maintaining internal control in federal programs. In 

addition, the Committee of Sponsoring Organizations of the Treadway Commission 

(COSO) has issued an internal control framework that, according to COSO, has gained 

broad acceptance and is widely used around the world, including by U.S. NGOs and by 

international organizations such as WFP. COSO was formed in 1985 to sponsor the 

National Commission on Fraudulent Financial Reporting, an independent, private sector 

initiative that studied the causal factors that can lead to fraudulent financial reporting and 

developed recommendations for public companies and their independent auditors; the 

U.S. Securities and Exchange Commission and other regulators; and educational 

institutions. In 1992, COSO issued Internal Control—Integrated Framework to help 

businesses and other entities assess and enhance their internal control. Since that time, 

COSO’s internal control framework has been recognized by regulatory standards setters 

and others as a comprehensive framework for evaluating internal control, including 

internal control over financial reporting. COSO updated its framework in May 2013 to 

enhance and clarify the framework’s use and application. This framework introduced the 

concept of principles related to five components of internal control. GAO revised the 

standards—previously published in 1999—and adapted these principles in September 

2014; the revised standards were effective beginning in fiscal year 2016. See GAO, 

Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 and

GAO-14-704G (Washington, D.C.: November 1999 and September 2014, respectively); 

Committee of Sponsoring Organizations of the Treadway Commission, Internal Control—

Integrated Framework (2013). 
Page 12 GAO-17-224 International Food Assistance

Figure 4: Components of Internal Control Framework Prescribed for Federal 

Agencies and Widely Used by International Organizations

In fiscal years 2014 and 2015, USAID used most of the increased 

proportion of Title II funds authorized by the 2014 Farm Bill for 202(e) to 

provide cash transfers, food vouchers, and local or regional procurement,

modalities the agency did not previously support through Title II. USAID 

has also used funding from other accounts to complement Title II 

projects. USAID obligations of 202(e) funding increased from about $171 

million in fiscal year 2012 to about $268 million in fiscal year 2015. 

Obligations of 202(e) funding for cash transfers, food vouchers, and local 

and regional procurement in fiscal years 2014 and 2015 constituted 75 

percent and 96 percent, respectively, of the additional authorized 202(e) 

funding that the agency utilized for those years. USAID has used funds 

from accounts authorized by the Foreign Assistance Act, along with Title 

II funding, to implement and support projects. Moreover, it has 

increasingly used funding from these accounts to cover the same types of 

costs as are covered by 202(e) and in some cases has used funding from 

these accounts as well as Title II to provide cash transfers, food 

vouchers, or local or regional procurement within a single project.

USAID Used Most of 

202(e) Funding 

Increase for Cash 

Transfers, Food 

Vouchers, and Local 

and Regional 

Procurement and 

Used Multiple 

Funding Sources with 

Title II
Page 13 GAO-17-224 International Food Assistance

USAID used most of the 2014 Farm Bill’s increase in authorized 202(e) 

funding (from 13 percent to 20 percent of total Title II appropriations) to 

provide cash transfers, food vouchers, and locally or regionally procured 

food for beneficiaries—modalities the agency did not previously support 

through Title II.19 USAID obligations of 202(e) funding rose from $171 

million in fiscal year 2012 to $268 million in fiscal year 2015. As table 1 

shows, in fiscal year 2014, USAID’s obligations for these modalities 

comprised 75 percent of the additional 202(e) amount it obligated under 

the 2014 Farm Bill; in fiscal year 2015, USAID’s obligations for these 

modalities comprised 96 percent of the additional obligated amount. 

Specifically, USAID obligated $73.7 million in 202(e) funding in fiscal year 

2015 for cash transfers, food vouchers, and local or regional 

procurement—that is, 96 percent of the additional $77 million of 202(e) 

funding available to the agency authorized by the 2014 Farm Bill.

 19According to USAID, it has used cash transfers and food vouchers in projects where 

markets are working, enabling the agency to prioritize in-kind aid for nutrition interventions 

or where markets are less functional. USAID reported that it has used local or regional 

procurement to become more cost-effective and timely in responding to food insecurity. 

USAID Used Most of the 

Increase in 202(e) 

Funding to Provide Cash 

Transfers, Food Vouchers,

and Locally and 

Regionally Procured 

Commodities in Title II 

Projects
Page 14 GAO-17-224 International Food Assistance

Table 1: USAID Title II Appropriations, Farm Bill Spending Limits, and 202(e) Obligations, Fiscal Years 2014-2015

Dollars in millions

2014 2015

Title II appropriation 1,466 1,466 

13 percent of annual Title II appropriations (maximum 202(e) funding authorized under the 

2008 Farm Bill, but no longer in effect)

191 191 

20 percent of annual Title II appropriations (maximum 202(e) funding authorized under the 

2014 Farm Bill)

293 293

USAID 202(e) actual obligation 266 268

USAID 202(e) obligation above the prior 13 percent spending limit contained in 2008 Farm Bill 75 77

202(e) obligation for cash transfers, food vouchers, and local or regional procurement 56.6 73.7

Percentage of additional 202(e) obligation used for cash transfers, food vouchers, and 

local or regional procurement 

75 96 

Legend: 202(e) = funding provided under Title II, Section 202(e), of the Food for Peace Act.

Source: GAO analysis of appropriations for the U.S. Agency for International Development (USAID) Title II and USAID data. | GAO-17-224

Notes: The 2008 and 2014 Farm Bills authorized USAID to spend 13 percent and 20 percent,

respectively, of annual Title II appropriation s to implement section 202(e) of the Food for Peace Act.

According to USAID officials, USAID 202(e) obligations include funding for development activities, 

such as funding for activities to reduce monetization.

In addition to obligating the amounts of 202(e) funding shown, USAID obligated about $24.1 million in 

202(e) funding to support commodity distributions from the Bill Emerson Humanitarian Trust in fiscal 

years 2014-2015. As reauthorized by the 2014 Farm Bill, this trust is an authority that allows USAID’s 

Office of Food for Peace to respond to unanticipated food crises abroad when other Title II resources 

are not available.

As figure 5 shows, USAID obligations of 202(e) funding in fiscal years 

2012 and 2015—including the portion of 202(e) funding provided for cash 

transfers, food vouchers, and local or regional procurement beginning in 

2014—were within the applicable 202(e) spending limits designated by 

the 2008 (13 percent) and 2014 (20 percent) Farm Bills. In both fiscal 

years 2014 and 2015, the 202(e) obligations were lower than the 20 

percent appropriation limit of $293 million. During this period, 202(e) 

obligations for commodity and development activities fluctuated slightly. 

In addition, 202(e) obligations for cash transfers, food vouchers, and local 

and regional procurement increased from about 21 percent of total 202(e) 

obligations in fiscal year 2014 to about 28 percent in fiscal year 2015.
Page 15 GAO-17-224 International Food Assistance

Figure 5: USAID Title II 202(e) Obligations to Implement and Support Various 

Assistance Modalities, Relative to Legislated Spending Limits, Fiscal Years 2012-

2015

Notes: The 2008 and 2014 Farm Bills authorized USAID to spend 13 percent and 20 percent, 

respectively, of annual Title II appropriations to implement section 202(e) of the Food for Peace Act

[202(e)]. For fiscal years 2014-2015, this graph shows the 20 percent maximum amount of 202(e) 

funding authorized under the 2014 Farm Bill in comparison with the 13 percent maximum amount that 

would have been in place had the 2008 Farm Bill limit on 202(e) funding remained in force.

According to USAID officials, USAID 202(e) obligations for commodities and development activities 

includes funding to reduce monetization. 

In addition to obligating the amounts of 202(e) funding shown, USAID obligated about $24.1 million in 

202(e) funding to support commodity distributions from the Bill Emerson Humanitarian Trust in fiscal 

years 2014-2015. As reauthorized by the 2014 Farm Bill, this trust is an authority that allows USAID’s 

Office of Food for Peace to respond to unanticipated food crises abroad when other Title II resources 

are not available.

As table 2 shows, of the approximately $130 million of 202(e) funding that 

USAID obligated for cash transfers, food vouchers, and local and regional 

procurement in fiscal years 2014 and 2015, the majority was obligated for 

local and regional procurement. USAID’s obligations of 202(e) funding for 

local and regional procurement accounted for about 66 percent of its total 

obligations of 202(e) funding for the three modalities in fiscal years 2014
Page 16 GAO-17-224 International Food Assistance

and 2015. Cash transfers and food vouchers accounted for approximately 

25 percent and 9 percent, respectively, of USAID’s obligations during this 

period.

Table 2: USAID Obligations of 202(e) Funding for Cash Transfers, Food Vouchers, and Locally and Regionally Procured 

Commodities in Title II Projects, Fiscal Years 2014-2015

Food assistance modality Number of projects Amount obligated

Local and regional procurement 24 $86.1 million

Cash transfers 11 $32.4 million

Food vouchers 4 $11.8 million

Total obligated $130.3 million

Legend: 202(e) = funding provided under Title II, Section 202(e), of the Food for Peace Act.

Source: GAO analysis of U.S. Agency for International Development (USAID) data. | GAO-17-224

Note: USAID obligated 202(e) funding for cash transfers, food vouchers, or local and regional 

procurement of food to six Title II development projects ($9.3 million) and 32 emergency projects 

($121 million). Four projects implemented with Title II emergency funding included more than one 

food assistance modality.

USAID has obligated 202(e) funding for some Title II projects that 

provided cash transfers, food vouchers, or locally or regionally procured 

food but no U.S.-sourced, in-kind food aid. Before 2014, USAID obligated 

Title II funding for projects that provided food commodities grown, 

purchased, and shipped from the United States and obligated 202(e) 

funding to cover the partners’ costs associated with administering these 

projects.20 According to USAID officials, multiple Title II projects can make 

up a Title II country program. In order to allow for the use of 202(e) 

funding for cash transfers, food vouchers, or locally or regionally procured 

food, a Title II country program must include U.S. in-kind commodities, 

though each individual project within the Title II country program is not 

required to include U.S. in-kind commodities, according to those officials.

In fiscal years 2014 and 2015, USAID obligated a total of about $29.6

million for 202(e)-funded cash transfers, food vouchers, or local and 

regional procurement in seven projects (four emergency projects and one 

development project in fiscal year 2014, and two emergency projects in 

fiscal year 2015) that did not include U.S.in-kind commodities. For 

example, USAID obligated about $2.2 million in 202(e) funding in fiscal 

 20According to USAID officials, prior to fiscal year 2014, the agency did not fund cash 

transfers, food vouchers, or local and regional procurement with 202(e) funding.
Page 17 GAO-17-224 International Food Assistance

year 2014 for a Title II emergency project in Haiti that provided cash 

transfers to beneficiaries, with no U.S. in-kind food aid. In fiscal year 

2015, USAID provided about $2 million for an emergency project 

implemented by the United Nations Children’s Fund in Niger that provided 

locally and regionally procured food and no U.S.in-kind food aid. In 

addition, in fiscal year 2015, USAID awarded $45 million in 202(e) funding 

for a 5-year Title II development project in Mali that did not include 

planned U.S. in-kind food aid.21

According to USAID, it has also used the increase in 202(e) funding, as 

well as funding from other sources, to reduce monetization in Title II 

projects. In 2011, we reported that USAID loses, on average, 24 cents on 

every dollar spent through the process of monetization.22 According to 

USAID officials, the use of 202(e) funds has allowed for a reduction in the 

use of monetization in development projects, enabling the agency to pay 

directly for the cost its partners incur and to increase the efficiency and 

effectiveness of its food assistance projects. Table 3 shows USAID’s use 

of monetization in Title II development projects in fiscal years 2012 

through 2015.

Table 3: USAID Monetization in Title II Development Projects, Fiscal Years 2012-2015

2012 2013 2014 2015

Total metric tonnage of U.S. in-kind food 

aid

438,360 251,130 196,321 410,233

Metric tonnage monetized 230,870 74,130 58,052 74,630

Number of projects monetizing 25 6 3 3

Number of countries where USAID 

monetized

13 4 1 1

Legend: Title II = Title II of the Food for Peace Act.

Source: GAO analysis of U.S. Agency for International Development (USAID) data. | GAO-17-224

Note: Monetization is the sale of U.S. in-kind food aid (i.e., U.S.-donated commodities) in local 

markets to generate funds for implementing food aid projects.

 21In fiscal year 2015, USAID distributed U.S. in-kind food as part of separate Title II 

projects in both Niger and Mali. For example, according to USAID officials, USAID has 

provided Title II emergency funding to WFP in Mali for general food distribution to severely 

food insecure households. According to USAID officials, the agency complements this 

WFP project with Title II and other funding sources to provide cash transfers and food 

vouchers in areas where markets are functioning and food is available. 

22In June 2011, we reported on the inefficiencies and adverse market impacts of 

monetization. See GAO-11-636.
Page 18 GAO-17-224 International Food Assistance

According to USAID, in fiscal year 2014, the agency saved $21 million by 

providing funds directly to implementing partners instead of using 

monetization. For example, for fiscal year 2014, USAID approved an 

approximately $13 million increase in the budgeted amount of 202(e) 

funding to be provided to an implementing partner in Zimbabwe to replace 

monetization. We found that the implementing partner used the 202(e) 

funding to support activities such as livestock management and water 

resources management (see fig. 6). According to USAID, the use of 

202(e) funding in place of monetization will save the agency almost $10 

million over the course of the 5-year project.

Figure 6: Development Assistance Activity Supported with 202(e) Funding in Zimbabwe

Cattle exiting dip tank that beneficiaries used to immerse livestock in liquid pesticides.

Our review of USAID funding data shows that USAID has used funds 

from two accounts authorized by the Foreign Assistance Act along with 

Title II food assistance projects. Since fiscal year 2013, the agency has 

increasingly obligated funds from the Development Assistance account to 

cover many of the same types of implementation costs as 202(e) funding 

and to help reduce monetization. USAID has also used both Development 

Assistance funds and 202(e) funding to provide food vouchers or local or 

regional procurement in two Title II development projects. In addition, 

USAID has used funds from the IDA account as well as 202(e) funding to 

provide cash transfers or local and regional procurement in a number of 

USAID Has Used Funding 

Authorized by the Foreign 

Assistance Act Along with 

Title II Development and 

Emergency Projects
Page 19 GAO-17-224 International Food Assistance

emergency projects. Figure 7 shows the locations of projects where 

USAID used Title II funding along with funding from the two accounts 

authorized by the Foreign Assistance Act.

Figure 7: Locations of USAID Food Assistance Projects That Received Both Title II Funding and Funding Authorized by the 

Foreign Assistance Act in Fiscal Year 2014 or 2015

Note: This figure shows the locations of projects managed by USAID’s Office of Food for Peace. 

Other USAID bureaus and offices, including missions, may also provide funding authorized by the 

Foreign Assistance Act for food assistance projects in countries with Title II–funded projects.
Page 20 GAO-17-224 International Food Assistance

With regard to funding for development projects, according to USAID

officials, the agency uses funding from the Development Assistance 

account for many of the same types of implementation costs for Title II 

development projects that 202(e) funding covers, including implementing 

partners’ staff salaries, office and program supplies, and equipment,

among other expenses. USAID provides Development Assistance 

account funds along with Title II development funding for projects either 

through a single award or through separate awards. According to USAID,

it provides these funds in part to reduce monetization in Title II 

development projects by paying directly for the costs its partners incur.23

As table 4 shows, USAID obligations from the Development Assistance 

account in support of Title II projects increased from $25 million in fiscal 

year 2013 to $62 million in fiscal year 2015.

Table 4: USAID Obligations from Development Assistance Account in Support of 

Title II Development Projects, Fiscal Years 2013-2015

2013 2014 2015

Development Assistance account 

obligations

$25 million $57 million $62 million

Number of Title II development 

projects

6 10 12

Legend: Title II = Title II of the Food for Peace Act.

Source: GAO analysis of U.S. Agency for International Development (USAID) data. | GAO-17-224

Notes: According to USAID, it did not obligate Development Assistance funds to support Title II 

projects in fiscal year 2012.

In fiscal year 2015, USAID obligated a total of $11 million in Development Assistance funds to two 

projects in Nepal; however, because these projects did not receive Title II funding, we excluded them 

from our analysis.

For example, in fiscal year 2014, USAID began a 5-year, $60 million 

development project in Malawi, budgeting $40 million in Development 

Assistance funding and $20 million in Title II funding, including $4 million 

in 202(e). USAID’s implementing partner used Development Assistance 

funds for support costs such as staff salaries, office supplies, and 

veterinary kits as well as for local procurement of food that it provided to 

 23According to USAID officials, the agency uses Development Assistance funding in 

countries where it also implements Feed the Future activities. Feed the Future is the U.S. 

government’s global hunger and food security initiative that seeks to partner with 

governments, donors, the private sector, and civil society in selected countries to ensure 

sustainable progress against global hunger. As of January 2017, Feed the Future 

operated in 19 countries. For more information, see GAO, Global Food Security: USAID Is 

Improving Coordination but Needs to Require Systematic Assessments of Country-Level 

Risks, GAO-13-809 (Washington, D.C.: Sept. 17, 2013).
Page 21 GAO-17-224 International Food Assistance

beneficiaries in exchange for their labor to build community assets (see 

fig. 8).

Figure 8: Title II Development Project Providing Tree Seedlings for Erosion Control,

Malawi

In addition, since fiscal year 2014, USAID has used both Development 

Assistance funds and 202(e) funding to provide food vouchers or local 

procurement in Title II development projects in two countries. In Haiti,

USAID obligated over $4 million in 202(e) funding and budgeted about $3 

million in Development Assistance account funds to provide food 

vouchers in a Title II development project in fiscal years 2014 through 

2015.24 According to USAID officials, the 202(e)-funded and Development 

Assistance account–funded food vouchers targeted different regions in 

 24Development Assistance funding for this modality represents budgeted or planned 

funding. USAID was not able to provide a breakdown of Development Assistance 

obligations by modality for this project as of January 2017. 
Page 22 GAO-17-224 International Food Assistance

Haiti and thus the beneficiaries did not overlap. USAID officials added 

that this was the first time USAID had used Development Assistance 

account funds for food vouchers in a Title II food assistance project. In 

Malawi, USAID used about $378,000 in 202(e) funding and budgeted 

about $161,000 in Development Assistance account funds in fiscal year 

2015 to procure 325 metric tons of local commodities as part of a Title II 

development project.25

With regard to funding for emergency food assistance, USAID’s 

implementation of the new 202(e) authorities to enhance existing Food for 

Peace programs provided by the 2014 Farm Bill has resulted in USAID’s 

use of both 202(e) funding and IDA account funds to provide either cash 

transfers, food vouchers, or local or regional procurement in the same 

emergency food assistance projects. Before the 2014 Farm Bill was 

enacted, some emergency projects received both Title II funding for U.S. 

in-kind commodities and funds from the IDA account’s EFSP for either 

cash transfers, food vouchers, or locally or regionally procured food. Our 

review of USAID funding data shows that USAID used Title II U.S. in-kind 

food aid along with ESFP-funded cash transfers, food vouchers, or locally 

or regionally procured food in some emergency food assistance projects. 

For example, in fiscal year 2012, USAID obligated about $134 million in 

EFSP funds to 10 emergency food assistance projects for which it also 

obligated Title II funding for U.S. in-kind food aid. However, with its 

expanded Title II authorities, USAID obligated a total of about $56 million 

in 202(e) funding along with $140 million in EFSP funds to provide cash 

transfers, food vouchers, or locally or regionally procured food in nine 

WFP-implemented projects in fiscal years 2014 and 2015. For example, a 

WFP emergency operation in Malawi used both $3 million in 202(e) 

funding along with $2.5 million in EFSP funds for the local procurement of 

commodities in fiscal year 2015. According to USAID officials, the agency 

designs country programs using multiple funding sources to best meet the 

 25According to the implementing partner, the budgeted amount was not expended in fiscal 

year 2015. 
Page 23 GAO-17-224 International Food Assistance

needs of the beneficiaries and comply with the restrictions placed on each 

funding source.26

USAID and its partners have various internal controls for financial 

oversight of implementation and support costs funded by 202(e) and 

ITSH in selected Title II development and emergency projects, although 

we found certain deficiencies in control activities, information and 

communication, and risk assessment. USAID’s and implementing 

partners’ internal controls for Title II project implementation and support 

costs include reviews of planned budgets and high-level spending,

reviews of audit reports, and periodic monitoring data, according to 

USAID and partner officials. Nevertheless, we identified deficiencies that 

affect USAID’s ability to reasonably ensure that aid reaches the intended 

beneficiaries and that funding is used for allowable and approved 

purposes.27 First, regarding control activities, USAID generally does not 

conduct systematic, targeted financial reviews of partners’ actual Title II 

spending to implement and support projects. Our limited,

nongeneralizable financial transactions testing identified instances where 

partners had not correctly recorded 202(e) and ITSH spending. Second,

regarding information and communication, USAID lacks key monitoring 

data related to these costs that could identify areas needing additional 

financial oversight and inform future decisions. Third, also related to 

information and communication, USAID has not consistently updated 

guidance and systems to help ensure that partners for Title II 

development and emergency projects do not use ITSH funds to cover 

implementation costs for local and regional procurement of commodities,

which is not an allowable use of these funds. Fourth, regarding risk 

 26According to USAID officials, USAID often relies on both EFSP and 202(e) funding to 

provide sufficient emergency resources in a given country. Given that 202(e) funding is 

limited (as are overall program resources), EFSP resources are necessary to ensure 

continuity and prevent gaps in funding. Funding under 202(e) is often used in countries 

where USAID is using a blended modality approach. For example, in the Central African 

Republic, USAID has provided 202(e) funds for local and regional procurement and food 

vouchers to prevent pipeline breaks until Title II in-kind food aid arrives, which can take 8-

9 months. 

27The internal controls framework prescribed for federal agencies and widely used by 

international organizations comprises five components: control environment, risk 

assessment, control activities, information and communication, and monitoring. Each 

component includes several principles, which represent the requirements necessary to 

establish an effective internal control system. See GAO/AIMD-00-21.3.1; GAO-14-704G; 

Committee of Sponsoring Organizations of the Treadway Commission, Internal Control—

Integrated Framework (2013).

USAID Has Various 

Controls for Financial 

Oversight of Title II 

Implementation and 

Support Costs, but Its 

Oversight Has 

Certain Deficiencies
Page 24 GAO-17-224 International Food Assistance

assessment, USAID does not require Title II development project partners 

to conduct comprehensive assessments of financial, fraud, and other 

risks that can affect cash transfers and food vouchers funded by 202(e),

although the agency has established such a requirement for emergency 

projects.

USAID and its implementing partners have various controls for financial 

oversight of Title II project implementation and support costs funded by 

202(e) and ITSH.28 The internal controls framework prescribed for federal 

agencies and widely used by international organizations notes that the 

establishment of effective internal controls can help agencies achieve 

desired results through the effective stewardship of resources.29

Examples of USAID’s and implementing partners’ internal controls for 

Title II project implementation and support costs include the following:

• Reviews of planned budgets. USAID officials told us that they 

review implementing partners’ detailed planned budgets for costs to 

implement and support Title II projects, which describe how the 

partners plan to spend U.S. funds in the future.30 Specifically,

according to USAID, it reviews planned budget breakdowns and 

explanatory narrative submitted by partners for Title II project 

implementation and support costs, including partner staff salaries and 

fringe benefits; transport, shipping, and handling costs; subaward 

budgets; cash transfer, food voucher, and local and regional 

 28USAID’s Automated Directives System (ADS) contains agency-wide policies and 

procedures for internal control as well as for making awards to both NGOs and public 

international organizations (PIO). Our three selected Title II emergency projects were 

implemented by WFP, which USAID has designated as a category 1 PIO. USAID officials 

indicated that, in accordance with ADS ch. 308, USAID may make awards to a category-1 

PIO, such as WFP, without conducting pre-award audits or regularly reviewing audit and 

financial information. As a result, USAID officials noted that the agency generally relies on 

WFP to conduct financial oversight of Title II funding to implement and support emergency 

projects awarded to WFP. For additional details from our review of WFP’s financial 

oversight of Title II funding to implement and support projects, see app. IV. 

29See GAO-14-704G; Committee of Sponsoring Organizations of the Treadway 

Commission, Internal Control—Integrated Framework. 

30USAID officials noted that USAID Agreement Officers’ Representatives generally review 

and approve detailed project budgets annually for multiyear Title II development projects. 

They review budgets at the application approval stage for Title II emergency projects, 

which are generally awarded for 1 year. USAID officials also added that they review 

budgets when they make modifications to emergency awards.

USAID Has Various 

Internal Controls for 

Implementation and 

Support Costs of Title II 

Projects
Page 25 GAO-17-224 International Food Assistance

procurement costs; other project activity costs; and other direct and 

indirect costs.

• Reviews of spending. To monitor actual spending, USAID officials,

including agreement officers’ representatives, told us that they rely 

primarily on each partner’s quarterly financial report, known as the 

SF-425. Implementing partners are required to report high-level 

expenditures for 202(e) and ITSH quarterly in the SF-425, according 

to USAID officials. The officials noted that they follow up with a 

partner if spending reported in the SF-425 is inconsistent with the 

annual approved amount.

• Reviews of audit reports. According to USAID officials, USAID’s 

Office of Food for Peace generally reviews the results of partners’ 

annual single audits as well as findings of the USAID Office of 

Inspector General’s (OIG) periodic audits.31 Single audits include an 

organization-wide review of an entity’s financial statements, a 

schedule of the expenditure of federal awards, and review of related 

internal controls. Single audit findings can be used by agencies to 

identify areas warranting additional financial oversight.32 For example,

USAID officials informed us that the agency modified the terms of one 

partner’s letter of credit as a result of single audit findings, which

 31For projects awarded prior to December 2014, U.S. nonprofit organizations that 

expended $500,000 or more in federal awards within their fiscal year were required to 

have a single (i.e., organization wide) or program-specific financial audit conducted by an 

external auditor for that year in accordance with OMB Circular A-133. In December 2014, 

OMB issued new guidance, effective for fiscal years beginning on or after December 26, 

2014, in the Uniform Administrative Requirements, Cost Principles, and Audit 

Requirements for Federal Awards; this guidance increased the threshold from $500,000 to 

$750,000, as permitted by the Single Audit Act. This requirement does not apply to 

international organizations, including WFP. Three of our selected Title II development 

projects were awarded to U.S. nonprofit organizations prior to December 2014. Our fourth 

selected Title II development project was implemented by a foreign NGO and was 

reimbursement-based. USAID officials indicated that they may review support 

documentation for all expenditures under reimbursement-based awards to NGOs; 

reimbursement-based awards may require the implementing partner to submit receipts 

and other support documentation to justify expenditures.

32GAO, Single Audit: Opportunities Exist to Improve the Single Audit Process and 

Oversight, GAO-09-307R (Washington, D.C.: Mar. 13, 2009) and GAO, Single Audit 

Analysis: Federated States of Micronesia and the Republic of the Marshall Islands, GAO16-550T (Washington, D.C.: September 20, 2016). 
Page 26 GAO-17-224 International Food Assistance

included material weaknesses.33 Specifically, USAID stipulated that 

the partner must request payment for incurred expenses in lieu of 

advance payments. According to USAID officials, the Office of Food 

for Peace also reviews periodic audit reports completed by the OIG 

that may address financial internal controls related to 202(e) and ITSH 

spending. According to USAID officials, in response to USAID OIG 

findings of partners’ misspending, the Office of Food for Peace hired 

an external auditor to conduct financial reviews for two Title II 

projects.

• Partners’ internal controls. USAID officials noted that USAID 

generally relies on its partners to implement financial oversight in Title 

II projects.34 Our financial reviews of selected Title II development 

projects found that partners’ internal controls generally included (1) 

policies to prevent the commingling of U.S. government funds, (2) 

policy manuals to instruct employees on the proper use of U.S. 

government funds, and (3) procedures to segregate incompatible 

financial duties. Partner officials also cited examples of various steps 

they are taking to implement internal controls, such as using mobile 

services providers for cash transfers, which can enhance the 

traceability of funding, and maintaining warehouse records for 

commodity receipt, storage, and distribution.

 33Single audits conducted in fiscal years 2013 through 2015 of USAID implementing 

partners responsible for our selected Title II development projects had findings that 

included material weaknesses (i.e., nonachievement of internal control principles and 

related components that is significant enough to be externally reported) and significant 

deficiencies (i.e., internal control deficiencies that are less severe than material 

weaknesses yet important enough to merit the attention of those charged with 

governance) in internal controls as well as corrective actions planned to address the 

findings. Specifically, three of our four selected Title II development projects were subject 

to the single audit. Single audits for one project found material weaknesses and significant 

deficiencies in internal controls related to financial reporting. For another project, audits 

found significant deficiencies related to internal controls and subpartner monitoring. For 

the third project, audits did not identify material weaknesses or significant deficiencies but 

questioned various unallowable indirect costs. The fourth project was implemented by a 

foreign NGO, which was required to have an annual independent external audit; its most 

recent audit found significant deficiencies in internal controls related to financial reporting 

and support documentation. 

34In accordance with federal regulations, all NGO partners must establish and maintain 

effective internal controls over federal awards to provide reasonable assurance that the 

awards are managed in compliance with federal statutes, regulations, and award terms 

and conditions. These internal controls should be in compliance with GAO Standards for 

Internal Control in the Federal Government. See 2 CFR 200.303, GAO/AIMD-00-21.3.1, 

and GAO-14-704G.
Page 27 GAO-17-224 International Food Assistance

• Periodic monitoring data for Title II emergency projects. To help 

inform USAID about potential issues, such as substantial increases or 

decreases in costs, USAID requires partners for Title II projects to 

report some information and data on implementation and support 

costs. For example, NGO partners for Title II emergency projects 

providing cash transfers, food vouchers, and local and regional 

procurement report quarterly and annual data comparing planned with 

actual activities, which may help inform USAID about the status and 

progress of these activities. Such information can also be used to help 

identify areas needing additional oversight.

Although USAID reviews partners’ quarterly SF-425 reports of high-level 

expenditures for 202(e) and ITSH, USAID generally does not conduct 

systematic, targeted reviews of partners’ spending on these costs.35 As a 

result, USAID is limited in its ability to provide reasonable assurance that 

partners’ spending for Title II implementation and support costs is in 

compliance with law and in accordance with approved budgets. In 

addition, USAID may be unaware of potential gaps in partners’ internal 

controls, which could result in misspending of funding to implement and 

support Title II projects. USAID’s ADS notes that the USAID award 

agreement officer is responsible for oversight of the financial 

management aspects of awards to NGOs to confirm that activities funded 

conform to the terms and conditions of the award, through review of 

reports, correspondence, site visits, or other appropriate means.36 In 

addition, the internal controls framework prescribed for federal agencies 

and widely used by international organizations calls for control activities,

 35For the purposes of our review, we defined a systematic, targeted financial review as a 

review by management that verifies actual incurred costs compared to planned budgets; 

verifies that implementing partners appropriately documented transactions and internal 

controls; and provides reasonable assurance that financial transactions were properly 

executed, valid, accurate, and timely. Such targeted reviews may vary in scope and 

frequency, depending on factors such as identified risks to a project or prior audit findings. 

See GAO/AIMD-00-21.3.1 and GAO-14-704G. 

36The agreement officer designates an agreement officer’s representative to assist with 

award monitoring and administration; see ADS ch. 303. A country backstop officer assists 

the agreement officer’s representative. USAID relies on WFP to conduct financial 

oversight of Title II funding to implement and support emergency projects awarded to 

WFP, a category 1 PIO. For additional details from our review of WFP’s financial oversight 

of Title II funding to implement and support projects, see app. IV. 

USAID Generally Does 

Not Conduct Systematic,

Targeted Financial 

Reviews
Page 28 GAO-17-224 International Food Assistance

which commonly include reviews by management to ensure achievement 

of objectives and to respond to risk.37

USAID officials, including agreement officers’ representatives, told us that 

to monitor NGO partners’ actual spending for implementation and support 

costs, they generally rely on reviews of partners’ quarterly financial (SF425) reports. However, in accordance with U.S. government regulation,

the SF-425 reports provide only the partners’ total expenditures for 202(e) 

and ITSH costs in the relevant quarter; the reports do not provide detailed 

information on the actual nature of the expenditures.38

While USAID’s Office of Food for Peace reviews partners’ single audits 

and OIG reports—which can identify areas warranting additional financial 

oversight—these audits are not designed to annually assess financial 

oversight for each Title II project.39 For example, USAID modified the 

terms of one partner’s letter of credit in response to single audit findings,

which included material weaknesses and significant internal control 

deficiencies. However, USAID did not require the partner to submit 

receipts or any other support documentation for expenditures.40

Additionally, according to USAID officials, USAID’s OIG typically reviews 

just one or two country food security programs each year, and these 

 37See GAO-14-704G; Committee of Sponsoring Organizations of the Treadway 

Commission, Internal Control—Integrated Framework.

38According to 2 C.F.R. § 200.327, unless otherwise approved by OMB, federal awarding 

agencies may solicit only the standard, OMB-approved government-wide data elements 

for collection of financial information. 

39Single audits are designed to review an entity’s major programs. 

40According to USAID officials, USAID modified the terms of this partner’s letter of credit 

as a result of single audit findings, including material weaknesses and significant 

deficiencies. The officials added that USAID held periodic meetings with the partner to 

discuss the partner’s compliance improvement plans and related progress, although as of 

January 2017, the most recent meeting for which USAID was able to provide us with 

documentation took place in July 2015. In addition, we found that USAID approved a 

subaward to this partner for one of our other selected projects and that this partner 

received an advance under this subaward, even though USAID had modified the terms of 

the partner’s letter of credit as a primary award recipient (i.e., recipient of a direct award 

from USAID). According to USAID officials, USAID did not inform the primary partner that 

the agency had modified the terms of the subaward recipient’s letter of credit. The internal 

controls framework prescribed for federal agencies calls for management to communicate 

quality information externally through reporting lines so that external parties can help the 

entity achieve its objectives and address related risks. This should include information 

relating to the entity’s events and activities that impact the internal controls system. See 

GAO/AIMD-00-21.3.1 and GAO-14-704G.

Internal Controls Component: Control 

Activities

According to internal controls standards 

prescribed for federal agencies, management 

should design control activities to achieve 

objectives and respond to risks. Control 

activities are the actions management 

established through policies and procedures 

to achieve objectives. For financial 

management, common control activity 

categories include the following:

• proper execution of transactions

• accurate and timely recording of 

transactions

• appropriate documentation of 

transactions and internal control

• reviews by management at the activity 

level

Sources: GAO; Committee of Sponsoring Organizations of 

the Treadway Commission (COSO). | GAO-17-224
Page 29 GAO-17-224 International Food Assistance

reviews do not typically address every Food for Peace project ongoing in 

a country.41 We found that in fiscal years 2012 through 2016, USAID’s 

OIG conducted an audit relevant to two of the four Title II development 

projects we reviewed.42 Although the Office of Food for Peace has hired 

an external auditor to conduct financial reviews for two Title II projects 

since fiscal year 2012 in response to USAID OIG recommendations, the 

external auditor has not reviewed most projects. Also, officials at two of 

the three USAID missions responsible for our selected Title II 

development projects implemented by U.S. NGOs told us that they 

generally do not conduct systematic, targeted financial reviews, including 

transaction testing, as part of their Title II project monitoring.43

Our limited, nongeneralizable financial transactions testing identified 

issues such as inaccurate accounting, insufficient support documentation,

and misspending of 202(e) and ITSH funding in 14 of the 60 transactions 

we reviewed (representing $304,854 of $1,086,226 in expenditures) for 

fiscal years 2014 and 2015 for three of the four selected Title II 

development projects.44 These findings raise questions about whether the 

partners have sufficient controls in place to ensure that they spend 202(e) 

and ITSH funding as planned. For example, for one project, we found a 

202(e) charge of $6,543 for fuel that should have been charged to 

another project. For another project, we found an ITSH charge of $6,449 

for the movement of stones for cash-for-assets activities, which is not an 

 41In fiscal year 2015, USAID had 99 ongoing development and emergency projects that 

received Title II funding.

42One of these two reviews addressed our selected project that was implemented by a 

foreign NGO. The other review addressed a project that we did not select for our review, 

but it addressed a prior, related project implemented by the same partner in the same 

country as our selected project. 

43Officials at the third mission informed us that as a result of the recent USAID’s OIG audit 

findings relevant to projects implemented by one partner in that country, the mission 

planned to include Title II projects in its periodic financial reviews. 

44We reviewed 20 additional transactions for our fourth selected project, implemented by a 

foreign NGO, which is reimbursement based. As part of its reimbursement process, the 

partner submits monthly financial reports to USAID, which include actual expenses 

incurred and corresponding transaction identifying numbers, as well as related support 

documentation, including invoices and receipts. Our review of selected transactions for 

202(e) and ITSH for this partner showed that expenditures were accurate, allowable, 

reasonable, and approved. 
Page 30 GAO-17-224 International Food Assistance

allowable use of ITSH.45 Also, for two transactions for two projects,

employees incorrectly charged time to 202(e) and ITSH that was not in 

accordance with approved budgets. After we informed implementing 

partner officials of these findings, the officials stated that they were taking 

steps to correct the errors we identified, such as providing additional 

training to staff.

USAID has not collected complete and consistent monitoring data on an 

ongoing basis for Title II development projects and some Title II 

emergency projects. As a result, USAID lacks information that could help 

inform budget decisions and financial oversight of spending for 

implementation and support costs within and across food assistance 

projects. The internal controls framework prescribed for federal agencies 

and widely used by international organizations calls for the use of quality 

information to achieve objectives, which may include identifying 

information requirements, obtaining relevant and reliable data, and 

processing data into quality information to make informed decisions.46

Our review of available monitoring reports submitted by the implementing 

partners for the seven selected Title II development and emergency 

projects for fiscal years 2014 through 2016 found that some reports 

contained incomplete and inconsistent data and information for 202(e) 

cash transfers, food vouchers, and local and regional procurement as well 

as for ITSH.47

• USAID has not required partners for Title II development projects to 

report on the status and progress of cash transfers, food vouchers,

and local and regional procurement funded by 202(e) on a quarterly 

basis. Nonetheless, implementing partners for the four development 

projects we reviewed indicated that they were collecting these data on 

 45Cash-for-assets activities require beneficiaries to work at constructing community 

assets, such as roads or irrigations schemes, in exchange for food assistance provided in 

the form of cash transfers or food vouchers. 

46See GAO-14-704G; Committee of Sponsoring Organizations of the Treadway 

Commission, Internal Control—Integrated Framework.

47Two of our selected Title II development projects included cash transfers, one included 

food vouchers, and one included local and regional procurement in fiscal years 2014-

2016. Two of our selected WFP projects included Title II funding for cash transfers, and all 

three projects included Title II funding for local and regional procurement during this time 

period.

USAID Lacks Key 

Monitoring Data for Some 

Title II Projects

Internal Controls Component: Information 

and Communication

According to internal controls standards 

prescribed for federal agencies, management 

should use quality information to achieve an 

entity’s objectives. Key attributes that 

contribute to the operating effectiveness of 

this principle include identifying information 

requirements, obtaining relevant and reliable 

data in a timely manner, and processing data 

into quality information to make informed 

decisions.

Sources: GAO; Committee of Sponsoring Organizations of 

the Treadway Commission (COSO). | GAO-17-224
Page 31 GAO-17-224 International Food Assistance

an ongoing basis. However, we found that the partners reported 

inconsistent data to USAID. For example, annual reports for the 

selected project that included 202(e)-funded food vouchers provided 

information on the frequency and number of months of food voucher 

distributions, but quarterly reports for the project did not consistently 

include this information. In addition, the project’s quarterly and annual 

reports did not include updates on certain data elements, including the 

actual number of vouchers redeemed and the actual cost of food 

vouchers. Further, the quarterly reports, but not the annual reports, for 

one of our two selected projects including 202(e)-funded cash 

transfers provided updates on the total actual cost of cash transfers 

and the value, frequency, and number of months that cash transfers 

were provided. For our other selected project that included cash 

transfers, the most recent annual report provided only annual data on 

the number of months that cash transfers were provided and the 

actual number of cash transfer beneficiaries.48 In October 2016, 

USAID updated reporting guidance, specifying requirements for Title II 

development projects to provide annual data on cash transfers, food 

vouchers, and local and regional procurement.49 However, USAID 

does not require partners for Title II development projects to provide 

quarterly updates for these data, which could help inform USAID 

about potential issues on a more frequent basis. In contrast, USAID 

requires this information and data in quarterly and annual reporting for 

Title II emergency projects implemented by NGOs.50

 48Additionally, quarterly and annual reports for the selected project that included 202(e) 

funding for local and regional procurement provided updates on the type of locally and 

regionally procured commodity and quantity distributed in metric tons. However, the 

reports provided no information on the quantity approved for each period (for comparison 

with the quantity procured and delivered), cost per metric ton, or impact on the 

procurement market. 

49According to USAID, the agency began including language in cooperative agreements 

with NGOs at the end of fiscal year 2015 that requires Title II development projects to 

report on cash transfers, food vouchers, and local and regional procurement beginning in 

fiscal year 2016. The cooperative agreements do not specify the data and information that 

are required; the agreements refer implementing partners to USAID guidance. In October 

2016, USAID added specific reporting requirements to its annual reporting guidance for 

implementing partners for Title II development projects to provide annual data on cash 

transfers, food vouchers, and local and regional procurement. 

50USAID’s Annual Program Statement for International Food Assistance for 2015 requires 

that implementing partners for Title II emergency projects providing cash transfers, food 

vouchers, and local and regional procurement report quarterly and annual data comparing 

planned with actual activities, which could help inform USAID about the status and 

progress of these activities. USAID’s Annual Program Statement applies to NGOs 

implementing Title II and EFSP emergency food assistance projects. 
Page 32 GAO-17-224 International Food Assistance

• While, according to USAID, it generally relies on WFP to conduct 

financial oversight of Title II funding it receives, the agency has 

established requirements for WFP to report periodic project 

monitoring data related to its expenditures of 202(e) funding for cash 

transfers, food vouchers, and local and regional procurement and of 

ITSH funding.

51 However, USAID generally has not collected 

complete and consistent data related to these expenditures from 

WFP. Our review of periodic monitoring reports that WFP submitted to 

USAID for the three selected Title II emergency projects—in Malawi,

South Sudan, and Zimbabwe—found that the reports provided the 

required information for local and regional procurement on the types 

and volumes (in metric tons) of commodities procured.52 However, the 

reports for only one of the projects provided the required information 

on commodity cost and market price analysis, and none of the reports 

we reviewed provided the required safety or quality assurance 

inspection results.53 Further, USAID has not obtained any of the 

 51USAID reporting requirements relevant to spending of 202(e) funding of cash transfers, 

food vouchers, and local and regional procurement and of ITSH funds for WFP 

emergency projects that receive Title II funding are generally included in transfer 

authorizations and amendments for the projects we reviewed. For example, USAID 

requires annual reporting of data such as the actual number and value of cash transfers 

and vouchers used and distributed to beneficiaries. In addition, USAID requires periodic 

price information for key staples and commodities relevant to cash transfers and food 

vouchers 4 weeks before the project begins, monthly during the project’s implementation, 

and 4 weeks after the project’s completion. For ITSH, USAID requires WFP to provide an 

assessment of ITSH costs detailing information used to formulate the ITSH rate within 30 

days of signing the agreement. In addition, USAID requires WFP to provide, at least every 

6 months, an accounting of ITSH costs supported by the agreement and revised estimates 

based on review of actual costs. Although USAID officials acknowledged that they 

generally had not collected and reviewed complete and consistent information and data 

from WFP on 202(e) spending for cash transfers, food vouchers, and local and regional 

procurement and on ITSH spending, they noted that they communicate informally with 

WFP on an ongoing basis regarding project activities. WFP officials added that WFP 

provides quarterly SF-425 reports for each project that provide the total amount of funds 

spent on ITSH costs in the relevant quarter. However, these reports do not provide 

detailed information on the actual nature of the expenditures.

52We selected three WFP emergency projects that received Title II funding in fiscal years 

2014 through 2016: WFP Protracted Relief and Recovery Operation 200692 in Malawi, 

which included Title II funding for local and regional procurement; WFP Emergency 

Operation 200659 in South Sudan, which included Title II funding for local and regional 

procurement; and WFP Protracted Relief and Recovery Operation 200453 in Zimbabwe, 

which included Title II funding for cash transfers and for local and regional procurement.

53Although one of our selected WFP projects provided information on locally and 

regionally procured commodity cost, this information did not include the required 

comparison of commodity costs to costs in USAID’s commodity calculator. USAID’s 

commodity calculator is a tool that USAID provides to implementing partners to determine 

the costs of Title II in-kind food aid provided in projects.
Page 33 GAO-17-224 International Food Assistance

required information or data on ITSH costs from WFP for the three 

selected projects, although such costs can be significant.54

Although USAID has limited the use of ITSH funds for Title II projects to 

costs directly associated with providing U.S. in-kind commodities, it has 

not provided consistent guidance to implementing partners or updated 

certain systems to help ensure that ITSH funds are not used to cover 

costs related to local and regional procurement. As a result, USAID 

cannot have reasonable assurance that partners are spending, and 

accounting for, ITSH funds in compliance with its policy and the Food for 

Peace Act. The internal controls framework prescribed for federal 

agencies and widely used by international organizations calls for 

management to externally communicate necessary information to ensure 

achievement of objectives.55 Moreover, a key attribute of this principle 

states that agency management should communicate with, and obtain 

quality information from, external parties, so that those parties can help 

the agency achieve its objectives and address risks.

Although USAID issued guidance prohibiting the use of ITSH funds for 

local and regional procurement in 2014, it had not updated other relevant 

guidance and systems as of December 2016. Pursuant to the Food for 

Peace Act, USAID may pay transportation costs incurred in moving U.S.-

sourced food commodities from ports of entry to storage and distribution 

sites as well as associated costs for storage and distribution.56 According 

to USAID, it has traditionally advised its partners to use ITSH funding to 

cover all movement and storage costs for the U.S. in-kind food aid 

authorized by Title II. With the increased authority granted in the 2014 

Farm Bill, USAID began allowing its partners to provide locally and 

regionally procured food commodities through Title II projects, many of 

which also provided U.S. in-kind food aid. For example, in fiscal years 

2014 and 2015, one Title II development project and 22 Title II 

emergency projects used Title II funding for local and regional 

 54For example, the selected WFP project in South Sudan incurred $110 million in ITSH 

costs including costs for air-lifts of food aid to populations in need and $120 million from 

the Commodity Credit Corporation to cover additional ITSH costs associated with the 

drawdown of commodities from the Bill Emerson Humanitarian Trust, according to USAID 

officials. 

55See GAO-14-704G; Committee of Sponsoring Organizations of the Treadway 

Commission, Internal Control—Integrated Framework.

56See 7 U.S.C. § 1736a.(c)(1)(B), 7 U.S.C. § 1736(b)(6). 

USAID Has Provided 

Inconsistent Guidance 

Regarding Use of ITSH 

Funds for Local and 

Regional Procurement

Internal Controls Component: Information 

and Communication

According to internal controls standards 

prescribed for federal agencies, management 

should externally communicate necessary 

quality information to achieve an entity’s 

objectives. Appropriate methods of external 

communication may enable external parties to 

help an entity achieve its objectives and 

address risks.

Sources: GAO; Committee of Sponsoring Organizations of 

the Treadway Commission (COSO). | GAO-17-224
Page 34 GAO-17-224 International Food Assistance

procurement as well as U.S. in-kind food aid. In the same years, 21 WFP 

projects used Title II funding for U.S in-kind food aid as well as ESFP 

funding for local and regional procurement (9 of the 21 received both Title 

II and EFSP funding for local and regional procurement).57 In 2014,

USAID issued guidance, in the form of a Food for Peace information 

bulletin, outlining the eligible and ineligible uses of ITSH funds. This 

guidance required that partners use ITSH funds only to cover costs 

directly associated with the movement, storage, and distribution of U.S. 

in-kind food aid. The guidance also advised partners that 202(e) funds 

may be used to cover movement and storage costs associated with 

locally or regionally procured commodities that enhance a Food for Peace 

program. However, as of December 2016, other USAID guidance and 

systems were not aligned with the 2014 information bulletin’s prohibition 

against using ITSH funds for costs related to local and regional 

procurement. Examples include the following:

• As of November 2016, USAID’s supplemental budget guidance for 

development programs stated that USAID prefers that partners use 

ITSH funding for all internal transportation, distribution, and storage 

costs.58

• USAID’s fiscal year 2016 request for applications for development 

projects in the Democratic Republic of the Congo, Ethiopia, and 

Liberia stated that if the applicant requested local or regional 

procurement as part of its project, the partner must also report on 

ITSH funding for the locally or regionally procured commodities.

• The fiscal year 2016 request for applications also directed USAID’s 

implementing partners to enter data in the Food for Peace information 

management system on the amount of funds spent in transporting and 

storing locally or regionally procured commodities as ITSH. 

According to USAID officials, although partners may use 202(e) funding 

to pay for costs related to local and regional procurement, the Food for 

Peace information management system does not clearly show that 202(e) 

 57According to USAID officials, partners have provided both U.S. in-kind food aid and 

locally or regionally procured commodities within a single project with the aim of improving 

overall program impact and to better address participants’ needs. 

58This supplemental budget guidance instructs partners that if discrepancies exist 

between it and USAID policy, the policy takes precedence. However, it does not specify 

that ITSH cannot be used to transport or store locally or regionally procured commodities, 

and therefore relies on implementing partner staff knowledge of the Food for Peace Act 

and USAID policy.
Page 35 GAO-17-224 International Food Assistance

funding should be used rather than ITSH funding. USAID officials told us 

that the agency was in the process of updating guidance to clarify the use 

of 202(e) funding related to local and regional procurement costs. 

However, as of January 2017, USAID had not completed these updates.

USAID does not require implementing partners for Title II development 

projects to conduct and document comprehensive risk assessments and 

mitigation plans for cash transfer and food vouchers funded by 202(e) 

despite requiring risk assessments for these modalities in emergency 

projects implemented by NGOs.59 As a result, USAID may be impeded in 

its efforts to determine whether development project partners have 

adequate controls in place to manage risks associated with these 

modalities. OMB guidance for federal agencies emphasizes the 

importance of risk management as a key component of internal control for 

improving the accountability and effectiveness of federal programs.60 In 

addition, the internal controls framework prescribed for federal agencies 

and widely used by international organizations calls for the identification 

and analysis of risks from both external and internal sources related to 

achieving defined objectives, as a basis for designing risk responses.61

While USAID requires applicants to provide some discussion of potential 

risks in award applications for Title II development projects, it does not 

require them to provide a comprehensive assessment of risks associated 

with cash transfers and food vouchers. USAID requests for applications 

for Title II development projects for fiscal years 2014 through 2016

generally state that application packages should include discussion of 

potential risks and contextual factors that could affect project success. In 

contrast, USAID requires applicants for Title II and EFSP emergency food 

assistance projects that provide cash transfers and food vouchers to 

 59Cash transfers and food vouchers are associated with different risks than U.S. in-kind 

food assistance, such as risks related to the potential diversion of cash, counterfeiting of 

food vouchers, and diversion of food voucher reimbursement funds. We have previously 

reported that a comprehensive risk assessment should address security risks as well as 

financial, fraud, political, market, and other risks; the risk assessment should also include 

mitigation plans and identify risk owners, reflected in a risk register. See GAO-15-328.

60OMB’s updated Circular A-123 requires agencies to evaluate fraud risk and use a riskbased approach for financial and administrative control activities to mitigate fraud risks. 

See OMB Circular No. A-123. In addition, GAO’s Fraud Risk Framework identified 

practices for managing fraud risks; see GAO, A Framework for Managing Fraud Risks in 

Federal Programs, GAO-15-593SP (Washington, D.C.: July 28, 2015). . 

61See GAO-14-704G; Committee of Sponsoring Organizations of the Treadway 

Commission, Internal Control—Integrated Framework. 

USAID Does Not Require 

Risk Assessments for 

Cash Transfers and Food 

Vouchers in Development 

Projects despite Requiring 

Them in Emergency 

Projects

Internal Controls Component: Risk

Assessment

According to internal controls standards 

prescribed for federal agencies, risk 

assessment involves

• comprehensively identifying risks 

associated with achieving program 

objectives;

• analyzing those risks to determine their 

significance, likelihood of occurrence, and 

impact; and

• determining actions or controls to 

implement to mitigate the risks.

The identification and analysis of risks from 

both external and internal sources related to 

achieving defined objectives form a basis for 

designing risk responses.

Sources: GAO; Committee of Sponsoring Organizations of 

the Treadway Commission (COSO). | GAO-17-224
Page 36 GAO-17-224 International Food Assistance

provide an analysis of risks related to proposed modalities and relevant 

mitigation measures, including an analysis of potential risks related to 

fraud, corruption, and mismanagement as well as security risks.62

Our review of three selected Title II development projects that provided 

202(e) funding for cash transfers or food vouchers found that none of the 

implementing partners had submitted a comprehensive assessment of 

the risks of using those modalities. Although none of these projects had 

planned to provide cash transfers or food vouchers funded by 202(e) at 

the application stage, USAID approved the use of 202(e) funding for 

those modalities through award modifications. We found that award 

documentation submitted by partners for the three projects generally 

included some broad discussion of risks, such as security or weather 

risks. However, the documentation did not address financial or fraud risks 

related to cash transfers or food vouchers funded by 202(e).

Since the 2014 Farm Bill was enacted, USAID has increased 202(e) 

funding for implementation costs in Title II food assistance projects and 

expanded the uses of this funding to support cash transfers, food 

vouchers, and local and regional procurement of commodities. At the 

same time, USAID has obligated funding authorized under the Foreign 

Assistance Act in addition to that authorized by Title II, in some cases 

using multiple funding sources to support similar costs and activities 

within the same food assistance project. USAID’s spending of significant 

and growing amounts of funding from different sources to implement and 

support Title II projects heightens the importance of effective financial 

oversight to ensure the correct and effective use of this funding. However,

without conducting systematic, targeted reviews of Title II development 

 62Under the Annual Program Statement (March 2015), which applies to Title II emergency 

projects, applicants are required to include an assessment of the risk of fraud or diversion 

and controls in place to prevent any diversion of cash, counterfeiting of food vouchers, 

and diversion of food voucher reimbursement funds. While WFP implements the majority 

of Title II emergency projects, according to USAID officials, the Annual Program 

Statement does not apply to WFP, a category 1 PIO. We reviewed WFP internal controls 

in 2012 and reviewed WFP internal controls for cash transfers and food vouchers provided 

through USAID’s EFSP in 2015, making several recommendations for USAID and WFP to 

strengthen internal controls related to risk management for emergency food assistance 

projects. We subsequently found that USAID and WFP had both taken some steps to 

respond to these recommendations. See GAO, World Food Program: Stronger Controls 

Needed in High-Risk Areas, GAO-12-790 (Washington, D.C.: Sept. 13, 2012); GAO-15-

328. For additional details from our review of WFP’s assessment of risks for selected 

projects, see app. IV.

Conclusions
Page 37 GAO-17-224 International Food Assistance

and emergency projects, USAID has limited ability to ensure that 

partners’ expenditures of 202(e) and ITSH funding comply with law and 

align with approved budgets. In addition, without collecting complete and 

consistent monitoring data on partners’ use of 202(e) funding for cash 

transfers, food vouchers, and local and regional procurement and of ITSH 

funding, USAID lacks information that could help inform its financial 

oversight. Further, until it ensures that its guidance and systems 

communicate consistent information about allowable uses of ITSH 

funding in Title II projects, USAID lacks reasonable assurance that its 

partners will spend, and account for, these funds correctly. Finally,

without requiring comprehensive risk assessments and mitigation plans 

for the use of cash transfers and food vouchers in Title II development 

projects, and taking steps to ensure that partners carry out the 

assessments, USAID cannot determine whether its partners are 

adequately addressing financial, fraud, and other risks. Taking steps to 

improve its financial oversight of Title II funding to implement and support 

food assistance projects will better position USAID to ensure the effective 

use of available U.S. resources to address both long-term and emergency 

food needs of vulnerable populations around the world.

To enhance USAID’s financial oversight of implementing partners’ 

spending to implement and support Title II development and emergency 

projects, we recommend that the USAID Administrator take the following 

five actions:

1. Develop, document, and implement a process for periodically 

conducting systematic, targeted financial reviews of Title II 

development and emergency projects. Such reviews should include 

efforts to verify that actual costs incurred for these projects align with 

planned budgets.

2. Ensure that its requirements for implementing partners to provide 

monitoring data on an ongoing basis on the use of 202(e) funding for 

cash transfers, food vouchers, and local and regional procurement are 

consistent for Title II development and emergency projects.

3. Take steps to ensure that it collects complete and consistent 

monitoring data from implementing partners for Title II development 

and emergency projects on the use of 202(e) funding for cash 

transfers, food vouchers, and local and regional procurement as well 

as data on the use of Title II funding for ITSH costs, in accordance 

with established requirements.

Recommendations for 

Executive Action
Page 38 GAO-17-224 International Food Assistance

4. Update key guidance and systems to consistently reflect allowable 

uses of ITSH funds in Title II development and emergency projects.

5. Establish a requirement for Title II development project partners to 

conduct and document comprehensive risk assessments and 

mitigation plans for cash transfers and food vouchers funded by 

202(e), and take steps to ensure that implementing partners adhere to 

the requirement.

We provided a draft version of this product to USAID for comment. USAID 

provided official comments, which are reprinted in appendix V, as well as 

technical comments, which we incorporated as appropriate. 

In its official comments, USAID concurred with our recommendations. For 

example, regarding our recommendation to develop, document, and 

implement a process for periodically conducting systematic, targeted 

financial reviews of Title II development and emergency projects, USAID 

stated that it is exploring options to develop a process for conducting 

financial reviews. USAID added that this process will include the 

development of additional guidance and training relevant to the 

management of food assistance awards, to help ensure that actual costs 

align with planned budgets. In addition, USAID stated that it has taken 

steps to implement our recommendation to establish a requirement that 

Title II development project partners conduct and document 

comprehensive risk assessments for cash transfers and food vouchers 

funded by 202(e) and to take steps to ensure that partners adhere to the 

requirement. Specifically, USAID stated that it added a risk assessment 

requirement to the fiscal year 2017 request for applications for 

development projects in Uganda, which USAID issued February 17, 2017.

As agreed with your office, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the Administrator of 

USAID. In addition, the report will be available at no charge on the GAO 

website at http://www.gao.gov.

Agency Comments 

and Our Evaluation
Page 39 GAO-17-224 International Food Assistance

If you or your staff 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 VI.

Sincerely yours,

Thomas Melito, Director

International Affairs and Trade
Appendix I: Objectives, Scope, and 

Methodology

Page 40 GAO-17-224 International Food Assistance

We examined (1) any changes in the U.S. Agency for International 

Development’s (USAID) use of Title II funding to implement and support 

projects since the enactment of the 2014 Farm Bill and (2) USAID’s 

financial oversight of Title II funding used to implement and support 

selected projects.

To address these objectives, we analyzed USAID Title II Food for Peace 

(Title II) funding data and policies, guidance, and procedures documents 

and interviewed USAID and implementing partner officials in Washington,

D.C., and in Haiti, Malawi, and Zimbabwe. We reviewed additional 

documentation, including partner application and award documentation,

and annual and comprehensive project budgets for seven selected 

projects—four development and three emergency projects—that received 

Title II funding in fiscal years 2014 through2016. We selected these 

seven projects on the basis of factors such as the highest level of funding 

and types of modalities implemented with 202(e) funding, geographic 

diversity, and project timeframe. Specifically, we focused on projects that 

were ongoing in fiscal year 2016 and that included 202(e) funding for 

cash transfers, food vouchers, or local and regional procurement.1 In 

Haiti, Malawi, and Zimbabwe, we visited project sites and observed 

ongoing activities; inspected food storage warehouses; reviewed 

implementing partners’ systems for managing and storing commodities; 

and met with beneficiaries who received U.S. in-kind assistance or cash 

transfers, food vouchers, or locally and regionally procured commodities. 

We selected countries for fieldwork to ensure that we included (1) 

different geographic locations, (2) both emergency and development 

projects, and (3) examples of cash transfers, food vouchers, and local 

and regional procurement that were funded by 202(e). Since we 

judgmentally selected projects and locations for fieldwork, our findings 

cannot be generalized.

To address our first objective, we analyzed USAID development and 

emergency Title II funding data for fiscal years 2012 through 2015,

including annual project level data on total obligations and obligations for 

internal transportation, storage, and handling (ITSH); 202(e) costs; 

 1

Six of our seven selected projects were ongoing in fiscal year 2016. Although the seventh 

project ended in fiscal year 2015, we selected it because it received the largest amount of 

202(e) and internal transportation, shipping, and handling (ITSH) obligations in fiscal years 

2014 through 2016, based on USAID funding data provided at the time of our project 

selection, and it represented our only selected World Food Program (WFP) Emergency 

Operation.

Appendix I: Objectives, Scope, and 

Methodology
Appendix I: Objectives, Scope, and 

Methodology

Page 41 GAO-17-224 International Food Assistance

commodity costs; ocean freight costs and inland transportation costs; 

cash transfers; food vouchers; and local and regional procurement.2 To 

assess the reliability of these data, we reviewed related documentation,

including data presented in USAID’s and the Department of Agriculture’s 

(USDA) annual United States International Food Assistance Report; 

interviewed, and reviewed written responses from, USAID agency 

officials; and electronically tested for outliers and potential errors. We 

determined that the data and information were sufficiently reliable to 

compare project funding obligations and amounts (metric tonnage) of 

food assistance provided. In addition, we reviewed implementing partner 

award documents for the selected projects, including detailed and 

comprehensive budget documents, quarterly and annual results reports,

and award agreements. We analyzed these data and documents to 

determine the amount of 202(e) funding USAID has provided for costs to 

implement and support Title II projects; the amount of funding and

number of projects using cash transfers, food vouchers, and local and 

regional procurement; and the most common types of modalities. We also 

reviewed non-Title II funding sources, such as foreign assistance funding 

from the Development Assistance and International Disaster Assistance 

(IDA) accounts, to identify countries and projects receiving funding from 

multiple sources. We did not assess partners’ studies on cost savings or 

efficiencies gained through reducing monetization.

To address our second objective, we reviewed USAID’s policies,

guidance, and procedures for financial oversight and monitoring of 202(e) 

and ITSH funding as of fiscal year 2016, including relevant chapters of 

USAID’s Automated Directives System (ADS), which outlines the 

agency’s operational policy. We also reviewed partner award 

documentation for the seven selected projects. For selected development 

projects, we reviewed and compared funding data and information 

provided in applications, award agreements, award modifications,

approved budgets, quarterly and annual reports, expenditure reports (SF425s) for both 202(e) and ITSH expenditures, and relevant audits, among 

other documentation, to identify significant issues or discrepancies in 

implementing partners’ financial oversight and monitoring of 202(e) and 

ITSH spending. We reviewed monitoring data and information provided in 

quarterly and annual reports for 202(e) cash transfers, food vouchers,

and local and regional procurement activities implemented during the 

period of our review.

 2

Title II funding data for fiscal year 2016 were not finalized at the time of our review. 
Appendix I: Objectives, Scope, and 

Methodology

Page 42 GAO-17-224 International Food Assistance

For our selected development projects, we reviewed the implementing 

partners’ internal controls and risks by reviewing policy manuals and 

procedures to see if partners had implemented key policies and 

procedures to (1) prevent comingling of U.S. funds, such as unique 

accounting codes; (2) separate bank accounts; (3) instruct employees on 

proper use of U.S. funds; (4) segregate financial duties; (5) document 

bank reconciliations; (6) monitor subpartners’ use of program funding,

including subpartner financial risk and capacity assessments; (7) maintain 

proper documentation to support subpartner expenditures; (8) conduct 

cost and price analysis; (9) account for staff time; (10) conduct annual 

audits; (11) conduct risk assessments and mitigation plans to address 

financial risks and fraud; and (12) reconcile SF-425s to the general 

ledger. The financial information we reviewed included general ledger 

downloads from the implementing partners’ accounting systems, bank 

account statements, and other information generated by accounting 

systems. We focused our financial review primarily on compliance with 

internal control standards related to monitoring of program funds and to 

reviewing certain control activities.

We also reviewed development partners’ disbursement processes and 

reviewed a nongeneralizable sample of 80 transactions from financial 

information provided by implementing partners to identify potential 

internal controls and financial management issues. We performed 

detailed expenditures transaction testing on expenditures of 202(e) or 

ITSH funds in fiscal years 2014 and 2015, using samples of 20 

transactions for each of our four selected development projects, including 

a combination of larger and smaller transactions for traditional 

implementation costs as well as cash transfers, food vouchers, and local 

and regional procurement. We tested each selected transaction to 

determine whether the costs were (1) accurate, (2) allowable, (3) 

reasonable, (4) approved, (5) adequately reviewed, and (6) supported by 

sufficient documentation. We compared the selected transactions with the 

amounts budgeted in partners’ annual approved budgets to verify that 

expenditures were (1) spent using the funding stream budgeted for the 

expense and (2) not in excess of the budgeted amount. For each entity 

we selected for transaction testing, we reviewed the transactions against 

supporting documentation such as travel orders and authorizations,

receipts and invoices, time and attendance reports, and billing reports. 

Since we judgmentally selected transactions, our findings cannot be 

generalized.

Additionally, for selected World Food Program (WFP) emergency 

projects, we reviewed WFP policies, procedures, and guidance related to 
Appendix I: Objectives, Scope, and 

Methodology

Page 43 GAO-17-224 International Food Assistance

financial oversight and monitoring of food assistance projects; WFP’s 

external and internal audits; project funding and support documentation,

including transfer agreements, amendments, budget revisions, and 

standard project reports. We reviewed monitoring data and information 

provided in periodic reports for 202(e) cash transfers, food vouchers, and 

local and regional procurement activities implemented during the period 

of our review. We also performed walk-throughs with WFP officials of 

preselected 202(e) and ITSH transactions. Because WFP is a public 

international organization (PIO), we did not audit its expenditures or its 

internal control systems.

We conducted this performance audit from October 2015 to March 2017 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.
Appendix II: USAID Internal Transportation, 

Storage, and Handling Funding

Page 44 GAO-17-224 International Food Assistance

The Food for Peace Act authorizes the U.S. Agency for International 

Development (USAID) to pay for costs to transport, store, and distribute 

Title II agricultural commodities (i.e., U.S. in-kind) overseas.1 To cover 

these costs that partners incur while moving, storing, and distributing Title 

II U.S. in-kind food aid after it reaches a destination country, USAID 

provides the partners with funds that it categorizes as internal 

transportation, storage, and handling (ITSH) funding. In fiscal years 2012 

through 2015, USAID provided about 28 percent of total Title II funding to 

cover ITSH costs (about $1.575 billion), which supported about 4 million 

metric tons of commodities during that timeframe.2

Since 2012, USAID’s obligations for ITSH costs have varied, ranging from 

about $371 million to about $405 million (see table 5). The amount of 

commodities USAID has provided in its Title II program also varied within 

this period, ranging from a high of about 1.2 million metric tons in fiscal 

year 2012, to a low of 873,414 metric tons in fiscal year 2014. Likewise,

the amount of ITSH funding USAID has obligated per metric ton of 

commodities (i.e., ITSH rate) ranged from a high of $457 in fiscal year 

2014, to a low of $338 in fiscal year 2012. According to USAID officials,

increases in the ITSH rate were due to increased commodity storage and 

transport costs, food prices, the shift to specialized nutrition products,

decreases in monetization, and security challenges, among other factors.

 1

7 USC § 1736(b)(6) (emergency assistance), 7 USC § 1736a(c)(1)(B) (nonemergency 

assistance).

2

Metric tons of commodities do not include monetized commodities. According to USAID, 

no ITSH costs are associated with monetization.

Appendix II: USAID Internal Transportation,

Storage, and Handling Funding
Appendix II: USAID Internal Transportation, 

Storage, and Handling Funding

Page 45 GAO-17-224 International Food Assistance

Table 5: USAID Title II ITSH Obligations, Fiscal Years 2012-2015

Fiscal year Project type ITSH obligation

(dollars in 

thousands)

Metric tons of 

commodities 

Average ITSH 

cost per metric 

ton ( dollars)

Number of active 

Title II projects

2012 Emergency 349,463.2 988,337 354 55

Development 55,053.70 207,490 265 41

Total 404,516.9 1,195,827 338 96

2013 Emergency 326,422.40 856,810 381 50

Development 44,307.30 177,000 250 34

Total 370,729.70 1,033,810 359 84

2014 Emergency 365,022.20 735,145 497 59

Development 34,356.20 138,269 248 31

Total 399,378.40 873,414 457 90

2015 Emergency 330,059.37 576,885 572 64

Development 70,040.04 335,603 209 35

Total 400,099.41 912,488 438 99

Total 2012-2015 1,574,724.41 4,015,539

Legend: ITSH = internal transportation, storage, and handling; Title II = Title II of the Food for Peace Act.

Source: GAO analysis of U.S. Agency for International Development (USAID) data. | GAO-17-224

Notes: Obligations of internal transportation, storage, and handling (ITSH) funding are provided to 

cover the costs of transporting, storing, and handling U.S. commodities overseas. In addition to the 

amounts shown for Title II ITSH costs, in fiscal years 2014 and 2015, $180.1 million in ITSH funding 

was made available from the Bill Emerson Humanitarian Trust to two World Food Program 

emergency projects in South Sudan. As reauthorized by the 2014 Farm Bill, this trust is an authority 

that allows USAID’s Office of Food for Peace to meet emergency humanitarian food needs in 

developing countries when other Title II resources are not available.

Metric tons of commodities do not include monetized commodities. According to USAID, there are no 

ITSH costs associated with monetization.

While USAID makes ITSH funding available in both development and 

emergency projects, emergency projects comprised the majority of ITSH 

funding in fiscal years 2012 through 2015 (see fig. 9). According to 

USAID officials, conflict and lack of in-country infrastructure can greatly 

increase ITSH costs, particularly in emergency projects. For example,

according to USAID, in South Sudan, the World Food Program (WFP)—

USAID’s implementing partner—distributed food assistance to 

beneficiaries during the country’s armed conflict and was forced to deliver 

some food via airdrops to conflict-impacted areas. When food could be 

moved over land, trucking companies charged a premium due to the high 

risk their drivers faced. Because of these factors, in June 2015, WFP 

agreed to an ITSH cost of $1,087.50 per metric ton of food. In 

comparison, in a country such as Malawi, which did not experience 
Appendix II: USAID Internal Transportation, 

Storage, and Handling Funding

Page 46 GAO-17-224 International Food Assistance

security concerns and where WFP distributed emergency food assistance 

to beneficiaries affected by severe drought conditions, WFP’s ITSH cost 

in August 2015 was $97.87 per metric ton.

Figure 9: USAID Title II Development and Emergency Projects’ ITSH Obligations,

Fiscal Years 2012-2015
Appendix III: Selected Title II Projects

Page 47 GAO-17-224 International Food Assistance

USAID Title II development project: August 2011 to July 20161

U.S. Agency for International Development (USAID) obligated Title II 

funding for U.S. in-kind (i.e., U.S.-donated) commodities, including wheat,

split peas, and vegetable oil, in fiscal years 2014 and 2015. During this 

period, USAID also obligated Title II 202(e) funding for cash transfers to 

landless youth beneficiaries in exchange for their labor on public works 

projects. These public work projects included terracing hillsides to create 

farmland. Table 6 shows USAID obligations for this development project.

Table 6: USAID Obligations for Development Project in Ethiopia, Fiscal Years 2014-

2015

Title II totala $70,238,560

U.S. commodities (94,320 MT) $28,535,900

ITSH $6,847,170

202(e)

Fiscal year 2014: cash transfers

Fiscal year 2015: cash transfers

$19,901,300

$4,460,320

$1,858,250

Legend: Title II = Title II of the Food for Peace Act; MT = metric tons; ITSH = internal transportation,

storage, and handling; 202(e) = funding authorized by Title II, Section 202(e), of the Food for Peace 

Act.

Source: GAO analysis of U.S. Agency for International Development (USAID) funding data. | GAO-17-224

a

The total shown for Title II obligations includes not only the obligations shown for commodities, ITSH,

and 202(e) but also ocean freight and inland transport.

 1

Although this project began before fiscal year 2014 and continued into fiscal year 2016, 

we show data only for fiscal years 2014 and 2015 to focus on changes in USAID’s use of 

Title II funding since the 2014 Farm Bill. Title II funding data for fiscal year 2016 were not 

finalized at the time of our review. 

Appendix III: Selected Title II Projects

Ethiopia

Selected Development 

Project Profile
Appendix III: Selected Title II Projects

Page 48 GAO-17-224 International Food Assistance

USAID Title II development project: August 2013 to September 20172

USAID obligated Title II funding to the project for U.S. in-kind food aid,

including lentils, bulgur, fortified cereal, and vegetable oil, in fiscal years 

2014 and 2015. In fiscal years 2014 and 2015, USAID obligated Title II 

emergency 202(e) funding to support food vouchers for beneficiaries 

affected by drought. In addition, USAID obligated $18.8 million from its 

Development Assistance account for this project. Of this amount, about 

$3.1 million was budgeted to support food vouchers that the partner 

provided to beneficiaries as part of its efforts to develop a long-term social 

safety net in Haiti. Table 7 shows USAID obligations for this development 

project.

Table 7: USAID Obligations for Development Project in Haiti, Fiscal Years 2014-2015

Title II totala $16,503,600

U.S. commodities (6,110 MT) $3,504,800

ITSH $3,750,200

202(e)

Fiscal year 2014: food vouchers

$8,065,100

$4,065,100

Development Assistance account total

Fiscal year 2014: Food vouchersb

Fiscal year 2015: Food vouchers

$18,782,320

$32,118

$3,021,636

Legend: Title II = Title II of the Food for Peace Act; MT = metric tons; ITSH = internal transportation,

storage, and handling; 202(e) = funding authorized by Title II, Section 202(e), of the Food for Peace 

Act.

Source: GAO analysis of U.S. Agency for International Development (USAID) funding data. | GAO-17-224

a

The total shown for Title II obligations includes not only the obligations shown for commodities, ITSH,

and 202(e), but also ocean freight and inland transport.

b

Development Assistance funding for this modality represents budgeted or planned funding; USAID 

was not able to provide a breakdown of Development Assistance obligations by modality for this 

project as of January 2017.

 2

Although this project began before fiscal year 2014 and was ongoing at the time of our 

review, we show data from only fiscal years 2014 and 2015 to focus on changes in 

USAID’s use of Title II funding since the 2014 Farm Bill. Title II funding data for fiscal year 

2016 were not finalized at the time of our review.

Haiti

Selected Development 

Project Profile
Appendix III: Selected Title II Projects

Page 49 GAO-17-224 International Food Assistance

USAID Title II development project: September 2014 to September 

2019

In fiscal year 2015, USAID obligated Title II funding for U.S. in-kind food 

aid such as fortified corn and soybean blend and vegetable oil. In 

addition, USAID obligated Title II 202(e) funding for the local procurement 

of commodities such as maize flour, salt, and soybeans for beneficiaries 

with immediate food needs after severe flooding. According to USAID, it 

will obligate over 65 percent of funding for the project from the 

Development Assistance account, including funding for some project 

implementation costs and local procurement of commodities to support 

food-for-assets activities. Table 8 shows USAID obligations for this 

development project.

Table 8: USAID Obligations for Development Project in Malawi, Fiscal Year 2015

Title II totala $5,914,020

U.S. commodities (3,470 MT) $2,420,600

ITSH $928,400

202(e)

Local procurement

$1,257,920

$377,520

Development Assistance account

Local procurementb

$8,000,000

$160,680

Legend: Title II = Title II of the Food for Peace Act; MT = metric tons; ITSH = internal transportation,

storage, and handling; ; 202(e) = funding authorized by Title II, Section 202(e), of the Food for Peace 

Act.

Source: GAO analysis of U.S. Agency for International Development (USAID) funding data. | GAO-17-224

Note: The project began implementing activities on September 29, 2014.

a

The total shown for Title II obligations includes not only the obligations shown for commodities, ITSH,

and 202(e) but also ocean freight and inland transport.

b

Development Assistance funding for this modality represents budgeted or planned funding; USAID 

was not able to provide a breakdown of Development Assistance obligations by modality for this 

project as of January 2017.

Malawi

Selected Development 

Project Profile
Appendix III: Selected Title II Projects

Page 50 GAO-17-224 International Food Assistance

World Food Program (WFP) project implemented with USAID Title II 

emergency funding: Protracted Relief and Recovery Operation 

(PRRO) 200692: December 2014 through March 2017

In fiscal years 2014 and 2015, USAID obligated Title II funding to this 

WFP PRRO for U.S. in-kind food aid—split yellow peas, lentils, sorghum,

and vegetable oil, and obligated 202(e) funding for the local procurement 

of commodities such as maize, maize meal, and pulses. In addition,

USAID obligated Title II 202(e) funding for the transport, storage, and 

distribution of 3,494 metric tons of maize that the government of Malawi 

locally procured and donated, which allowed WFP to transport, store, and 

distribute the food. Table 9 shows USAID obligations for this emergency 

project.

Table 9: USAID Obligations for Emergency Project in Malawi, Fiscal Years 2014-

2015

Title II totala $28,138,700

U.S. commodities (12,190 MT) $10,141,700

ITSH $3,698,800

202(e)

Fiscal year 2014: Local procurement

Fiscal year 2015: Twinningb

 Local procurement 

$9,561,400

$5,000,000

$1,000,000

$2,000,000

EFSP

Fiscal year 2015: Local procurement

$2,500,000

$2,500,000

Legend: Title II = Title II of the Food for Peace Act; MT = metric tons; ITSH = internal transportation,

storage, and handling;; 202(e) = funding authorized by Title II, Section 202(e), of the Food for Peace 

Act. EFSP = Emergency Food Security Program.

Source: GAO analysis of U.S. Agency for International Development (USAID) funding data. | GAO-17-224

a

The total shown for Title II obligations includes not only the obligations shown for commodities, ITSH,

and 202(e), but also ocean freight and inland transport.

b

According to the World Food Program (WFP), twinning is the matching of in-kind food aid from one 

donor with a cash contribution from another donor to cover the costs associated with distributing the 

in-kind food aid. In fiscal year 2015, USAID obligated $1 million to cover WFP’s costs associated with 

distributing food donated by the government of Malawi.

Selected Emergency 

Project Profile
Appendix III: Selected Title II Projects

Page 51 GAO-17-224 International Food Assistance

WFP project implemented with USAID Title II emergency funding: 

Emergency Operation (EMOP) 200659: January 2014 through 

September 2015

In fiscal years 2014 and 2015, USAID obligated Title II funding to EMOP 

200659 for U.S. in-kind food aid, including lentils, split peas, sorghum,

and vegetable oil. USAID also obligated $4 million in Title II 202(e) 

funding for locally and regionally procured maize and fortified cereal along 

with $10.3 million in Emergency Food Security Program (EFSP) funds for 

regionally procured food for this project. Table 10 shows USAID 

obligations for this emergency project.

Table 10: USAID Obligations for Emergency Project in South Sudan, Fiscal Years 

2014-2015

Title II totala $179,835,520

U.S. commodities (49,470 MT) $25,482,800

ITSH $109,810,390

202(e)

Fiscal year 2014: Local procurement 

$17,380,430

$4,000,000

ESFP

Fiscal year 2014: Regional procurement 

$10,314,580

$10,314,580

Legend: Title II = Title II of the Food for Peace Act; MT = metric tons; ITSH = internal transportation,

storage, and handling; 202(e) = funding authorized by Title II, Section 202(e), of the Food for Peace 

Act. EFSP = Emergency Food Security Program.

Source: GAO analysis of U.S. Agency for International Development (USAID) funding data. | GAO-17-224

a

The total shown for Title II obligations includes not only the obligations shown for commodities, ITSH,

and 202(e), but also ocean freight and inland transport. In addition, USAID made available about 

$120.3 million in ITSH funding and $14.5 million in 202(e) funding from the Bill Emerson 

Humanitarian Trust. As reauthorized by the 2014 Farm Bill, this trust is an authority that allows 

USAID’s Office of Food for Peace to meet emergency humanitarian food needs in developing 

countries when other Title II resources are not available.

South Sudan

Selected Emergency 

Project Profile
Appendix III: Selected Title II Projects

Page 52 GAO-17-224 International Food Assistance

USAID Title II development project: June 2013 to June 20183

In fiscal years 2014 and 2015, USAID obligated Title II funding for the 

project for U.S. in-kind food aid, including sorghum, lentils, and vegetable 

oil. In addition, USAID obligated Title II 202(e) funding for cash transfers 

to beneficiaries in exchange for building or rehabilitating assets, such as a 

livestock dip tank and dams that improve their community’s resilience to 

shocks. This project also used 202(e) funding for development activities,

such as providing $150 household asset vouchers to 1,000 vulnerable 

beneficiaries in exchange for their participation in training in fiscal year 

2015. These vouchers could be used for the purchase of agriculture 

inputs and supplies, such as seeds, livestock, wheelbarrows, and plows. 

The project’s other activities included using 202(e) funding for agricultural 

input and livestock fairs to facilitate market access for rural beneficiaries 

in order to reduce food insecurity. Table 11 shows USAID obligations for 

this development project.

Table 11: USAID Obligations for Development Project in Zimbabwe, Fiscal Years 

2014-2015

Title II totala $17,761,140

U.S. commodities (4,290 MT) $2,264,300

ITSH $1,206,340

202(e)

Fiscal year 2014: Cash transfers

Fiscal year 2015: Cash transfers

$12,703,410

$60,000

$708,000

Legend: Title II = Title II of the Food for Peace Act; MT = metric tons; ITSH = internal transportation,

storage, and handling; 202(e) = funding authorized by Title II, Section 202(e), of the Food for Peace 

Act.

Source: GAO analysis of U.S. Agency for International Development (USAID) funding data. | GAO-17-224

a

The total shown for Title II obligations includes not only the obligations shown for commodities, ITSH,

and 202(e), but also ocean freight and inland transport.

 3

Although this project began before fiscal year 2014 and was ongoing at the time of our 

review, we show data from only fiscal years 2014 and 2015 to focus on changes in 

USAID’s use of Title II funding since the 2014 Farm Bill. Title II funding data for fiscal year 

2016 were not finalized at the time of our review.

Zimbabwe

Selected Development 

Project Profile
Appendix III: Selected Title II Projects

Page 53 GAO-17-224 International Food Assistance

WFP project implemented with USAID Title II emergency funding: 

Protracted Relief and Recovery Operation (PRRO) 200453: May 2013 

to June 20164

In fiscal years 2014 and 2015, USAID obligated Title II funding to PRRO 

200453 for U.S. in-kind food aid, including peas, sorghum, and vegetable 

oil. In addition, USAID obligated Title II 202(e) funding along with EFSP 

funds to this project for regionally procured commodities such as maize 

and peas from Zambia and Malawi and for cash transfers to beneficiaries 

in exchange for their work on assets such as dams and irrigation 

schemes. Table 12 shows USAID obligations for this emergency project.

Table 12: USAID Obligations for Emergency Project in Zimbabwe, Fiscal Years 

2014-2015a

Title II totalb $17,281,500

U.S. commodities (11,260 MT) $4,126,000

ITSH $4,879,000

202(e)

Fiscal year 2014: Cash transfers;

 Regional procurement

$4,319,800

$2,250,000

$750,000

ESFP

Fiscal year 2014: Regional procurement;

Cash transfers

Fiscal year 2015: Cash transfers

$7,500,000

$2,108,690

$891,310

$4,500,000

Legend: Title II = Title II of the Food for Peace Act; MT = metric tons; ITSH = internal transportation,

storage, and handling; 202(e) = funding authorized by Title II, Section 202(e), of the Food for Peace 

Act. EFSP = Emergency Food Security Program.

Source: GAO analysis of U.S. Agency for International Development (USAID) funding data. | GAO-17-224

a

According to USAID officials, the agency provided some Title II development funding for this project 

beginning in fiscal year 2015. The information in this table includes both development and emergency 

funding for fiscal year 2015.

b

The total shown for Title II obligations includes not only the obligations shown for commodities, ITSH,

and 202(e), but also ocean freight and inland transport.

 4

Although this project began before fiscal year 2014 and continued through fiscal year 

2016, we show data from only fiscal years 2014 and 2015 to focus on changes in USAID’s 

use of Title II funding since the 2014 Farm Bill. Title II funding data for fiscal year 

2016were not finalized at the time of our review. According to USAID officials, the agency 

provided some Title II development funding for this project beginning in fiscal year 2015.

Selected Emergency 

Project Profile
Appendix IV: Financial Oversight of Title II 

Funding to Implement and Support WFP 

Emergency Food Assistance Projects

Page 54 GAO-17-224 International Food Assistance

The U.S. Agency for International Development (USAID) makes most of 

its Title II emergency awards to the World Food Program (WFP). In 

accordance with USAID’s Automated Directives System (ADS), USAID

has designated WFP as a category 1 public international organization 

(PIO) on the basis of its review of WFP and United Nations (UN) 

documents and reports, including strategy, policy, and audit documents 

related to WFP’s internal controls procedures, financial resources and risk 

management.1 USAID officials indicated that, in accordance with the 

ADS, USAID may make awards to a category 1 PIO without conducting 

pre-award audits or regularly reviewing audit and financial information. As 

a result, USAID officials noted that the agency generally relies on WFP to 

conduct financial oversight of implementation costs in Title II emergency 

projects awarded to WFP.

WFP’s Office of Evaluation is responsible for evaluations to provide 

information on the quality and effectiveness of WFP’s policies, strategies,

operations, and efficiency of their implementation. WFP’s Office of the 

Inspector General (OIG) is responsible for providing assurance on 

governance, policy, risk, resources, operations and accountability, and

internal controls, including through internal audit and investigation, to 

ensure the effective and efficient use of the resources of WFP and the 

safeguarding of its assets. WFP also has an external auditor that is 

appointed by, and reports to, WFP’s Executive Board and is responsible 

for auditing WFP’s accounts and for carrying out performance audits of 

WFP’s operations.2 According to the annual reports of WFP’s OIG for 

2014 and 2015, the oversight work of the OIG did not disclose any 

significant weaknesses. Moreover, in 2015, WFP’s Finance Committee 

reported that the external auditor’s review of WFP’s financial statements 

for 2014 revealed no material weaknesses or errors. We found that WFP 

conducted 42 internal audits in 2014 and 2015 as well as several external 

audits, with a range of findings and recommendations. For example,

audits identified instances in which a country office did not verify services 

performed by third parties before paying for services and also identified 

inconsistent or suboptimal rates of completion of risk assessments by 

country offices, particularly for cash transfers and food vouchers. The 

majority of internal audits reached satisfactory or partially satisfactory 

 1

USAID’s ADS contains agency-wide policies and procedures for internal control, as well 

as for making awards to PIOs.

2

According to USAID officials, as a member of WFP’s Executive Board, the U.S. 

government participates in advisory committees to provide WFP guidance on financial 

matters as well as on governance, risk management, and internal controls. 

Appendix IV: Financial Oversight of Title II 

Funding to Implement and Support WFP 

Emergency Food Assistance Projects
Appendix IV: Financial Oversight of Title II 

Funding to Implement and Support WFP 

Emergency Food Assistance Projects

Page 55 GAO-17-224 International Food Assistance

conclusions, and WFP generally reported implementing, or taking some

steps to implement, the audits’ recommendations.3

We reviewed WFP’s policies and procedures for financial internal controls 

and found that they generally reflect Committee of Sponsoring 

Organizations of the Treadway Commission (COSO) principles.4 We also 

reviewed support documentation—such as purchase orders, payment 

requests, and reconciliation documents—for one or two transactions 

preselected by WFP involving 202(e) cash transfers, food vouchers, local 

and regional procurement, or internal transportation, storage, and 

handling (ITSH) funding for each of the three emergency projects we 

reviewed. For example, in Zimbabwe, WFP officials walked us through 

support documentation and discussed the approval process for a 202(e) 

cash transfer transaction for our selected WFP project in Zimbabwe. 

Support documentation included WFP’s agreement with the mobile 

service provider for the cash transfers to beneficiaries; the purchase 

requisition (including a breakout of actual cash distributed to beneficiaries 

and associated costs, such as fees paid to the mobile provider); the 

purchase order; the distribution plan by district and month; distribution 

lists (including names and account numbers for beneficiaries); and the 

actual payment request and corporate payment report, as well as 

reconciliation documentation. We determined that for the purposes of our 

review, documentation that WFP provided for these preselected 

 3

WFP also reported issuing six investigation reports during the period 2014-2016 relevant 

to fraud or misuse in the countries where our selected WFP projects were implemented 

(one report (published in 2016) for WFP/Malawi, five reports for WFP/South Sudan 

(published in 2014-2016), and none for WFP/Zimbabwe). 

4

The Committee of Sponsoring Organizations for the Treadway Commission’s (COSO) 

Internal Control—Integrated Framework (updated in 2013) has been recognized by 

regulatory standard setters as a comprehensive framework for evaluating internal controls, 

including internal controls over financial reporting. We previously reviewed WFP internal 

controls in 2012, as well as WFP internal controls for cash-based food assistance 

provided through USAID’s Emergency Food Security Program (EFSP) in 2015. While our 

prior reports found that the design of WFP’s internal controls related to risk management 

generally reflected COSO principles and that WFP had generally implemented financial 

controls over cash and voucher distributions, the reports included several 

recommendations for USAID and WFP to strengthen internal controls-related risk 

management for emergency food assistance projects. We have subsequently found that 

USAID and WFP have both taken actions to develop guidance and requirements related 

to risk management and third-party monitoring for emergency food assistance. See GAO, 

World Food Program: Stronger Controls Needed in High-Risk Areas, GAO-12-790 

(Washington, D.C.: Sept. 13, 2012); and GAO, International Cash-Based Food 

Assistance: USAID Has Developed Processes for Initial Project Approval but Should 

Strengthen Financial Oversight, GAO-15-328 (Washington, D.C.: Mar. 26, 2015).
Appendix IV: Financial Oversight of Title II 

Funding to Implement and Support WFP 

Emergency Food Assistance Projects

Page 56 GAO-17-224 International Food Assistance

transactions showed that expenses were accurate and allowable and had 

adequate levels of review and approval.

Further, in reviewing three WFP projects for our current report, we found 

that WFP country offices had compiled required risk assessments and 

mitigation plans relevant to the three projects. Specifically, the three WFP 

country offices developed higher-level risk assessments that addressed 

risks to strategic or operational objectives of WFP country operations,

such as risks related to political instability, poor road infrastructure, or 

erratic weather. In addition, one of the country offices, in South Sudan,

also developed a more in-depth assessment that addressed 66 

programmatic risks, including risks related to internal controls; financial 

risks; and potential fraud, waste, or abuse. According to WFP, it requires 

country offices to develop only the higher-level assessments, and country 

offices may choose to also develop more in-depth assessments. In 

addition, we reviewed WFP sectoral capacity assessments related to 

cash transfers, food vouchers, and local and regional procurement for the 

selected projects. These assessments evaluate the capacities and 

associated risks of cooperating partners, financial institutions, and 

markets as well as retailers for cash transfers, food vouchers, and local 

and regional procurement. WFP noted that it consults with local 

governments in developing these assessments. WFP also noted that it 

uses the assessments to inform the choice of program delivery modality,

particularly examining logistics, financial, and information and 

communications technology in determining the appropriateness and 

feasibility of using cash transfers, food vouchers, and local and regional 

procurement and mobile technology in its projects.
Appendix V: Comments from the U.S. Agency 

for International Development

Page 57 GAO-17-224 International Food Assistance

Appendix V: Comments from the U.S. 

Agency for International Development
Appendix V: Comments from the U.S. Agency 

for International Development

Page 58 GAO-17-224 International Food Assistance
Appendix V: Comments from the U.S. Agency 

for International Development

Page 59 GAO-17-224 International Food Assistance
Appendix V: Comments from the U.S. Agency 

for International Development

Page 60 GAO-17-224 International Food Assistance
Appendix VI: GAO Contact and Staff 

Acknowledgments

Page 61 GAO-17-224 International Food Assistance

Thomas Melito, 202-512-9601 or melitot@gao.gov

In addition to the contact named above, Valérie L. Nowak (Assistant 

Director), Elisabeth Helmer, Nicholas Jepson, Steven Rocker, Ming Chen,

Jeff Isaacs, Reid Lowe, and Kimberly McGatlin made significant 

contributions to this report. Jaime Allentuck, Jacques Arsenault, Diana 

Blumenfeld, Martin de Alteriis, Neil Doherty, Mark Dowling, Christopher

Hayes, Susmita Pendurthi, Theresa Perkins, and Sushmita Srikanth 

provided technical assistance.

Appendix VI: GAO Contact and Staff 

Acknowledgments

GAO Contact 

Staff 

Acknowledgments

(100355)
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