Foreign Assistance: Various Challenges Impede the Efficiency and Effectiveness of U.S. Food Aid
Published: 2007-04-13T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The United States is the largest global food aid donor, accounting for over half of all food aid supplies to alleviate hunger and support development. Since 2002, Congress has appropriated an average of $2 billion per year for U.S. food aid programs, which delivered an average of 4 million metric tons of food commodities per year. Despite growing demand for food aid, rising business and transportation costs have contributed to a 52 percent decline in average tonnage delivered over the last 5 years. These costs represent 65 percent of total emergency food aid, highlighting the need to maximize its efficiency and effectiveness. Based on analysis of agency documents, interviews with experts and practitioners, and fieldwork, this report examines some key challenges to the (1) efficiency of U.S. food aid programs and (2) effective use of U.S. food aid.
section_title: What GAO Found
paragraphs: Multiple challenges hinder the efficiency of U.S. food aid programs by reducing the amount, timeliness, and quality of food provided. Specific factors that cause inefficiencies include (1) funding and planning processes that increase delivery costs and lengthen time frames; (2) ocean transportation and contracting practices that create high levels of risk for ocean carriers, resulting in increased rates; (3) legal requirements that result in awarding of food aid contracts to more expensive service providers; and (4) inadequate coordination between U.S. agencies and food aid stakeholders to track and respond to food and delivery problems. U.S. agencies have taken some steps to address timeliness concerns. The U.S. Agency for International Development (USAID) has been stocking or prepositioning food commodities domestically and abroad, and the U.S. Department of Agriculture (USDA) has implemented a new transportation bid process, but the long-term cost effectiveness of these initiatives has not yet been measured. In addition, the current practice of using food aid to generate cash for development projects--monetization--is an inherently inefficient use of resources. Furthermore, since U.S. agencies do not collect monetization revenue data electronically, they are unable to adequately monitor the degree to which revenues cover costs. Numerous challenges limit the effective use of U.S. food aid. Factors contributing to limitations in targeting the most vulnerable populations include (1) challenging operating environments in recipient countries; (2) insufficient coordination among key stakeholders, resulting in disparate estimates of food needs; (3) difficulty in identifying vulnerable groups and causes of their food insecurity; and (4) resource constraints on conducting reliable assessments and providing food and other assistance. Further, some impediments to improving the nutritional quality of U.S. food aid may reduce the benefits of food aid to recipients. Finally, U.S. agencies do not adequately monitor food aid programs due to limited staff, competing priorities, and restrictions on the use of food aid resources. As a result, these programs are vulnerable to not getting the right food to the right people at the right time.

section_title: Letter
paragraphs: The United States is the largest provider of food aid in the world,  accounting for over half of all global food aid supplies intended to alleviate  hunger and support development in low-income countries. Since its last  reauthorization of the Farm Bill in 2002, Congress has appropriated an  average of $2 billion per year in annual and supplemental funding for U.S.  international food aid programs, which delivered an average of 4 million  metric tons of agricultural commodities per year. In 2006, the largest U.S.  food aid program, Title II of Public Law 480, benefited over 70 million  people through emergency and development-focused projects. However,  about 850 million people in the world are currently undernourished—a  number that has remained relatively unchanged since the early 1990s,  according to United Nations (UN) Food and Agriculture Organization  (FAO) estimates. Furthermore, the number of food and humanitarian  emergencies has doubled from an average of about 15 per year in the  1980s to more than 30 per year since 2000, due in large part to increasing  conflicts, poverty, and natural disasters around the world. Despite the  growing demand for food aid, rising transportation and business costs  have contributed to a 52 percent decline in average tonnage delivered over  the last 5 years. For the largest U.S. food aid program, these  noncommodity costs now account for approximately 65 percent of  program expenditures, highlighting the need to maximize the efficiency  and effectiveness of U.S. food aid.
To inform Congress as it begins the process of reauthorizing the food aid  provisions of the Farm Bill in 2007, we examine in this report some key  challenges to the (1) efficiency of U.S. food aid programs and (2) effective  use of U.S. food aid.
To address these objectives, we analyzed food aid procurement and  transportation data provided by the U.S. Department of Agriculture’s  (USDA) Kansas City Commodity Office (KCCO) and food aid budget and  expenditure data provided by USDA and the U.S. Agency for International  Development (USAID). We determined that the food aid data obtained  were sufficiently reliable for our purposes. We reviewed economic  literature on the implications of food aid on local markets and recent  reports, studies, and papers issued on U.S. and international food aid  programs. We conducted structured interviews of 14 U.S.- and foreign-flag  ocean carriers that transport over 80 percent of U.S. food aid tonnage. In  Washington, D.C., we interviewed officials from USAID, USDA, the  Departments of State (State) and Defense (DOD), the Department of  Transportation Maritime Administration (DOT/MARAD), and the Office of  Management and Budget (OMB). We also met with a number of officials  representing nongovernmental organizations (NGO) that serve as  implementing partners to USAID and USDA in carrying out U.S. food aid  programs overseas, freight forwarding companies, and agricultural  commodity groups. In Rome, we met with officials from the U.S. Mission  to the UN Food and Agriculture Agencies, the UN World Food Program  (WFP) headquarters, and FAO. We also conducted fieldwork in three  countries that are recipients of food aid—Ethiopia, Kenya, and Zambia— and met with officials from U.S. missions, implementing organizations, and  relevant host government agencies in these countries and South Africa. We  visited a port in Texas from which food is shipped, two food destination  ports in South Africa and Kenya, and two sites in Louisiana and Dubai  where U.S. food may be stocked prior to shipment to destination ports.  For the countries we visited, we also reviewed numerous documents on  U.S. food aid, including all the proposals that USDA approved and  approximately half of the proposals that USAID approved from fiscal years  2002 through 2006 for the food aid programs that they respectively  administer. In January 2007, we also convened a roundtable of 15 experts  and practitioners—including representatives from academia, think tanks,  implementing organizations, the maritime industry, and agricultural  commodity groups—to further delineate, based on GAO’s initial work,  some key challenges to the efficient delivery and effective use of U.S. food  aid and to explore options for improvement. We took the roundtable  participants’ views into account as we finalized our analysis of these  challenges and options. We conducted our work between May 2006 and  March 2007 in accordance with generally accepted government auditing  standards. (Appendix I provides a detailed discussion of our objectives,  scope, and methodology.)
subsections: section_title: Background
paragraphs: Food aid comprises all food-supported interventions by foreign donors to  individuals or institutions within a country. It has helped save millions of  lives and improve the nutritional status of the most vulnerable groups,  including women and children, in developing countries. Food aid is one  element of a broader global strategy to enhance food security by reducing  poverty and improving the availability of, access to, and use of food in low- income, less developed countries. Food aid is utilized as both a  humanitarian response to address acute hunger in emergencies and a  development-focused response to address chronic hunger. Large-scale  conflicts, poverty, weather calamities, and severe health-related problems  are among the underlying causes of both acute and chronic hunger.
subsections: section_title: Countries Provide Food Aid through In-kind or Cash Donations, with the United States the Largest Donor
paragraphs: Countries provide food aid through either in-kind donations or cash  donations. In-kind food aid is food procured and delivered to vulnerable  populations, while cash donations are given to implementing  organizations to purchase food in local, regional, or global markets. U.S.  food aid programs are all in-kind, and no cash donations are allowed under  current legislation. However, the administration has recently proposed  legislation to allow up to 25 percent of appropriated food aid funds to  purchase commodities in locations closer to where they are needed. Other  food aid donors have also recently moved from providing primarily in-kind  aid to more or all cash donations for local procurement. Despite ongoing  debates as to which form of assistance is more effective and efficient, the  largest international food aid organization, the UN WFP, continues to  accept both. The United States is both the largest overall and in-kind  provider of food aid to WFP, supplying about 43 percent of WFP’s total  contributions in 2006 (see fig. 1) and 70 percent of WFP’s in-kind  contributions in 2005. Other major donors of in-kind food aid in 2005  included China, the Republic of Korea, Japan, and Canada.
section_title: Most U.S. Food Aid Goes to Africa
paragraphs: In fiscal year 2006, the United States delivered food aid through its largest  program to over 50 countries, with about 80 percent of its funding  allocations for in-kind food donations going to Africa, 12 percent to Asia  and the Near East, 7 percent to Latin America, and 1 percent to Eurasia  (see fig. 2).
Of the 80 percent of the food aid funding going to Africa, 30 percent went  to Sudan, 27 percent to the Horn of Africa, 18 percent to southern Africa,  14 percent to West Africa, and 11 percent to Central Africa.
section_title: Programs Use Assessments to Determine Emergency and Nonemergency Food Aid Needs
paragraphs: Food aid is used for emergency and nonemergency purposes. Program  design and implementation decisions for both emergency and  nonemergency situations are informed by assessments that help determine  the nature and scale of humanitarian crises and the type and scope of  assistance needed. These assessments inform the selection of geographic  areas to be targeted as well as criteria for the selection of intended  recipients.
The majority of U.S. emergency food aid resources are distributed to  affected communities and households that require food assistance to  survive an emergency and begin the process of recovery. Emergency  needs assessments include analyses of various factors, among them the  effects of the crisis on vulnerable populations, strategies used by these  populations to deal with the crisis, and the outcome in terms of food  insecurity. They are usually carried out as a joint effort by several  organizations, including FAO, WFP, and NGOs, in response to a request  from the government of an affected country. In addition to collecting  primary data, assessors may use information from other sources, such as  population estimates and agricultural data from recipient governments.  Assessors may also rely on pre-crisis vulnerability assessments and  information generated by early warning systems, such as the USAID- funded Famine Early Warning System Network and the FAO-funded  Global International Early Warning System.
In nonemergency situations, U.S. commodities may be provided to address  chronic hunger. In addition, U.S. law allows U.S. commodities to be sold— i.e., monetized—in developing countries to generate cash for development  activities that address causes and symptoms of chronic food insecurity.  For example, food may be provided in exchange for labor in poor  communities to build agricultural infrastructure, or cash from  monetization may be used to provide basic health services, nutrition  education, and agricultural training. Assessments conducted during  nonemergency situations help to identify vulnerable populations and the  need for food aid interventions.
section_title: Nonemergency Funding for U.S. Food Aid Has Declined
paragraphs: Over the last several years, funding for nonemergency U.S. food aid  programs has declined. For example, in fiscal year 2001, the United States  directed approximately $1.2 billion of funding for international food aid  programs to nonemergencies. In contrast, in fiscal year 2006, the United  States directed approximately $698 million for international food aid  programs to nonemergencies (see fig. 3).
section_title: U.S. Food Aid Is Delivered through Multiple Programs with Multiple Mandates
paragraphs: U.S. food aid is funded under four program authorities and delivered  through six programs administered by USAID and USDA; the programs  serve a range of objectives, including humanitarian goals, economic  assistance, foreign policy, market development, and international trade.  (For a description of each of these programs, see app. II.) The largest  program, P.L. 480 Title II, is managed by USAID and represents  approximately 74 percent of total in-kind food aid allocations over the past  4 years, mostly to fund emergency programs (see fig. 4). In addition, P.L.  480, as amended, authorizes USAID to preposition food aid both  domestically and abroad with a cap on storage expenses for foreign  prepositioning sites of $2 million per fiscal year.
U.S. food aid programs also have multiple legislative and regulatory  mandates that affect their operations. One mandate that governs U.S. food  aid transportation is cargo preference, which is designed to support a U.S.- flag commercial fleet for national defense purposes. Cargo preference  requires that 75 percent of the gross tonnage of all government-generated  cargo be transported on U.S.-flag vessels. A second transportation  mandate, known as the Great Lakes Set-Aside, requires that up to   25 percent of Title II bagged food aid tonnage be allocated to Great Lakes  ports each month. Other mandates require that a minimum of 2.5 million  metric tons of food aid be provided through Title II programs and that of  this amount, a subminimum of 1.825 million metric tons be provided for  nonemergency programs. (For a summary of congressional mandates for  P.L. 480, see app. II.)
section_title: Multiple U.S. Government Agencies and Stakeholders Coordinate U.S. Food Aid Programs through Various Forums
paragraphs: Multiple U.S. government agencies coordinate U.S. food aid programs.  USDA and USAID share in the administration of all U.S. food aid  programs. USDA’s KCCO manages the product standards, purchase, and  delivery of all food aid commodities, while other branches of USDA—such  as the Animal and Plant Health Inspection Service (APHIS) and the  Federal Grain Inspection Service (FGIS)—conduct quality reviews and  certification of food aid products. DOT/MARAD is also involved in  supporting the ocean transport of food aid on U.S. vessels. Finally, the U.S.  Department of State works to advance U.S. food aid as part of its  international humanitarian and multilateral assistance initiatives.
U.S. food aid programs also involve many stakeholders, including donors,  implementing organizations (also known as cooperating sponsors),  agricultural commodity groups, and the maritime industry. U.S. agencies  channel U.S. food aid contributions through organizations such as WFP,  NGOs, and recipient country governments that serve as implementing  partners. The level of contributions that each implementing partner  receives varies for each food aid program. For example, between 2001 and  2006, WFP received the majority of U.S. Title II emergency food aid  resources—approximately 78 percent—while NGOs received 94 percent of  nonemergency Title II resources. Recipient country governments received  considerable amounts of funding for USDA food aid programs. For  example, the governments received 43 percent of funding for the Food for  Progress program, while NGOs received 55 percent.
Stakeholders use various forums to discuss and coordinate U.S. food aid  programs. The principal interagency forums are the Food Assistance  Policy Council and the Food Aid Consultative Group. Led by USDA’s  Under Secretary for Farm and Foreign Agricultural Services, the Food  Assistance Policy Council includes representatives from USDA, USAID,  and other key government agencies. The council oversees the Bill  Emerson Humanitarian Trust, an emergency food reserve. The Food Aid  Consultative Group, which includes various working groups, is led by  USAID’s Office of Food for Peace. As stipulated by law, the Food Aid  Consultative Group includes representatives from USAID, USDA, NGOs,  and agricultural commodity groups. It meets at least twice a year and  addresses issues concerning the effectiveness of the regulations and  procedures that govern food assistance programs.
section_title: Multiple Challenges Hinder the Efficiency of U.S. Food Aid Programs
paragraphs: Multiple challenges reduce the efficiency of U.S. food aid programs,  including logistical constraints that impede food aid delivery and reduce  the amount and quality of food provided as well as inefficiencies inherent  in the current practice of using food aid to generate cash resources to fund  development projects. While in some cases agencies have tried to expedite  food aid delivery, most food aid program expenditures are for logistics,  and the delivery of food from vendor to village is generally too time- consuming to be responsive in emergencies. Factors that increase  logistical costs and time frames include uncertain funding and inadequate  planning, ocean transportation contracting practices that  disproportionately increase risks for ocean carriers (who then factor those  risks into freight rates), legal requirements, and inadequate coordination  to systematically track and respond to food delivery problems, such as  food spoilage or contamination. While U.S. agencies are pursuing  initiatives to improve food aid logistics—such as prepositioning food  commodities—their long-term cost-effectiveness has not yet been  measured. In addition, the current practice of selling commodities as a  means to generate resources for development projects—monetization—is  an inherently inefficient use of food aid. Monetization entails not only the  costs of procuring, shipping, and handling food, but also the costs of  marketing and selling it in recipient countries. Furthermore, the time and  expertise needed to market and sell food abroad requires NGOs to divert  resources away from their core missions. In addition, U.S. agencies do not  collect or maintain an electronic database on monetization revenues and  the lack of such data impedes the agencies’ ability to fully monitor the  degree to which revenues can cover the costs related to monetization.
subsections: section_title: Food Aid Procurement and Transportation Are Costly and Time-Consuming
paragraphs: Transportation costs represent a significant share of food aid  expenditures. For the largest U.S. food aid program (Title II),  approximately 65 percent of expenditures are for transportation to the  U.S. port for export, ocean transportation, in-country delivery, associated  cargo handling costs, and administration. According to USAID, these  noncommodity expenditures have been rising in part due to the increasing  number of emergencies and the expensive nature of logistics in such  situations. For all food aid programs, rising transportation and business  costs have contributed to a 52 percent decline in average tonnage  delivered over the last 5 years. To examine procurement costs  (expenditures on commodities and ocean transportation) for all U.S. food  aid programs, we obtained KCCO procurement data for fiscal years 2002  through 2006. KCCO data also suggest that ocean transportation has been  accounting for a larger share of procurement costs, with average freight  rates rising from $123 per metric ton in fiscal year 2002 to $171 per metric  ton in fiscal year 2006 (see fig. 5). Further, U.S. food aid ocean  transportation costs are relatively expensive compared with those of some  other donors. WFP transports both U.S. and non-U.S. food aid worldwide  at reported ocean freight costs averaging around $100 per metric ton— representing just over 20 percent of its total procurement costs. At  current U.S. food aid budget levels, every $10 per metric ton reduction in  freight rates could feed almost 850,000 more people during an average  hungry season.
Delivering U.S. food aid from vendor to village is also a time-consuming  task, requiring on average 4 to 6 months. Food aid purchasing processes  and sample time frames are illustrated in figure 6. While KCCO purchases  food aid on a monthly basis, it allows implementing partner orders to  accumulate for 1 month prior to purchase in order to buy in scale. KCCO  then purchases the commodities and receives transportation offers leading  to awards of transportation contracts over the following month.  Commodity vendors bag the food and ship it to a U.S. port for export  during the next 1 to 2 months. After an additional 40 to 50 days for ocean  transportation to Africa, for example, the food arrives at an overseas  port, where it is trucked or railroaded to the final distribution location  over the next few weeks. While agencies have in some cases tried to  expedite food aid delivery, the entire logistics process often lacks the  timeliness required to meet humanitarian needs in emergencies and may at  times result in food spoilage. Additionally, the largest tonnage of U.S. food  aid is purchased during August and September. Average tonnage  purchased during the fourth quarter of the last 5 fiscal years has exceeded  that purchased during the second and third quarters by more than 40  percent. Given a 6-month delivery window, these food commodities do not  arrive in country in most cases until the end of the peak hungry season  (from October through January in southern Africa, for example).
section_title: Various Factors Cause Inefficiencies in Food Aid Logistics
paragraphs: Food aid logistics are costly and time-consuming for a variety of reasons.  First, uncertain funding processes for emergencies can result in bunching  of food aid purchases, which increases food and transportation costs and  lengthens delivery time frames. Many experts, officials, and stakeholders  emphasized the need for improved logistical planning. Second, ocean  transportation contracting practices—such as freight and payment terms,  claims processes, and time penalties—further increase ocean freight rates  and contribute to delivery delays. Third, legal requirements such as cargo  preference can increase delivery costs. Although DOT reimburses food aid  agencies for certain transportation expenditures, the sufficiency of  reimbursement levels varies and officials disagree on whether the levels  are sufficient to cover the additional costs of such requirements. Fourth,  when food delivery problems arise, such as food spoilage or  contamination, U.S. agencies and stakeholders lack adequately  coordinated mechanisms to systematically track and respond to  complaints.
subsections: section_title: Funding and Planning Processes Increase Delivery Costs and Lengthen Time Frames
paragraphs: Uncertain funding processes, combined with reactive and insufficiently  planned procurement, increase food aid delivery costs and time frames.  Food aid emergencies are increasingly common and now account for 70  percent of USAID program expenditures. To respond to sudden-onset  emergencies—such as Afghanistan in 2002; Iraq in 2003; Sudan, Eritrea,  and Ethiopia in 2005; and Sudan and the Horn of Africa in 2006—U.S.  agencies largely rely on supplemental appropriations and the Bill Emerson  Humanitarian Trust (BEHT) to augment annual appropriations by up to a  quarter of their budget. Figure 7, for example, illustrates that USAID  supplemental appropriations and other funding in addition to its annual  appropriations have ranged from $270 million in fiscal year 2002 and $350  million in fiscal year 2006 to over $600 million annually in fiscal years 2003  and 2005. Agency officials and implementing partners told us that the  uncertainty of whether, when, and at what levels supplemental  appropriations would be forthcoming hampers their ability to plan both  emergency and nonemergency food aid programs on a consistent, long- term basis and to purchase food at the best price. Although USAID and  USDA instituted multiyear planning approaches in recent years, uncertain  supplemental funding has caused them to adjust or redirect funds from  prior commitments, according to agency officials.
Agencies and implementing organizations also face uncertainty about the  availability of BEHT funds. As of January 2007, BEHT held about   $107.2 million in cash and around 915,350 metric tons of wheat valued at  $133.9 million—a grain balance that could support two major emergencies  based on an existing authority to release up to 500,000 metric tons per  fiscal year and another 500,000 of commodities that could have been, but  were not, released from previous fiscal years. Although the Secretary of  Agriculture and the USAID Administrator have agreed that the   $341 million combined value of commodity and cash currently held in  BEHT is more than adequate to cover expected usage over the current  authorization period, the authorization is scheduled to expire on  September 30, 2007. Resources have been drawn from BEHT on 12  occasions since 1984 (see fig. 8). For example, in fiscal year 2005,   $377 million from the trust was used to procure 700,000 metric tons of  commodities for Ethiopia, Eritrea, and Sudan. However, experts and  stakeholders with whom we met noted that the trust lacks an effective  replenishment mechanism—withdrawals from BEHT must be reimbursed  by the procuring agency or by direct appropriations for reimbursement,  and legislation establishing BEHT capped the annual amount of  reimbursement from P.L. 480 at $20 million.
Inadequately planned food and transportation procurement reflects the  uncertainty of food aid funding. As previously discussed, KCCO purchases  the largest share of food aid tonnage during the last quarter of each fiscal  year. This bunching of procurement occurs in part because USDA requires  6 months to approve programs and/or because funds for both USDA and  USAID programs may not be received until the middle of a fiscal year  (after OMB has approved budget apportionments for the agencies) or  through a supplemental appropriation. USAID officials stated that they  have reduced procurement bunching through improved cash flow  management. Although USAID has had more stable monthly purchases in  fiscal years 2004 and 2005, total food aid procurement has not been  consistent enough to avoid the higher prices associated with bunching.  Higher food and transportation prices result from procurement bunching  as suppliers try to smooth earnings by charging higher prices during their  peak seasons and as food aid contracts must compete with seasonally high  commercial demand. According to KCCO data for fiscal years 2002  through 2006, average commodity and transportation prices were each   $12 to $14 per metric ton higher in the fourth quarter than in the first  quarter of each year. Procurement bunching also stresses KCCO  operations and can result in costly and time-consuming congestion for  ports, railways, and trucking companies.
While agencies face challenges to improving procurement planning given  the uncertain nature of supplemental funding in particular, stakeholders  and experts emphasized the importance of such efforts. For example, 11 of  the 14 ocean carriers we interviewed stated that reduced procurement  bunching could greatly reduce transportation costs. When asked about  bunching, agency officials, stakeholders, and experts suggested the  following potential improvements:    Improved communication and coordination. KCCO and WFP  representatives suggested that USAID and USDA improve coordination of  purchases to reduce bunching. KCCO has also established a web-based  system for agencies and implementing organizations to enter up to several  years’ worth of commodity requests. However, implementing  organizations are currently only entering purchases for the next month.  Additionally, since the statute that established the Food Aid Consultative  Group does not specify including transportation stakeholders, DOT  officials and ocean carriers strongly recommended establishing a formal  mechanism for improving coordination and transportation planning.
Increased flexibility in procurement schedules. USAID expressed  interest in an additional time slot each month for food aid purchases.  Several ocean carriers expressed interest in shipping food according to  cargo availability rather than through preset shipping windows that begin  4 weeks and 6 weeks after each monthly purchase. Although KCCO has  established shipping windows to avoid port congestion, DOT  representatives believe that carriers should be able to manage their own  schedules within required delivery time frames.
Increased use of historical analysis. DOT representatives, experts, and  stakeholders emphasized that USAID and USDA should increase their use  of historical analysis and forecasting to improve procurement. USAID has  examined historical trends to devise budget proposals prepared 2 years in  advance, and it is now beginning to use this analysis to improve timing of  procurement. However, neither USAID nor USDA has used historical  analysis to establish more efficient transportation practices, such as the  long-term agreements commonly used by DOD. For example, WFP is now  using forecasting to improve purchasing patterns through advanced  financing but is unable to use this financing for U.S. food aid programs due  to legal and administrative constraints.
section_title: Ocean Transportation Contracting Practices Increase Delivery Costs and Contribute to Delays
paragraphs: Ocean transportation contracting practices are a second factor  contributing to higher food aid costs. DOT officials, experts, and ocean  carriers emphasized that commercial transportation contracts include  shared risk between buyers, sellers, and ocean carriers. In food aid  transportation contracts, risks are disproportionately placed on ocean  carriers, discouraging participation and resulting in expensive freight  rates. Examples of costly contracting practices include the following.
Noncommercial and nonstandardized freight terms. Food aid  contracts often define freight terms differently than commercial contracts  and place increased liability on ocean carriers. For example, many food  aid contracts hold ocean carriers responsible for logistical problems such  as improperly filled containers that may occur at the load port before they  arrive. Many food aid contracts also hold ocean carriers responsible for  logistical problems, such as truck delays or improper port documentation,  that may occur at the discharge port after they arrive. One carrier reported  financial losses of around $1 million for an instance where, to be able to  deliver food aid to a port in Madagascar, the carrier was required to wait  almost 60 days for a vessel already at port to finish unloading and to assist  the government in repairing port discharging equipment. Further, several  carriers reported that food aid contracts are not sufficiently standardized.  Although USDA and USAID created a standard contract for nonbulk  shipments, contracts for bulk shipments (which accounted for 63 percent  of total food aid tonnage in fiscal year 2006) have not yet been  standardized. To account for risks that are unknown or outside their  control, carriers told us that they charge higher freight rates.
Impractical time requirements. Food aid contracts may include  impractical time requirements, but agencies disagree on how frequently  this occurs. Although USAID officials reviewed contract time requirements  and described them as reasonable, they also indicated that transportation  delays often result from poor carrier performance and the diminishing  number of ocean carriers participating in food aid programs. Several  implementing organizations also complained about inadequate carrier  performance. WFP representatives, for example, provided several  examples of ocean shipments in 2005 and 2006 that were more than 20  days late. While acknowledging that transportation delays occur, DOT  officials indicated that these delays often result from problems at a  discharge port on the vessel’s previous food aid voyage. DOT officials also  stated that although contract time requirements are being made more  reasonable, some contracts still include requirements that are impossible  for carriers to meet. For example, one carrier complained about a contract  that required the same delivery date for four different ports. When carriers  do not meet time requirements, they must often pay costly penalties.  Carriers reported that they review contracts in advance and, where time  requirements are deemed implausible, factor the anticipated penalty into  the freight rate. While agencies do not systematically collect data on time  requirements and penalties associated with food aid contracts, DOT  officials examined a subset of contracts from December 2005 to  September 2006 and estimated that 13 percent of them included  impractical time requirements. Assuming that the anticipated penalties  specified in the contracts analyzed were included in freight rates, food aid  costs may have increased by almost $2 million (monies that could have  been used to provide food to more than 57,000 additional beneficiaries  during a typical hungry season).
Lengthy claims processes. Lengthy processes for resolving  transportation disputes discourage both carriers and implementing  organizations from filing claims. According to KCCO officials, obtaining  needed documentation for a claim can require several years, and disputed  claims must be resolved by the Department of Justice. USAID’s Inspector  General reported that inadequate and irregular review of claims by USAID  and USDA has also contributed to delayed resolution. Currently, KCCO  has over $6 million in open claims, some of which were filed prior to fiscal  year 2001. For ocean carriers, the process is burdensome and encourages  them to factor potential losses into freight rates rather than pursue claims.  Incentives for most implementing organizations are even weaker given  that monies recovered from claims reimburse the overall food aid budget  rather than the organization that experienced the loss. According to  KCCO and WFP officials, transportation claims are filed for less than   2 percent of cargo. However, several experts and implementing  organizations suggested that actual losses are likely higher. In 2003, KCCO  proposed a new administrative appeals process for ocean freight claims  that would establish a hearing officer within USDA and a 285-day time  frame. While DOT and some carriers agreed that a faster process was  needed, DOT officials suggested that the claims review process should  include hearing officers outside of USDA to ensure independent findings.  To date, KCCO’s proposed process has not been implemented.
Lengthy payment time frames and burdensome administration.  Payment of food aid contracts is slow and paperwork is insufficiently  streamlined. When carriers are not paid for several months, they incur  large interest costs that are factored into freight rates. While a new  electronic payment system has enabled USDA to provide freight payments  within a few weeks, several ocean carriers complained that USAID often  requires 2 to 4 months to provide payment, though USAID officials dispute  this claim. USAID officials also asserted that the electronic payment  system used by USDA is too expensive, and they are considering other  payment options. In addition to payment issues, a few carriers suggested  that paperwork in general needs streamlining and modernization. The 2002  Farm Bill required both USDA and USAID to pursue streamlining  initiatives that the agencies are implementing. KCCO officials indicated  that they are updating food aid information technology systems (to be in  place in fiscal year 2009).
In structured interviews, ocean carriers confirmed the cost impact of food  aid transportation contracting practices. Figure 9 shows that depending  upon the practice, between 9 (60 percent) and 14 (100 percent) of the  carriers reported increased costs, with “liabilities outside the carriers’  control” as the most significant factor. To quantify the impact, two carriers  estimated that nonstandardized freight terms increase costs by about   5 percent (about $8 per metric ton), while another carrier suggested that  slow payment increases costs by about 10 percent (about $15 per metric  ton). Figure 9 also shows that a large percentage of carriers strongly  recommended actions to address contracting practices.
Legal requirements governing food aid procurement are a third factor that  can increase delivery costs and time frames, with program impacts  dependent on the sufficiency of associated reimbursements. In awarding  contracts, KCCO must meet various legal requirements, such as cargo  preference and the Great Lakes Set-Aside. Each requirement may result in  higher commodity and freight costs. Cargo preference laws, for example,  require 75 percent of food aid to be shipped on U.S.-flag carriers, which  are generally more expensive than foreign-flag carriers by an amount  known as the ocean freight differential (OFD). The total annual value of  this cost differential between U.S.- and foreign-flag carriers averaged   $134 million from fiscal years 2001 to 2005 (see fig. 10). DOT  reimbursements have varied from $126 million in fiscal year 2002 to   $153 million in fiscal year 2005. However, USAID officials expressed  concern that the OFD calculations do not fully account for the costs of  cargo preference or the uncertainties regarding its application. For  example, several U.S. agency and port officials believe that cargo  preference regulations discourage foreign-flag participation in the program  due to the small percentage of cargo that can be shipped on foreign-flag  vessels. OFD reimbursements do not include shipments for which a  foreign-flag vessel has not submitted a bid or for the additional costs of  shipping on U.S.-flag vessels that are older than 25 years (about half of the  vessels). USAID officials estimated that for Title II programs, the actual  cost of cargo preference in fiscal year 2003 exceeded the total OFD cost by  about $50 million due to these factors. DOT officials estimated these  additional costs for Title II at about $34 million in fiscal year 2004 and  about $56 million in fiscal year 2005. Finally, USAID and DOT officials  have not yet agreed on whether cargo preference applies to shipments  from prepositioning sites.
U.S. agencies and stakeholders do not coordinate adequately to respond to  food and delivery problems when they arise. USAID and USDA lack a  shared, coordinated system to systematically track and respond to food  quality complaints. Food quality concerns have been long-standing issues  for both food aid agencies and the U.S. Congress. In 2003, for example,  USAID’s Inspector General reported some Ethiopian warehouses in poor  condition, with rodent droppings near torn bags of corn soy blend (CSB),  rainwater seepage, pigeons flying into one warehouse, and holes in the  roof of another. Implementing organizations we spoke with also frequently  complained about receiving heavily infested and contaminated cargo. For  example, in Durban, South Africa, in October 2006, we saw 1,925 metric  tons of heavily infested cornmeal that arrived late in port after it had been  erroneously shipped to the wrong countries first. As shown in figure 11,  we found live and dead insects in bags of cornmeal, along with their nests.  NGOs noted that some of the food had been in containers for as long as 78  days. This food could have fed over 37,000 people during a typical hungry  season. When food arrives heavily infested, NGOs hire a surveyor to   (1) determine how much is salvageable for human consumption or for use  as animal feed and (2) destroy what is deemed unfit.
U.S. agencies and food aid stakeholders face a variety of coordination  challenges in addressing such food delivery problems, including the  following:    KCCO, USDA and USAID have disparate quality complaint tracking  mechanisms that monitor different levels of information. As a result, they  are unable to determine the extent of and trends in food quality problems.  In addition, because implementing organizations track food quality  concerns differently, if at all, it is difficult for them to coordinate to share  concerns with each other and with U.S. government agencies. For  example, since WFP—which accounts for approximately 60 percent of all  U.S. food aid shipments—independently handles its own claims, KCCO  officials are unable to track the quality of food aid delivery programwide.  Agencies and stakeholders have suggested that food quality tracking and  coordination could be improved if USAID and USDA shared the same  database and created an integrated food quality complaint reporting  system.
Agency country offices are often unclear about their roles in tracking food  quality, creating gaps in monitoring and reporting. For example, USAID  found that some missions do not clearly understand their responsibilities  to independently verify claims stemming from food spoilage and often rely  on the implementing organization to research the circumstances  surrounding losses. One USAID country office also noted that rather than  tracking all food quality problems reported, it only recorded and tracked  commodity losses for which an official claim had been filed. Further, in  2004, USAID’s Inspector General found that USAID country offices were  not always adequately following up on commodity loss claims to ensure  that they were reviewed and resolved in a timely manner. To improve food  quality monitoring, agencies and stakeholders have suggested updating  regulations to include separate guidance for complaints, as well as  developing a secure Web site for all agencies and their country offices to  use to track both complaints and claims.
When food quality issues arise, there is no clear and coordinated process  to resolve problems. For example, WFP officials stated that they  experienced coordination issues with USAID in 2003 when they received  4,200 metric tons of maize from USAID in Angola and found a large  quantity to be wet and moldy. Although USAID officials maintain that their  response was timely,  WFP officials stated that USAID did not provide  timely guidance on how WFP would be reimbursed for testing and  destruction of cargo that was not fit for consumption and how USAID  would replace the quantity lost. WFP officials claim that WFP lost over  $640,000 in this case, including testing and destruction costs and the value  of the commodity, and no replacement cargo was provided by USAID.  Although KCCO established a hotline to provide assistance on food quality  complaints, KCCO officials stated that it was discontinued because USDA  and USAID officials wanted to receive complaints directly, rather than  from KCCO. Agencies and stakeholders have suggested that providing a  standard questionnaire to implementing organizations would ensure more  consistent reporting on food quality issues.
section_title: While Agencies Have Taken Steps to Improve Efficiency, Related Long- term Costs and Benefits Have Not Yet Been Measured
paragraphs: To improve timeliness in food aid delivery, USAID has been prepositioning  commodities in two locations and KCCO is implementing a new  transportation bid process. Prepositioning enabled USAID to respond  more rapidly to the 2004-2005 Asian tsunami emergency than would have  been possible otherwise. KCCO’s bid process is also expected to reduce  delivery time frames and ocean freight rates. However, the long-term cost- effectiveness of both initiatives has not yet been measured.
subsections: section_title: Prepositioning and Transportation Procurement Could Improve Timeliness
paragraphs: USAID has prepositioned food aid on a limited basis to improve timeliness  in delivery. USAID has used warehouses in Lake Charles (Louisiana)  since 2002 and Dubai (United Arab Emirates) since 2004 to stock  commodities in preparation for food aid emergencies, and it is now adding  a third site in Djibouti, East Africa. USAID has used prepositioned food to  respond to recent emergencies in Lebanon, Somalia, and Southeast Asia,  among other areas. Prepositioning is beneficial because it allows USAID to  bypass lengthy procurement processes and to reduce transportation time  frames. USAID officials told us that diverting food aid cargo to the site of  an emergency before it reaches a prepositioning warehouse further  reduces response time and eliminates storage costs. When the 2004 Asian  tsunami struck, for example, USAID quickly provided 7,000 metric tons of  food to victims by diverting the carrier at sea, before it reached the Dubai  warehouse. According to USAID officials, prepositioning warehouses also  offer the opportunity to improve logistics when USAID is able to begin the  procurement process before an emergency occurs or if it is able to  implement long-term agreements with ocean carriers for tonnage levels  that are more certain.
Despite its potential for improved timeliness, USAID has not studied the  long-term cost-effectiveness of prepositioning. Table 1 shows that over  fiscal years 2005 and 2006, USAID purchased about 200,000 metric tons of  processed food for prepositioning (around 3 percent of total food aid  tonnage), diverted about 36,000 metric tons en route, and incurred  contract costs of about $1.5 million for food that reached the warehouse  (averaging around $10 per metric ton). In addition to contract costs, ocean  carriers generally charge higher freight rates for prepositioned cargo to  account for additional cargo loading or unloading, additional days at port,  and additional risk of damage associated with cargo that has undergone  extra handling. USAID officials have suggested that average freight rates  for prepositioned cargo could be $20 per metric ton higher.
In addition to the costs of prepositioning, agencies face several challenges  to their effective management of this program, including the following:    Food aid experts and stakeholders expressed mixed views on the  appropriateness of current prepositioning locations. Only 5 of the 14  ocean carriers we interviewed rated existing sites positively, and most  indicated interest in alternative sites. KCCO officials and experts also  expressed concern with the quality of the Lake Charles warehouse and the  lack of ocean carriers providing service to that location. For example,  many carriers must move cargo by truck from Lake Charles to Houston  before shipping it. Relative to other ports, shipping out of the Lake Charles  prepositioning site can add as much as 21 days for delivery.
Inadequate inventory management increases the risk of cargo infestation.  KCCO and port officials suggested that USAID had not consistently  shipped older cargo out of the warehouses first. USAID officials  emphasized that inventory management has been improving but that  limited monitoring and evaluation funds constrain their oversight  capacity. For example, the current USAID official responsible for  overseeing the Lake Charles prepositioning stock was able to visit the site  only once in fiscal year 2006—at his own expense.
Agencies have had difficulties ensuring phytosanitary certification for  prepositioned food because they do not know the country of final  destination when they request phytosanitary certification from APHIS.  According to USDA, since prepositioned food is not imported directly  from a U.S. port, it requires either a U.S.-reissued phytosanitary certificate  or a foreign-issued phytosanitary certificate for re-export. USDA officials  told us they do not think it is appropriate to reissue these certificates— once a food aid shipment leaves the United States, they cannot make any  statements about the phytosanitary status of the commodities, which may  not meet the entry requirements of the destination country. USDA officials  are also concerned that USAID will store commodities for a considerable  period of time during which their status may change, thus making their  certificate invalid. Although USDA and USAID officials are willing to allow  foreign government officials to issue these certificates, U.S. inspection  officials remain concerned that the foreign officials might not have  adequate resources for inspection or be willing to certify these  commodities. Without phytosanitary certificates, food aid shipments could  be rejected, turned away, or destroyed by recipient country governments.
Certain regulations applicable to food aid create challenges for improving  supply logistics. For example, food aid bags must include various  markings reflecting contract information, when the commodity should be  consumed, and whether the commodity is for sale or direct distribution.  Marking requirements vary by country (some require markings in local  languages), making it difficult for USAID to divert cargo. Also, due to the  small quantity of total food aid tonnage (around 3 percent) allocated for  the prepositioning program, USAID is unable to use the program to  consistently purchase large quantities of food aid earlier in the fiscal year.
section_title: New Transportation Bid Process Could Reduce Procurement Time Frames
paragraphs: In addition to prepositioning, KCCO is implementing a new transportation  bid process to reduce procurement time frames and increase competition  between ocean carriers. In the prior two–step system, during a first  procurement round, commodity vendors bid on contracts and ocean  carriers indicated potential freight rates. Carriers provided actual rate bids  during a second procurement round once the location of the commodity  vendor had been determined. In the new one-step system, ocean carriers  will bid at the same time as commodity vendors. KCCO expects the new  system to cut 2 weeks from the procurement process and provide  potential annual savings of around $25 million. KCCO expects this new bid  process to also reduce cargo handling costs as cargo loading becomes  more consolidated. When asked about the new system, several carriers  reported uncertainty about its future impact and expressed concern that  USDA’s testing of the system had not been sufficiently transparent.
section_title: Monetization Is an Inefficient Practice and the Lack of Electronic Data Impedes Agencies’ Ability to Monitor
paragraphs: Despite efforts to improve the efficiency of the delivery of U.S. food aid,  the current use of food aid as a means to raise cash to fund development  projects—a practice known as monetization—is inherently inefficient.  Besides procurement and shipping costs, NGOs involved in monetization  programs often incur additional costs for marketing food commodities in  recipient countries. Furthermore, NGOs must maintain the expertise  necessary to sell and market food aid abroad, which diverts resources  from their core missions. The permissible use of monetization revenues  has expanded beyond its original intent over the years. Although  monetization was initially established to fund expenses related to direct  food aid delivery for humanitarian purposes, it now funds projects ranging  from rural financing to health services. Additionally, U.S. agencies do not  collect data electronically, and the lack of such data impedes their ability  to monitor the extent to which monetization revenues can cover the costs.
subsections: section_title: Monetizing Food to Fund Development Projects Is Inherently Inefficient
paragraphs: Monetizing food to fund development projects is an inherently inefficient  use of food aid. Monetization requires food to be procured, shipped, and  eventually sold—incurring costs at each step in the process. Furthermore,  although bulk products comprise a larger proportion of monetized food  aid, they have higher transportation costs relative to their market price in  recipient countries than nonbulk (processed) products. For example, the  ratio of transportation cost to market price for bulk wheat is more than  three times that of vegetable oil.
In addition to shipping and handling costs, the process of generating cash  from selling food is inefficient because it also requires NGOs to maintain  the capacity necessary to sell and market food aid, diverting them from  their core missions. In its 2001 report to Congress on Food Aid  Monetization, USDA stated that the increasing involvement of NGOs in  implementing food aid programs has required these organizations to seek  expertise in all facets of commodity sales and cope with price, exchange  rate, and other uncertainties, which has affected the way in which they  operate. Noting that NGOs have differing missions and backgrounds and  vary in size and scope of operations, the USDA report stated that some  NGOs view the monetization process as “inconvenient but necessary to  generate program development funds.” However, some NGOs would  prefer to end their involvement in monetization. For example, CARE, one  of the major NGOs engaged in the practice, decided to transition out of it  by 2009 partly because “monetization requires intensive management and  is fraught with risks. Procurement, shipping, commodity management, and  commercial transactions are management intensive and costly. Experience  has shown that these transactions are also fraught with legal and financial  risks.” Some participants at the GAO roundtable on food aid stated that  they recognize that monetization is not an efficient way to raise  development money, but they pointed out that it is the only available  resource to supplement food aid and enhance food security and other  development projects.
section_title: Permissible Use of Monetization Revenues Has Expanded
paragraphs: The permissible use of monetization revenues and the minimum level of  monetization allowed by the law have expanded, contributing to an  increasing use of monetization as a means to generate cash for  development projects. While monetization was initially established to pay  for administrative costs related to direct food distribution, monetization  revenues now fund development activities beyond food distribution that  aim to improve food security. Examples include the following.
Title II monetization revenues can be used to implement income- generating, community development, health, nutrition, cooperative  development, agricultural, and other development activities. Revenues can  also be invested, and any interest earned on such investments may be used  for the same purposes.
Food for Progress monetization revenues can be used for private sector  agricultural development through improved agricultural techniques,  marketing systems, farmer education, and cooperative development;  enhanced food processing capacity; introduction of new foods; or  agricultural-related business growth.
Monetization has also been used on rare occasions to achieve objectives  that may be beyond the scope of direct food delivery. USAID officials  informed us of a case in which monetization was intentionally used to help  increase access to food for the urban poor in Zimbabwe. The program  involved subsidized sales of sorghum meal in poor areas of a few selected  cities. The main goal was not to generate revenue but to provide  affordable staple foods to households in urban areas where conventional  food aid distribution programs were not practical or appropriate.
The monetization rate for Title II nonemergency food aid has far exceeded  the minimum requirement of 15 percent, reaching close to 70 percent in  2001 but declining to about 50 percent in 2005. This decline is due to both  increasing demand for emergency food aid and OMB’s 2002  recommendation to decrease monetization, according to USAID officials.  OMB pointed out that monetization can impede U.S. commercial exports,  lower market prices, induce black market activity, and thwart market  development for U.S farm products. OMB also raised questions about the  economic efficiency of the practice. Furthermore, in 2002 The President’s  Management Agenda suggested that directly feeding the hungry, rather  than providing food for development, should be the primary goal of U.S.  food aid programs. Figure 12 shows the average share of nonemergency  food aid funding different programs used for monetization from fiscal  years 2001 through 2006.
section_title: Agencies’ Ability to Adequately Monitor Monetization Cost Recovery Impeded by Lack of Electronic Data
paragraphs: U.S. agencies do not electronically collect data on monetization revenues.  Without such data, the agencies’ ability to adequately monitor the degree  to which revenues cover costs is impeded. USAID used to require that  monetization revenues cover at least 80 percent of costs associated with  delivering food to recipient countries, but this requirement no longer  exists. Neither agency was able to provide us with data on the revenues  generated through monetization. The agencies told us that the information  should be in the results reports, which are in individual hard copies and  not available in any electronic database. We have expressed similar  concerns about the limited oversight of monetization revenues in our 2002  review of the McGovern-Dole Food for Education program.
USAID officials told us that they believe NGOs have incentives to generate  the maximum amount of resources possible from monetization and,  therefore, the officials are not concerned about monitoring revenue data.  However, some NGOs may not have sufficient expertise in commodity  trading to ensure that they are selling food at the best possible price. In  addition, due to insufficient market expertise or delivery delays,  monetization revenues can also be reduced when NGOs sell the  commodity at a time when market supplies have grown. For example,  selling Title I- and Title II-funded wheat simultaneously in Mozambique in  2002 flooded the market and decreased food prices, resulting in reduced  monetization revenues.
section_title: Various Challenges Reduce the Effective Use of Food Aid
paragraphs: A number of challenges reduce the effectiveness of food aid in alleviating  hunger. Since food aid is limited, it is important that donors and  implementers use it effectively by ensuring that it reaches the most  vulnerable populations and does not cause negative market impact.  However, a number of factors limit efforts to develop reliable estimates of  food needs and respond to crises in a timely manner. These include  challenging operating environments in recipient countries, insufficient  coordination among stakeholders and use of noncomparable assessment  methods, difficulties in identifying vulnerable groups (such as chronic  versus transitory food-insecure populations) and understanding the causes  of food insecurity, and resource constraints that adversely affect the  quality of assessments and quantity of food and other assistance.  Consequently, estimates of food needs have differed significantly and, in  some cases, have resulted in delays in appropriately responding to crises  with sufficient food and complementary assistance. Furthermore, some  impediments to improving the nutrition quality of U.S. food aid, including  the lack of interagency coordination to update food aid products and  specifications, may prevent the most nutritious or appropriate food from  reaching intended recipients. Despite these concerns, USAID and USDA  do not sufficiently monitor food aid programs, particularly in recipient  countries, as they have limited staff and competing priorities and face legal  restrictions on the use of food aid resources.
subsections: section_title: Ensuring That Food Aid Reaches the Most Vulnerable Populations Is Critical to Enhancing Its Effectiveness and Avoiding Negative Market Impact
paragraphs: U.S. food aid assists only about 11 percent of the estimated hungry  population worldwide. In light of the significant need for food aid, it is  critical that this assistance be used effectively by ensuring that the right  food reaches the right people at the right time. Generally, the most food- insecure populations include poor households with elderly people, young  children (especially those under 5 years of age), pregnant and lactating  women, and the chronically sick (e.g., people with HIV/AIDS). To provide  food to these vulnerable populations, agencies and stakeholders target  food aid resources. Targeting involves assessments of needs, program  planning to reach vulnerable households with adequate food,  implementing the distribution of food, and monitoring these programs.  (Figure 13 illustrates these elements of the targeting process). The timing  of food delivery is a key factor that impacts targeting effectiveness. Timely  provision of food aid will not only save lives during an emergency, but also  help to avert crises that may result from increasing vulnerability. To focus  on the vulnerability of food insecure populations, USAID discussed the  concept of development relief in its Food Security Strategic Plan for 2006- 2010, whereby programs dealing with emergencies would also address the  underlying causes of emergencies and development programs would help  vulnerable people improve their ability to prevent and cope with future  emergencies. Enhancements to early warning systems, such as the USAID- funded Famine Early Warning System Network, and efforts to better  understand the livelihoods of vulnerable populations have contributed to  improved information on the needs of vulnerable populations, according  to officials from implementing organizations and USAID.
In addition to ensuring effective use of food aid resources, accurate  targeting can reduce the potential adverse impact of food aid on recipient  country markets. (See app. III for more information on the impact of food  aid on local markets.) When food aid is distributed during a food shortfall  to people who would not otherwise be able to purchase food, markets may  remain unaffected. In the case of food shortfalls, food aid may actually  serve to bring supply back to levels that would have occurred in the  absence of the shortage and help limit price increases. However, when  food aid is sent in response to a food shortfall but arrives while food is  readily available—such as after the hungry season—and is distributed to  people who can otherwise purchase food, it increases total food supplies  above normal market levels. Additionally, in such cases, the food aid may  decrease market prices and the incomes of food producers in recipient  countries. These low prices could decrease agricultural investments and  reduce the return on labor allocated to agriculture. While food aid may  lower prices, it may also increase income for recipients. For example,  according to one study, distribution of food aid to households in northern  Ethiopia during the hungry season actually increased household  purchasing power and contributed to increased agricultural productivity.
section_title: Various Factors Limit the Effectiveness of Efforts to Provide Food Aid to the Most Vulnerable Populations
paragraphs: Various factors limit the ability of U.S. agencies to ensure that food aid is  directed to the most vulnerable populations. First, challenging operating  environments, characterized by poor infrastructure and concerns about  physical safety and security, have limited access to vulnerable groups and  caused delays in providing food aid. Inadequate recipient government  participation and human resource constraints also contribute to  insufficient assistance to vulnerable people. Second, weak in-country  coordination among key stakeholders and the use of noncomparable  methods in assessing food needs have resulted in significantly different  estimates and delays in donor assistance. Additionally, assessments have  not been used sufficiently to inform food aid programs. Third, difficulties  in identifying vulnerable populations and understanding the causes of their  food insecurity contributed to the lack of timely and appropriate response  in some instances. For example, it has been challenging for implementing  organizations to determine the causes of chronic food insecurity and  provide appropriate assistance. Fourth, resource constraints have affected  the quality and timeliness of assessments as well as the quantity of food  and other related assistance provided to vulnerable populations.
subsections: section_title: Challenging Operating Environments in Recipient Countries Have Restricted Access to Vulnerable Populations and Caused Delays
paragraphs: Difficult operating environments characterized by poor infrastructure and  physical safety, as well as the limited participation and capacity of  recipient governments, have impeded access to and the timely delivery of  food aid to the most vulnerable populations. In 2003, we reported on the  southern Africa food crisis, noting that long-standing weaknesses in  transportation infrastructure across the region hampered timely delivery  of food aid where it was needed. Access to intended recipients in villages  was further hindered during the rainy seasons when many village roads  became impassable.  Due to concerns about physical safety and security,  the timely provision of food aid to recipients has been especially difficult  in regions experiencing war and conflict. We recently reported that  frequent violence and continued conflict and an increase in attacks on  humanitarian staff in the Darfur region of Sudan limited the ability of  implementing organizations to access parts of the region and provide food  and other assistance to vulnerable populations, such as internally  displaced persons. As a result, approximately 460,000 people in northern  Darfur were cut off from emergency food aid in July 2006, and 355,000  people still did not receive food aid in August 2006, according to UN  sources.
Limited recipient government participation has contributed to insufficient  coverage of vulnerable populations. In late 2006, while donors were  providing assistance to support the food needs of Zambians, the  government continued to hold large quantities of its food stocks— approximately 350,000 metric tons—in its emergency reserve, according to  Zambian officials. Even in cases where recipient governments are  participating, lack of human resources and financial capacity can limit  overall efforts to target vulnerable populations. For example, while the  governments of Ethiopia and Kenya are involved in coordinating the food  aid efforts of donors and implementers, several implementing  organizations expressed concerns about the governments’ human resource  capacity at the district and village level to effectively contribute to  planning and implementing food aid programs. According to a number of  USAID-approved proposals for Ethiopia, a lack of government staffing and  skills combined with high turnover rates posed a significant challenge to  implementing food aid projects. USAID officials acknowledged these  concerns and noted that the government of Ethiopia is addressing these  deficiencies by providing training to staff at all levels of the government.  Additionally, all Title II-funded NGOs in Ethiopia have received resources  for capacity building and training as part of their agreements with USAID.
section_title: Weak Coordination on Assessments and the Use of Noncomparable Methods Have Led to Different Estimates of Food Needs
paragraphs: Insufficient coordination among key stakeholders and the use of  noncomparable methods has resulted in disparate assessments of food  needs and numbers of recipients, although some efforts are under way to  improve coordination. Officials of various implementing organizations we  interviewed in Ethiopia, Kenya, Zambia, and South Africa identified lack of  coordination on assessments, especially with recipient governments, as  one of the key challenges to accurately assessing the needs of vulnerable  populations. According to an NGO official in Zambia, the Zambian  government and NGOs conducted two parallel but separate assessments in  2005 that resulted in significantly different estimates. This discrepancy led  to a 6-month delay in declaring an emergency while the difference in  assessment results was resolved.
Some recipient governments have increased their efforts to ensure  coordination on assessments between stakeholders; however, estimates of  food needs have sometimes differed significantly because the stakeholders  use different methods and estimating assumptions. For example, although  the Ethiopian government's Disaster Prevention and Preparedness  Agency coordinates with donors and implementing organizations in  conducting assessments of food needs, their assessments varied  significantly in 2004. Specifically, WFP estimated that 1.8 million people  would need food assistance, while the government of Ethiopia estimated  that 700,000 fewer people (1.1 million) would need assistance. Donors we  interviewed in Ethiopia stated that the host government has tended to  lower food need estimates based on its view of what donors are likely to  fund. They noted that an earlier assessment in 2006, which was led by the  government but involved other stakeholders, underestimated the number  of potential beneficiaries by 1 million people. This significant  underestimation created a humanitarian crisis, according to a senior UN  official, and more emergency food was eventually requested.  Implementing organizations have had to resort to measures, such as  reducing ration size or shortening the duration of assistance, to provide  food aid to a larger than estimated number of vulnerable households.
Various implementing organizations have attributed a proliferation of  assessment methods and approaches to a lack of coordination that can  result in different estimates and delay donor response, especially during  emergencies. Although USAID and NGOs have noted that multiple  assessment methods and approaches are required to respond to different  circumstances, noncomparable methods have resulted in disparate food  need estimates. Donors and implementing organizations do not agree on  definitions and common approaches to conducting assessments;  according to USAID officials, this has resulted in inconsistent estimates  that prevent timely donor responses, especially during emergencies. WFP’s  Strengthening Emergency Needs Assessment Capacity (SENAC) initiative,  launched in 2004, is aimed at addressing some of these concerns by  developing better methods and guidance for assessments conducted  during emergencies. However, USAID and other officials have expressed  concerns about the limited involvement of NGOs in the SENAC process  and its implementation in selected countries. Moreover, there is a lack of  coordination among various NGOs, which tend to assess food needs  differently, according to U.S. government officials. Some GAO roundtable  participants stated that peer learning and information-sharing among  implementing organizations had been further hampered by the dissolution  in 2004 of Food Aid Management (FAM), a USAID-funded NGO that  facilitated information sharing and development of food aid standards.
Additionally, assessments have not been used sufficiently to inform food  aid programs. According to WFP and NGO officials, estimates resulting  from needs assessments have not, in many cases, driven donor response to  impending or existing crises. Other factors—such as donors’ foreign policy  objectives or media attention to a crisis—tend to determine the timing and  level of donor assistance, according to these officials. However, donors  and GAO roundtable participants have expressed concerns about the  independence of assessors, because organizations such as WFP and NGOs  generally conduct assessments and also implement programs based on  their results. According to GAO roundtable participants, NGOs generally  conduct assessments and propose projects in areas where they are already  operating, which may introduce geographical gaps in the delivery of  assistance and prevent food aid from reaching the most vulnerable areas.  According to a USAID-funded study on Title II development food aid  programs in 2002, although program assessments had advanced  considerably and proposals described critical country-level food security  problems, quantitative data collection and analysis at the local level were  deficient. Our review of USAID- and USDA-approved proposals indicates  that some proposed programs were based on assessments that identified  specific criteria to target food aid, whereas other proposals justified  programs based on general statements of need. For example, while  proposals for a nationwide safety net program in Ethiopia generally  identified districts based on high levels of chronic vulnerability, proposals  for some other countries did not include adequate assessment information  on the extent or severity of needs in areas proposed for food aid programs.
section_title: Difficulties in Identifying Vulnerable Populations Have Limited Effective Targeting
paragraphs: Accurately identifying various types of vulnerable populations and the  causes of their vulnerability has been difficult due to the complexity of  factors—such as poverty, environmental degradation, and disease—that  contribute to food insecurity. According to WFP officials in southern  Africa, identifying people with HIV/AIDS who need food aid has been very  difficult because the social stigma associated with the disease may  discourage intended recipients from getting tested for it. It is also difficult  to assess whether deterioration in health is due to hunger or the disease  itself.
Insufficient understanding of the causes of malnutrition and chronic food  insecurity, as well as the role of local markets, has in some cases resulted  in inaccurate assessment of and response to crises. According to WFP  and USAID, assessments have focused too narrowly on food availability  (such as food production in vulnerable countries) and not enough on  factors that determine access to food (such as food prices in local  markets) and effective use of food (such as health and sanitation  practices). The 2005 food crisis in Niger, where about 1.8 million people  received food aid, illustrated such a limitation in focus. According to  WFP’s evaluation, donors as well as implementers focused too narrowly  on food production and deficits and analyzed the causes of malnutrition  insufficiently. As a result, the cause of the crisis was misdiagnosed as  lack of food availability, when in fact it was caused by factors affecting the  effective use of food, such as health and sanitation problems and poor  water quality, according to a USAID analysis. Donors did not respond until  May 2005, 3 months after the crisis reached emergency proportions in  February 2005. Moreover, insufficient understanding of the causes of the  crisis initially led to a disagreement between the recipient government and  WFP on how to respond to the situation. As a result, the request for aid  was revised seven times in the next 3 months, from May to August, and  recipients finally received food in August 2005.
Difficulties in the targeting process related to determining eligibility of  recipients and appropriate food distribution activities have also been  exacerbated because implementers have not developed or optimally used  best practices and institutional knowledge. According to USAID officials  in Kenya, there has been very limited analysis of which targeting  approaches and activities are more appropriate to provide food aid in  certain situations and how long these should be used. (See app. IV for  food distribution activities to target different vulnerable groups.)  According to a WFP evaluation of its targeting practices during emergency  and relief operations, a more systematic analysis of WFP’s experience in  targeting recipients is necessary to resolve recurring issues and improve  this practice. Furthermore, WFP’s targeting approaches tend to depend on  individual staff experience rather than organizationwide experience,  according to the review. In part, this is because WFP had not yet  developed a consolidated policy and comprehensive guidance material  on targeting.
Despite these limitations, there is some evidence that with experience,  accuracy in providing food to intended recipients has generally improved  at the country and program level. For example, according to several  implementing organization officials in Ethiopia, during the first year of  implementing a nationwide food and cash assistance program, targeting  the most vulnerable populations was challenging because implementers  did not adequately understand the eligibility criteria for recipients and  selected better-off people in many cases. In the second year, however,  targeting improved as program goals were more clearly communicated to  implementers, who applied the recipient selection criteria more  accurately.
section_title: Resource Constraints Have Adversely Affected Assessments and Adequate Coverage of Vulnerable Populations
paragraphs: Limitations on the amount and use of resources have adversely affected  the quality and timing of assessments, particularly for Title II-funded  programs. According to USAID, NGO, and WFP officials we interviewed in  the field, lack of sufficient resources is one of the main constraints to  conducting accurate and reliable assessments. The U.S. agencies provide  very limited or no resources to conduct assessments prior to the  implementing organizations’ submission of proposals requesting food aid.  This is because requests for cash for materials or activities related to U.S.  food aid funding, such as assessments, must accompany requests for food  commodities. Since cash is in effect tied to requests for commodities, the  U.S. government cannot provide assistance for activities such as needs  assessments that may enhance the use of food aid but may not require  commodities at the same time. Due to such constraints, U.S. agencies have  not provided financial assistance for WFP’s major initiative to improve  needs assessments, although they have provided technical assistance.  According to WFP officials we spoke with in South Africa, this lack of  adequate financial support for assessments diminishes U.S. influence and  input on how assessments are conducted. USAID officials stated that  they would like to fund assessments using P.L.480 Title II resources, but  they are unable to do so because of legal restrictions related to such use of  these funds.
In addition to their impact on assessments, resource constraints have also  limited the quantity of food and other complementary assistance that is  provided to intended recipients. In 2003, we reported that due to the lack  of adequate donor funding in Afghanistan, food rations to refugees and  internally displaced persons were reduced to a third of the original  planned amount, and program implementation was delayed by up to 10  weeks in some cases. During our fieldwork, we found instances where  insufficient complementary assistance to meet basic needs in addition to  food has also limited the benefits of food aid to recipients. For example,  people with HIV/AIDS receiving food aid in Wukuru, Ethiopia, informed us  that they sold part of their food rations to pay for other basic necessities  because they lacked other assistance or income. Similarly, Somali and  Sudanese refugees in Kenya sold approximately 4 percent of their food  rations to buy basic items (such as fuel, cooking utensils, and clothes) or  supplementary foods, according to a 2004 food consumption survey by  WFP and the UN High Commission for Refugees. These refugees suffered  from poor nutrition as a result of insufficient food consumption and other  factors, such as poor hygiene.
section_title: Impediments to Improving Nutritional Quality Reduce the Benefits of Food Aid
paragraphs: Some impediments to improving nutritional quality further reduce the  effectiveness of food aid. Although U.S. agencies have made efforts to  improve the nutritional quality of food aid, the appropriate nutritional  value of the food and the readiness of U.S. agencies to address nutrition- related quality issues remain uncertain. Further, existing interagency food  aid working groups have not resolved coordination problems on nutrition  issues. Moreover, USAID and USDA do not have a central interagency  mechanism to update food aid products and their specifications. As a  result, vulnerable populations may not be receiving the most nutritious or  appropriate food from the agencies, and disputes may occur when either  agency attempts to update the products.
subsections: section_title: Despite Efforts to Improve Nutrition, Challenges Remain with Quality Control and Interagency Coordination
paragraphs: Although U.S. agencies have made efforts to improve the nutritional  quality of food aid, challenges remain with nutrition quality control  mechanisms and interagency coordination on these issues. Past  micronutrient assessments of U.S. food aid have also found that  commodities are produced containing low and inconsistent levels of  micronutrients, and gaps exist in nutrition quality control procedures.  According to the World Health Organization, deficiencies in iron, vitamin  A, and zinc rank among the top 10 leading causes of death from disease in  developing countries, and micronutrient fortification of food aid is  considered one of the most cost-effective approaches to addressing  widespread deficiencies.
Despite efforts to update food aid nutritional quality control mechanisms,  the quality of U.S. food aid and U.S. agencies’ readiness to address quality  issues remains uncertain. USDA attempted to improve its quality control  procedures by introducing a Total Quality Systems Audit (TQSA)  program to verify a supplier’s capability of producing products that meet  program requirements. The TQSA program is responsible for examining  commodity suppliers’ quality control mechanisms, such as management  processes and procedures for food aid production, to ensure that they are  operating according to U.S. food aid standards. However, the TQSA  program is not responsible for overseeing the nutritional quality of the  product itself. It was only recently given more funding in this area in  response to a 2005 incident involving CSB food aid that was found to be  overfortified with iron. Because food with iron overfortification can be  toxic when consumed by vulnerable groups in large quantities, USAID and  USDA suspended distribution of 1,100 metric tons of CSB food aid  donations while WFP suspended distribution of 16,000 tons of U.S.- donated CSB to Ethiopia. It was not until after this incident that the TQSA  program was provided with funding to test CSB fortification, but it was  given only enough resources to cover the costs of sampling and testing  CSB and no other processed commodities. USDA has recently requested  additional funding to develop quality sampling and testing protocols for  each blended or processed food aid product, but this proposal has yet to  be approved. USDA officials have stated that they are still struggling to  verify the nutritional quality of U.S. food aid.
Insufficient coordination also limits agencies’ abilities to improve the  nutritional quality of food aid commodities. First, existing food aid  commodity working groups have not resolved interagency coordination  problems. While U.S. government agencies have begun to jointly discuss  ways to improve nutrition issues in the FACG’s Commodity Working  Group, the group has yet to implement any of their suggested  improvements. And while interagency forums such as the Commodity  Working Group exist, coordination problems still occur. For example,  USAID approached USDA officials to collaborate on exploring ways to  deliver fortified and enriched food aid commodities to beneficiaries at a  competitive cost. USDA’s Agriculture Research Service declined, citing its  mission to address problems for U.S. agriculture and food supply and its  lack of authority to study nutritional needs in other countries. Second,  USAID and USDA do not have a central interagency mechanism to update  products and their specifications. As a result, food aid recipients may not  be receiving the most nutritious or appropriate food from the agencies,  and disputes may occur when either agency attempts to update the  products. Examples include the following:    Although USDA has taken some steps to improve its food aid product  specifications, there is still no central system in place to ensure that the  product specifications are consistently updated. USDA recently made  fortification improvements and updated the specifications to comply with  Federal Acquisition Regulations and also requested resources to review  the specifications. However, commodity suppliers complain that food aid  product specifications are not as clear and consistent as in the commercial  sector and that some requirements for food aid commodities are outdated  and no longer necessary. One commodity supplier questioned the need for  a current requirement of 50 ash for all USDA food aid flour purchases,  noting that other countries have different ash specifications or none at  all.
KCCO officials have stated that most of the food aid products in use today  were first developed in the 1960s and that they do not have a system in  place to evaluate and update them. Therefore, KCCO officials may not be  using the most cost-effective products to address food aid nutrition needs.  One commodity supplier noted that products should be updated every 5 to  6 years and that it would be more cost-effective for the U.S. government to  update products as technology develops.
U.S. government agencies are currently attempting to discuss recipients’  nutritional needs in the Commodity Working Group and have started to  explore the introduction of new food aid products that address health  issues related to HIV/AIDS in young children and nutritional deficiencies  in young mothers. USDA has also recently requested resources to conduct  a long-term study on the present composition and use of food aid  commodities. However, the agencies have yet to (1) agree on what  products to update and (2) implement a central system to ensure that such  updates are put into practice when they do reach an agreement.
USDA and USAID disagree on a proposed update to product  specifications. USDA reviewed micronutrient fortification and enrichment  of Title II commodities in 1994 and recommended that tricalcium  phosphate (TCP) be reduced by 25 percent. According to USDA, this  reduction would result in an annual savings of over $1.5 million, which  would increase funds available for Title II program commodities without  compromising their nutritional value. However, USAID did not agree with  the recommended reduction and chose not to reduce TCP in any Title II  commodities due to its concern about the effect of the reduction on  malnourished food aid recipients. The agencies have disagreed about the  nutritional effect of TCP reductions since 2004 and have yet to reach an  agreement.
section_title: U.S. Agencies Do Not Sufficiently Monitor Food Aid Programs
paragraphs: Although USAID and USDA require implementing organizations to  regularly monitor and report on the use of food aid, these agencies have  undertaken limited field-level monitoring of food aid programs. Agency  inspectors general have reported that monitoring has not been regular and  systematic, that in some cases intended recipients have not received food  aid, or that the number of recipients could not be verified. Our audit work  also indicates that monitoring has been insufficient due to various factors  including limited staff, competing priorities, and legal restrictions on the  use of food aid resources.
USAID and USDA require NGOs and WFP to regularly monitor food aid  programs. USAID Title II guidance for multiyear programs requires  implementing organizations to provide a monitoring plan, which includes  information such as the percentage of the target population reached and  midterm and final evaluations of program impact. USDA requires  implementing organizations to report semiannually on commodity logistics  and the use of food. According to WFP’s agreement with the U.S.  government, WFP field staff should undertake periodic monitoring at food  distribution sites to ensure that commodities are distributed according to  an agreed-upon plan. Additionally, WFP is to provide annual reports for  each of its U.S.-funded programs.
In addition to monitoring by implementing organizations, agency  monitoring is important to ensure that targeting of food aid is adjusted to  changes in conditions as they occur and to modify programs to improve  their effectiveness, according to USAID officials. However, various USAID  and USDA Inspectors General reports have cited problems with agencies’  monitoring of programs. For example, according to various USAID  Inspector General reports on nonemergency programs in 2003, food aid  was generally delivered to intended recipients, but USAID officials did not  conduct regular and systematic monitoring. One assessment of direct  distribution programs in Madagascar, for example, noted that as a result of  insufficient and ad hoc site visits, USAID officials were unable to detect an  NGO reallocation of significant quantities of food aid to a different district;  combined with the late arrival of U.S. food aid, this resulted in severe  shortages of food aid for recipients in a USAID-approved district. The  Inspector General’s assessment of food aid programs in Ghana stated that  the USAID mission’s annual report included data, such as the number of  recipients, that were directly reported by implementing organizations  without any procedures to review the completeness and accuracy of this  information over a 3-year period. As a result, the Inspector General  concluded, the mission had no assurance as to the quality and accuracy of  this data.
Limited staff and other demands in USAID missions and regional offices  have constrained their field-level monitoring of food aid programs. In  fiscal year 2006, although USAID had some non-Title II-funded staff  assigned to monitoring, it had only 23 Title II-funded USAID staff assigned  to missions and regional offices in 10 countries to monitor programs  costing about $1.7 billion in 55 countries. For example, USAID’s Zambia  mission had only one Title-II funded foreign national and one U.S. national  staff member to oversee $4.6 million in U.S. food aid funding in fiscal year  2006. Moreover, the U.S. national staff member spent only about one-third  of his time on food aid activities and two-thirds on the President’s  Emergency Plan for AIDS Relief program.
USAID regional offices’ monitoring of food aid programs has also been  limited. These offices oversee programs in multiple countries, especially  where USAID missions lack human resource capacity. For example,  USAID’s East Africa regional office, which is located in Kenya, is  responsible for oversight in 13 countries in East and Central Africa, of  which 6 had limited or no capacity to monitor food aid activities,  according to USAID officials. This regional office, rather than USAID’s  Kenya mission, provided monitoring staff to oversee about $100 million in  U.S. food aid to Kenya in fiscal year 2006. While officials from the  regional office reported that their program officers monitor food aid  programs, an implementing organization official we interviewed told us  that USAID officials have visited the project site only three times in 1 year.  USAID officials told us that they may be responsible for multiple project  sites in a given country and may monitor selected sites based on factors  such as severity of need and level of funding. Monitoring food aid  programs in the Democratic Republic of Congo (DRC) from the USAID  regional office had been difficult due to poor transportation and  communication infrastructure, according to USAID officials. Therefore,  USAID decided to station one full-time employee in the capital of the DRC  to monitor U.S. food aid programs that cost about $51 million in fiscal year  2006.
Field-level monitoring is also constrained by limited resources and  restrictions on their use. Title II resources provide only part of the funding  for USAID’s food aid monitoring activities, and there are legal restrictions  on the use of these funds for nonemergency programs. Other funds, such  as those from the agency’s overall operations expense and development  assistance accounts, are also to be used for food aid activities, such as  monitoring. However, these additional resources are limited due to  competing priorities, and their use is based on agencywide allocation  decisions, according to USAID officials. As a result, resources available to  hire food aid monitors are limited. For example, about five U.S. national  and five foreign national staff are responsible for monitoring all food aid  programs in seven countries in southern Africa, according to a USAID  food aid regional coordinator. Moreover, because its operations expense  budget is limited and Title II funding allows food monitors only for  emergency programs, USAID relies significantly on personal services  contractors (PSC)—both U.S. national and foreign national hires—to  monitor and manage food aid programs in the field. For example, while  PSCs can use emergency food aid project funds for travel, USAID’s  General Schedule staff cannot. Restrictions on the use of Title II resources  for monitoring nonemergency programs further reduce USAID’s  monitoring of these programs.
USDA administers a smaller proportion of food aid programs than USAID  and its field-level monitoring of food aid programs is more limited. In  March 2006, USDA’s Inspector General reported that USDA’s Foreign  Agricultural Service (FAS) had not implemented a number of  recommendations made in a March 1999 report on NGO monitoring.  Furthermore, several NGOs informed us that the quality of USDA  oversight from Washington, D.C., is generally more limited than USAID’s.  USDA has fewer overseas staff, and they are usually focused on  monitoring agricultural trade issues and foreign market development. For  example, the agency assigns a field attaché—with multiple responsibilities  in addition to food aid monitoring—to the U.S. mission in some countries.  However, FAS officials informed us that in response to past USDA  Inspector General and GAO recommendations, a new monitoring and  evaluation unit was recently established with an increased staffing level to  monitor the semiannual reports, conduct site visits, and evaluate  programs.
Without adequate monitoring from U.S. agencies, food aid programs may  not effectively direct limited food aid resources to those populations most  in need. As a result, agencies may not be accomplishing their goal of  getting the right food to the right people at the right time.
section_title: Conclusions
paragraphs: U.S. international food aid programs have helped hundreds of millions of  people around the world survive and recover from crises since the  Agricultural Trade Development and Assistance Act (P.L. 480) was signed  into law in 1954. Nevertheless, in an environment of increasing  emergencies, tight budget constraints, and rising transportation and  business costs, U.S. agencies must explore ways to optimize the delivery  and use of food aid. U.S. agencies have taken some measures to enhance  their ability to respond to emergencies and streamline the myriad  processes involved in delivering food aid. However, opportunities for  further improvement in such areas as logistical planning and  transportation contracting remain. Inadequate coordination among food  aid stakeholders has hampered ongoing efforts to address some of these  logistical challenges. Furthermore, inefficiencies inherent in current  monetization practices best illustrate the complex challenges that face  U.S. food aid programs today. In addition, the lack of comparable and  reliable needs assessments, insufficient complementary assistance, and  impediments to improving the nutritional quality of food aid commodities  raise questions about the effectiveness of the use of food aid. Finally, U.S.  agencies’ lack of sufficient monitoring leaves U.S. food aid programs  vulnerable to wasting increasingly limited resources, not putting them to  their most effective use, or not reaching the most vulnerable populations  on a timely basis.
section_title: Recommendations for Executive Action
paragraphs: To improve the efficiency of U.S. food aid—in terms of its amount,  timeliness, and quality—we recommend that the Administrator of USAID  and the Secretaries of Agriculture and Transportation take the following  five actions:  improve food aid logistical planning through cost-benefit analysis of   (1) supply-management options, such as long-term transportation  agreements, and (2) prepositioning, including consideration of alternative  methods, such as those used by WFP;   work together and with stakeholders to modernize ocean transportation  and contracting practices to include, to the extent possible, commercial  principles of shared risks, streamlined administration, and expedited  payment and claims resolution;    seek to minimize the cost impact of cargo preference regulations on food  aid transportation expenditures by updating implementation and  reimbursement methodologies to account for new supply practices, such  as prepositioning, and potential costs associated with older vessels or  limited foreign-flag participation;   establish a coordinated system for tracking and resolving food quality    develop an information collection system to track monetization  transactions.
To improve the effective use of food aid, we recommend that the  Administrator of USAID and the Secretary of Agriculture take the  following four actions:    enhance the reliability and use of needs assessments for new and existing  food aid programs through better coordination among implementing  organizations, make assessments a priority in informing funding decisions,  and more effectively build on lessons from past targeting experiences;   determine ways to provide adequate nonfood resources in situations  where there is sufficient evidence that such assistance will enhance the  effectiveness of food aid;   develop a coordinated interagency mechanism to update food aid  specifications and products to improve food quality and nutritional  standards; and improve monitoring of food aid programs to ensure proper management  and implementation.
section_title: Agency Comments and Our Evaluation
paragraphs: DOT, USAID, and USDA—the three U.S. agencies to whom we direct our  recommendations— provided comments on a draft of our report. We have  reprinted their comments in appendixes V, VI, and VII, respectively, along  with our responses to specific points. These agencies—along with DOD,  State, FAO, and WFP—also provided technical comments and updated  information, which we have incorporated throughout this report as  appropriate.
DOT stated that it strongly supports the transportation initiatives  highlighted in the draft report and that full and effective implementation of  these initiatives—in particular, modernizing transportation and  contracting practices and updating reimbursement methodologies—offers  the potential to reduce costs for ocean transportation. DOT commented  that legal requirements (such as cargo preference) that increase delivery  costs are not borne by food aid programs and have minimal impact on the  amount of food available for distribution. While we recognize that DOT  reimbursements have improved, the impact of cargo preference on the  amount of food aid tonnage provided depends on the sufficiency of  reimbursements to cover cargo preference costs. Our analysis shows that  compared with the estimated costs of cargo preference, the level of DOT  reimbursements varied—falling short in fiscal years 2001 through 2004  when taking into account the costs included in the current reimbursement  formula and the additional costs associated with older vessels and  shipments where there was no foreign-flag vessel bid.
USAID’s comments suggest that we did not adequately address some of  the challenges facing U.S. food aid programs or take into account the  considerable improvements USAID has made in a number of areas, such as  transportation and contracting practices. USAID raised two key  overarching points: (1) the crucial relationship between emergencies and  development and the need to address the linkages between chronic and  acute vulnerabilities discussed in the new USAID Food Security Strategic  Plan for 2006-2010 and (2) the need for additional analysis of the  magnitude and perspective of the recommendations in relation to program  size and the number of beneficiaries reached. While we recognize the  important linkages between emergencies and development programs,  these issues primarily relate to food security, which was not a research  objective of this study. However, we used the strategic plan to provide  contextual information, particularly in our discussion of the effective use  of food aid. We also provided information throughout this report to  indicate the potential magnitude and impact of savings from efficiency  improvements in food aid delivery.
USDA took issue with a number of our findings and conclusions and  expressed two overarching concerns. First, USDA believes that we did not  fully articulate the challenges inherent in achieving an ideal first world  performance when implementing programs in difficult third world  environments and that critical nutritional needs are routinely met in a  timely manner. Second, USDA believes that we lacked hard analysis to  support many of the weaknesses that we identified and suggested that our  conclusions are based upon anecdotal incidents reported by various  constituencies with their own interests and viewpoints. We recognize the  difficult operating environments in developing countries and agencies’  efforts to provide U.S. food aid on a timely basis with minimal commodity  losses. However, during our fieldwork in three recipient countries, many  implementing organizations we met with complained about the lack of  timeliness in food aid delivery, particularly to meet emergency needs. The  example of the Ethiopian grain reserve illustrates how local food aid  stakeholders adapted ways to provide food aid in a timely manner even  when U.S. shipments were late. As described in our scope and  methodology (app. I), this report is based on a rigorous and systematic  review of multiple sources of evidence, including procurement and budget  data, site visits, previous audits, agency studies, economic literature, and  testimonial evidence collected in both structured and unstructured  formats. To ensure accuracy and independence in our findings, we  assessed the reliability of data we used for our analysis and compared  information from stakeholders who have different points of view and are  involved in different stages of food aid programs. We discussed our  preliminary findings with a roundtable of food aid experts and  practitioners. We reviewed and incorporated, where appropriate, agency  oral, technical, and official comments. We use anecdotal examples in our  report to illustrate findings that are based on our broader work.
We are sending copies of this report to interested members of Congress,  the Administrator of USAID and the Secretaries of Agriculture, State, and  Transportation. We will also make copies available to others upon request.  In addition, this report will be available at no charge on the GAO Web site  at http://www.gao.gov.
If you or your staffs have any questions about this report, please contact  me at (202) 512-9601 or melitot@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix VIII.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: Our objectives were to examine some key challenges to the (1) efficiency  of U.S. food aid programs and (2) effective use of U.S. food aid.
To examine key challenges to the efficiency of the delivery of U.S. food aid  programs, we analyzed (1) food aid procurement and ocean transportation  data provided by the Kansas City Commodity Office (KCCO) and (2) total  food aid budget and monetization cost data provided by the U.S. Agency  for International Development (USAID), the U.S. Department of  Agriculture (USDA), and the World Food Program (WFP). We did not  assess the reliability of the data that we used for background purposes or  that WFP reported for transportation costs. We examined the KCCO data  for their reliability and appropriateness for our purposes through  electronic testing of the data, verification of the data against other  sources, and interviews with agency officials that manage the data. We  found the data to be sufficiently reliable to represent trends in food aid  tonnage, required time frames for delivery, and commodity versus  noncommodity costs. We also conducted structured interviews of the 14  U.S.- and foreign-flag ocean carriers that transport over 80 percent of U.S.  food aid tonnage. While information from these interviews may not be  generalized to all ocean carriers, we supplemented the structured  interviews with information from several other ocean carriers, shipping  agents, and transportation experts. To examine key challenges to the sale  of food to generate cash (monetization), we reviewed monetization data  from USAID and USDA for all food aid programs to determine the  commodity and noncommodity (such as shipping and other  transportation) costs. We tested the data for internal consistency,  interviewed USAID and USDA officials to clarify data definitions, and  corroborated our classification of bulk commodities with them. We  determined that the data were sufficiently reliable to represent the level,  cost breakdown, and bulk versus nonbulk breakdown of monetization. We  were not able to determine to what extent the costs of monetization are  recovered through sales proceeds because neither USAID nor USDA  systematically collect the data, which we point out as a finding in this  report. We reviewed program authorities and regulations to determine  their impact on food aid transportation; the nature of food aid  transportation contracts; and the allowable use of monetization proceeds,  202(e) funding, and Internal Transportation, Storage, and Handling (ITSH)  costs.
To examine key challenges to the effectiveness of the use of food aid, we  reviewed numerous U.S. government documents, including all USDA- approved proposals and approximately half of all USAID-approved  proposals from fiscal years 2002 through 2006 for food aid programs each  agency administers in the countries we visited. We reviewed several WFP  internal evaluations, including those related to needs assessments and  targeting, and some external studies, such as those conducted by the  Washington, D.C.-based International Food Policy Research Institute. We  also incorporated information from our past audits as appropriate.  Additionally, we interviewed officials from WFP, nongovernmental  organizations (NGO), recipient governments, the U.S. government, and  food aid recipients in the field and obtained relevant documentation from  them. To assess food quality and nutrition issues, we conducted interviews  with and reviewed reports by commodity suppliers, trade associations,  and officials from NGOs, WFP, KCCO, USAID, and Animal and Plant  Health Inspection Service (APHIS). We also reviewed U.S. agency food aid  product specifications, rules and regulations, commodity complaint logs,  and quality control guidelines; USAID audit reports; and internal agency  correspondence and draft documents concerning food quality and  nutrition issues. To assess U.S. agencies’ monitoring of food aid programs,  we reviewed agencies’ inspectors general reports, guidance for  implementing organizations, and staffing data. Lastly, we reviewed  economic literature on the impact of food aid on local markets and recent  reports, studies, and papers issued on U.S. and international food aid  programs.
In Washington, D.C., we interviewed officials from USAID; USDA; the  Departments of State (State) and Defense (DOD); the Department of  Transportation Maritime Administration (DOT/MARAD); and the Office of  Management and Budget (OMB). We also met with a number of officials  representing NGOs, including 8 of the top 10 recipients of Title II food aid  between fiscal years 2002 to 2005, that serve as implementing partners to  USAID and USDA in carrying out U.S. food aid programs overseas; freight  forwarding companies; and agricultural commodity groups. In Rome, we  met with officials from the U.S. Mission to the United Nations (UN) Food  and Agriculture Agencies, the WFP headquarters, and the Food and  Agriculture Organization. We also conducted fieldwork in three countries  that are recipients of food aid—Ethiopia, Kenya, and Zambia—and met  with officials from over 40 organizations representing U.S. missions,  implementing organizations, and relevant host government agencies. We  visited a port in Texas from which food is shipped; two food destination  ports in South Africa and Kenya; and two sites in Louisiana and Dubai  where U.S. food may be stocked prior to shipment to destination ports.  Finally, in January 2007, we convened a roundtable of experts and  practitioners—including 15 representatives from academia, think tanks,  implementing organizations, the maritime industry, and agricultural  commodity groups—to further delineate, based on our initial work, some  key challenges to the efficient delivery and effective use of U.S. food aid  and to explore options for improvement. We took the roundtable  participants’ views into account as we finalized our analysis of these  challenges and options.
We conducted our work between May 2006 and March 2007 in accordance  with generally accepted government auditing standards.
section_title: Appendix II: Program Authorities and Congressional Mandates
paragraphs: The United States has principally employed six programs to deliver food  aid: Public Law (P.L.) 480 Titles I, II, and III; Food for Progress; the  McGovern-Dole Food for Education and Child Nutrition; and Section  416(b). Table 2 provides a summary of these food aid programs by  program authority.
In addition to these programs, resources for U.S. food aid can be provided  through other sources, which include the following:    The International Disaster and Famine Assistance Fund, which  provides funding for famine prevention and relief, as well as mitigation of  the effects of famine by addressing its root causes. Over the past 3 years,  USAID has programmed $73.8 million in famine prevention funds. Most of  the funds have been programmed in the Horn of Africa, where USAID  officials told us that famine is now endemic. According to USAID officials,  experience to date demonstrates that these funds have the advantage of  enabling USAID to combine emergency responses with development  approaches to address the threat of famine. Approaches need to be  innovative and catalytic while providing flexibility in assisting famine- prone countries or regions. Famine prevention assistance funds should  generally be programmed for no more than 1 year and seek to achieve  significant and measurable results during that time period. Funding  decisions are made jointly by USAID’s regional bureaus and its Bureau for  Democracy, Conflict, and Humanitarian Assistance and are subject to  OMB concurrence and congressional consultations. In fiscal year 2006,  USAID programmed $19.8 million to address the chronic failure of the  pastoralist livelihood system in the Mandera Triangle—a large, arid region  encompassing parts of Ethiopia, Somalia, and Kenya that was the  epicenter of that year’s hunger crisis in the Horn of Africa. In fiscal year  2005, USAID received $34.2 million in famine prevention funds for  activities in Ethiopia and six Great Lakes countries in Africa. The activities  in Ethiopia enabled USAID to intervene early enough in the 2005 drought  cycle to protect the livelihoods—as well as the lives—of pastoralist  populations in the Somali region, which were not yet protected by  Ethiopia’s Productive Safety Net program. In fiscal year 2004, the USAID  mission in Ethiopia received $19.8 million in famine prevention funds to  enhance and diversify the livelihoods of the chronically food insecure.
State’s Bureau of Population, Refugees, and Migration (PRM),  which provides limited amounts of cash to WFP to purchase food locally  and globally to remedy shortages in refugee feeding pipeline breaks. In  these situations, PRM generally provides about 1 month’s worth of refugee  feeding needs and will not usually provide funds unless USAID’s resources  have been exhausted. Funding from year to year varies. In fiscal year 2006,  PRM’s cash assistance to WFP to fund operations in 14 countries totaled  about $15 million, including $1.45 million for humanitarian air service. In  addition, PRM also funds food aid and food security programs for  Burmese refugees in Thailand. In fiscal year 2006, PRM provided $7 million  in emergency supplemental funds to the Thailand-Burma Border  Consortium, most of which supported food-related programs. PRM  officials told us that they coordinate efforts with USAID as needed.
Table 3 lists congressional mandates for the P.L. 480 food aid programs  and the targets for fiscal year 2006.
section_title: Appendix III: Ensuring Food Aid Reaches Intended Recipients Is Important to Avoid Market Distorting Effect of Food Aid
paragraphs: The impact of food aid on local markets can be assessed by analyzing its  impact on supply and demand and on expectations of market participants  regarding future market stability. A number of factors affect the impact of  food aid on the markets of recipient countries. In general, in-kind food aid  affects recipient markets by increasing supply. In the case of food  shortfalls, food aid may actually serve to bring supply back to what the  levels would have been in the absence of the shortage and would not be  thought to cause a distortion. Under these circumstances, food aid would  help stop the rise in prices caused by the shortage-induced decreased  supply. To the extent that food aid prevents major losses in physical and  human capital, it may help assure growth in subsequent periods. In  addition, if food aid is distributed free of charge to people who are  desperately poor and have no purchasing power, the transaction can be  “off line” to the market—not leading to changes in market prices.
To the extent that food aid increases supply beyond what it would have  been in the absence of shortage, it can have a potentially adverse effect on  the market. These effects would include downward pressure on prices.  The extent of this decrease would depend on (1) the amount of food aid  relative to the total volume handled in the market and (2) the sensitivity of  demand to changes in the quantities supplied to the market (price  elasticity of demand). Declines in market prices provide disincentives to  local production and could also affect the allocation of inputs to  production by reducing the value of labor—for example, causing  households to reallocate labor away from agricultural production. The  impact of food aid could extend to other sectors of the market by affecting  the prices for substitute and complementary foods.
The general characteristics of the recipient market—such as the extent to  which the local market is integrated into broader national, regional, and  global markets—can also influence the impact of food aid. Market  integration measures the degree to which changes in market conditions in  one market affect those in other markets (separated by time or space). It is  typically the result of traders moving products across markets when it  makes economic sense to do so—when the price differential between  those markets exceeds the cost of moving the product. If markets are well  integrated, injecting aid in one area can strongly affect market conditions  in related areas. In well integrated markets, food aid shocks are short term  and dissipate quickly. In poorly functioning markets, food aid impact  could be more long term, and price movements can be dramatic. In  addition, the increase in supply due to food aid may result in less need for  commercial sales or imports.
Adverse market impacts resulting from food aid can be alleviated through  the timing and targeting of food aid delivery. For example, timing the  delivery of food aid to occur when it is needed, such as in the “hungry  season,” would alleviate adverse market effects by bringing market supply  to what the levels would have been in the absence of supply shortfalls. In  this case food aid might be effective in capping what might otherwise be a  very sharp spike in prices. In addition, it would reduce the longer term  effects of the food shortages by alleviating the need for recipients to  liquidate high return assets, such as livestock and tools, or incur high  levels of debt to meet short-term requirements for food, thus reducing  their future capacity to produce. Conversely, food aid that arrives at  harvest time, when prices are already falling due to increased supply, can  plunge prices below what it costs farmers to produce and distribute the  commodity, thereby discouraging them from future production.
Targeting food aid by making sure it goes to the people who need it the  most and excluding those who can obtain the food in other ways is also  important. This assures that the supply arrives where the demand is  greatest. In addition, according to some of the studies we reviewed and  economic principles, the very poor tend to spend a greater proportion of  income on food (high income-elasticity) and are responsive to prices when  income is available (high price-elasticity of demand). When food aid is  targeted to this group, the combined price and income effects lead to  proportionately more purchases of food, checking overall price declines.
The actual impact of food aid on markets is an empirical question. Studies  have been inconclusive regarding disincentives and other effects of food  aid. In the case of emergency food aid distributions, there is less evidence  of negative effects than for nonemergency aid, the effects of which tend to  persist over longer time periods.
section_title: Appendix IV: Food Distribution Activities to Target Recipients of Food Aid
paragraphs: Figure 14 describes the food distribution activities used to target different  groups of food and recipients.
section_title: Appendix V: Comments from the U.S. Department of Transportation
paragraphs: The following is GAO’s comment on the U.S. Department of  Transportation’s (DOT) letter dated March 29, 2007.
subsections: section_title: GAO Comment
paragraphs: 1.  We recognize that processing of DOT reimbursements has improved.
However, the impact of cargo preference on the amount of food aid  tonnage provided depends on the sufficiency of reimbursements to  cover cargo preference costs—both those that are included in the  reimbursement calculation as well as those associated with shipments  where no foreign-flag vessel has submitted a bid and where the vessel’s  age is 25 years or older. Figure 10 in out report illustrates how DOT  reimbursements compare with the estimated costs of cargo preference  (ocean freight differential (OFD) costs) included in the reimbursement  calculation. As shown in the figure, DOT reimbursements fell short of  OFD costs in fiscal years 2001 through 2003 and exceeded OFD costs  in fiscal years 2004 and 2005. Including the estimated additional costs  for Title II programs only that were associated with older vessels and  shipments where there was no foreign-flag vessel bid (about $50  million in fiscal year 2003, about $34 million in fiscal year 2004, and  about $56 million in fiscal year 2005), DOT reimbursements would  have exceeded total cargo preference costs in fiscal year 2005 only.  Finally, while we acknowledge that DOT revised the reimbursement  formula in 2004 to provide more timely payments, the current  methodology has not been updated to include these additional costs of  cargo preference or to promote new supply practices, such as  prepositioning.
section_title: Appendix VI: Comments from the U.S. Agency for International Development
paragraphs: The following are GAO’s comments on the U.S. Agency for International  Development’s letter dated March 29, 2007.
subsections: section_title: GAO Comments
paragraphs: 1.  We incorporated contextual information from USAID’s Food Security  Strategic Plan for 2006–2010 in the background and in the discussion  on the effectiveness of the use of food aid. We also added a direct  reference in the text to the strategic plan. While we recognize the  importance of the linkages between emergencies and development  programs, these issues primarily relate to food security, which was not  a research objective of this study.  2.  We added information from the specific study cited. While this study  mentioned that proposals had improved in identifying and describing  critical country-level food security problems, it also noted that  quantitative data collection and analysis at the local level were  deficient. Additionally, according to this study, USAID’s policy  guidance has been insufficient, and there has been friction between  USAID and implementing organizations regarding the transparency  and timeliness of the program management by the Office of Food for  Peace.  3.  We have provided available information throughout this report to  indicate the potential magnitude and impact of savings from improving  the efficiency of food aid delivery. In our view, even a savings of less  than 2 percent of the fiscal year 2006 program funding could have a  significant impact by enabling the United States to feed almost 850,000  additional people for 90 days.  4.  We have included additional information regarding the selection  process for prepositioning warehouses.  5.  We recognize that uncertainties in funding processes, combined with  reactive and insufficiently planned procurement, increase food aid  delivery costs and time frames. Further, we noted that difficult  operating environments contribute to various challenges that impede  the effective use of food aid. Despite these constraints, we noted that  enhancements, such as better planning and improved coordination in  conducting assessments, can improve the efficiency and effectiveness  of U.S. food aid programs.  6.  We reference the standard booking note that USAID and USDA created  with input from the booking note committee. We have included  additional information regarding members of this committee.
However, in structured interviews, all 14 ocean carriers indicated that  further improvements are needed to standardize freight terms and to  further include, to the extent possible, commercial principles for the  allocation of risk.  7.  More timely payment of food aid contracts is not a competitiveness  issue and would reduce costs for both U.S.- and foreign-flag carriers.  DOD and DOT officials have also reported that long-term  transportation agreements have produced savings for DOD and could  provide savings for food aid programs. As DOD is also subject to cargo  preference regulations, legal requirements governing food aid may not  necessarily prevent the agencies from achieving savings with long-term  transportation agreements. To determine potential savings, we are  recommending that USAID, USDA, and DOT work together to conduct  further cost-benefit analyses of supply-management options.  8.  We recognize that USAID asked DOD several years ago to calculate the  cost for a sample set of shipments using long-term transportation  agreements managed by DOD, and that this analysis indicated a lack of  potential savings. However, as discussed in this report, DOD and DOT  officials subsequently found that the analysis contained flaws and both  agencies recommend that a new analysis be conducted. For example,  DOT officials indicated that cost savings could be realized if USAID  were to manage its own contracts, and they have offered to assist  USAID in doing so. Regarding USAID’s use of multiple port discharge  options, we have included additional language in our report to reflect  this information.  9.  While food quality issues may be discussed in the Food Aid  Consultative Group, there is still no shared, coordinated system in  place that USDA, KCCO, and USAID can use to track and respond to  complaints. Additionally, while we acknowledge that USAID has  developed the Quarterly Web-Interfaced Commodity Reporting  (QWICR) system to assist in tracking food aid commodities, this  system is currently utilized only by some Food for Peace programs and  NGOs in Africa and is not shared with USDA and KCCO. We also point  out the need for better monitoring and tracking of monetization  transactions, including tracking of revenues generated by  monetization. At this point, it is not clear whether QWICR will be able  to accommodate this need for both USAID and USDA.  10. We note that USAID recognizes that the quality and formulation of  food aid products are crucial for undernourished populations and that  the Director of the Office of Food for Peace highlighted the need to  improve the quality of food aid commodities in his statement before  the Senate Committee on Agriculture, Nutrition, and Forestry on  March 21, 2007. We also note that USAID, along with USDA, plans to  do an in-depth review of the types and quality of food products used in  U.S. food aid programs and will continue its efforts to review existing  contract specifications and improve commodity sampling and testing.  However, these planned reviews and improvements have not yet been  implemented.  11. USAID recognizes that enhancing assessments is a priority. Our  recommendation to improve needs assessments was also endorsed by  the Director of USAID’s Office of Food for Peace in his statement  before the Senate Committee on Agriculture, Nutrition, and Forestry  on March 21, 2007.  12. Based on USAID’s technical comments, we have added a footnote  stating that implementing organizations are required to monitor food  aid programs according to OMB Circular A-110 as well as USAID  regulations (22 C.F.R. 226.51). While noting the implementing  organizations’ monitoring responsibilities, we maintain that U.S.  agencies still need to adequately monitor programs to ensure  independence and provide assurance that food aid resources are used  optimally. In its official comments, USAID states that it has over 65  staff in the field and over 30 staff in Washington, D.C., to monitor and  oversee food aid programs. However, as noted in our report, there are  only 23 Title II-funded staff in the field, and non-Title II funded staff  often have other responsibilities in addition to monitoring food aid  programs. Further, the Director of the Office of Food for Peace, in his  statement before the Senate Committee on Agriculture, Nutrition, and  Forestry on March 21, 2007,  supported our recommendation on the  need for increased monitoring.  13. We agree that it is important to carefully review the monetization  proposals in order to minimize the disruption to local production and  markets. However, even when the proposals satisfy all the criteria  USAID considers, monetization is still an inherently inefficient practice  because converting food to cash in order to fund development projects  is costly.
section_title: Appendix VII: Comments from the U.S. Department of Agriculture
paragraphs: The following are GAO’s comments on the U.S. Department of  Agriculture’s letter dated March 30, 2007.
subsections: section_title: GAO Comments
paragraphs: 1.  We recognize (1) the challenges of providing food aid in developing  countries and (2) agency efforts to provide U.S. food aid on a timely  basis with minimal commodity losses. However, multiple implementing  organizations we met with expressed concern regarding the lack of  timeliness in food aid delivery, particularly to meet emergency needs.  The Ethiopian grain reserve example illustrates how food aid  stakeholders have adapted strategies to provide food aid in a timely  manner even when U.S. shipments are late. Although commodity losses  for non-WFP programs are reported at less than 1 percent, KCCO is  unable to determine the extent of commodity losses for WFP  programs, which account for approximately 60 percent of U.S. food aid  shipments. Additionally, various factors suggest that actual commodity  losses may exceed those reported in the data.  2.  We provide a detailed description of our scope and methodology in  appendix I. Each of our report findings and recommendations is based  on a rigorous and systematic review of multiple sources of evidence,  including procurement and budget data, site visits, previous audits,  agency studies, economic literature, and testimonial evidence collected  in both structured and unstructured formats. To ensure accuracy and  independence in our findings, we assessed the reliability of data used  for our analysis and compared information from stakeholders who  have different points of view and are involved in different stages of  food aid programs. We discussed our preliminary findings with a  roundtable of food aid experts and practitioners. We reviewed and  incorporated, where appropriate, agency oral, technical, and official  comments. We include anecdotal examples in our report to illustrate  findings that are based on our broader work.  3.  While it is likely that the risks of transporting packaged cargo are  higher than those for bulk cargo, all of our transportation  recommendations are intended to improve the delivery of both types of  food aid. Improving food aid logistical planning could decrease  procurement bunching (and the higher prices that result) for both  packaged and bulk food shipments. Modernizing transportation  contracting practices, including standardizing bulk cargo contracts and  improving claims processes, could likewise decrease ocean freight  rates for both bulk and packaged shipments. Finally, since cargo  preference regulations apply to shipments of both bulk and packaged  cargoes and food quality complaints may occur for all food aid  shipments, our remaining two recommendations to improve the  efficiency of delivery are aimed at the entire food aid program.  4.  KCCO officials told us that USDA needs to improve procurement  planning in order to reduce the continued bunching of purchases that  stresses its operations and those of its food suppliers. KCCO data and a  recent KCCO study confirmed that bunching of procurement has  occurred through fiscal year 2006—findings that were confirmed by a  broad representation of other food aid stakeholders and experts we  interviewed.  5.  To determine the length of time required to provide U.S. food aid, we  examined the delivery process from vendor to village. Our analysis of  transportation contracting practices refers to ocean transportation  contracts only, and we have added language in the report to reflect this  scope. We did not systematically examine transportation contracts for  foreign inland cargo since U.S. agencies do not collect uniform  contract data for these shipments. KCCO does not include these costs  when determining lowest cost providers for food aid delivery, and DOT  cargo preference reimbursement methodologies pertain to ocean  transportation only.  6.  We have added language to the report to reflect that USDA ships bulk  cargoes using contract terms that incorporate more shared risk.  However, contracts for bulk shipments have not yet been standardized,  and the standard booking note used by both USAID and USDA for  packaged cargoes defines freight terms differently than commercial  contracts. Other areas where USDA transportation contracting  practices differ from commercial practices include lengthy claims  processes and insufficiently streamlined administration and  paperwork.  7.  We have added language to the report to indicate that the net cost  impact of shifting risk from ocean carriers to other food aid  stakeholders, such as commodity suppliers and implementing  organizations has not been studied. However, savings could arise  through aligning the fiduciary responsibility for food delivery risks with  those stakeholders that could better assess and manage those risks.  Under the current approach, ocean carriers are held responsible for  certain food delivery risks that they have no direct ability to manage.  Ocean carriers generally insure themselves against these risks by  increasing their freight rates for all deliveries. Moreover, by realigning  the cost of risk to those who manage it during each step of the process,  food aid stakeholders would have additional incentives to make sure  the process goes right.  8.  Figure 10 in our report compares DOT reimbursements with the  estimated costs of cargo preference. DOT reimbursements include the  incremental ocean freight rate differential and the additional costs of  ocean transportation exceeding 20 percent of the total cost of food aid  commodities and ocean freight (Sections 901d(a) and 901d(b) of the  Merchant Marine Act). As shown in the figure, DOT reimbursements  fell short of OFD costs in fiscal years 2001 through 2003 and exceeded  OFD costs in fiscal years 2004 and 2005. However, the estimated OFD  costs in figure 10 do not include costs associated with shipments  where no foreign-flag vessel submitted a bid and where the vessel’s age  was 25 years or older. USAID and DOT officials separately estimated  the additional costs associated with these two factors for past Title II  shipments. Agency estimates amounted to about $50 million in fiscal  year 2003, about $34 million in fiscal year 2004, and about $56 million  in fiscal year 2005. Including additional estimated costs, DOT  reimbursements would only have exceeded total cargo preference  costs in fiscal year 2005.  9.  While we acknowledge that USAID and USDA do have some means of  sharing information on quality problems and that commodity and  storage-specific initiatives like the Containerization Aid Product  Improvement Team are helpful in addressing quality issues , both  agencies still do not have a shared, coordinated system to track and  respond systematically to food quality complaints for all of their  commodities. And as stated in comment 1, agency officials are unable  to track the quality of food aid for approximately 60 percent of food aid  shipments, and commodity losses may exceed those reported in the  data. We also acknowledge that USDA has a rapid response team, but  KCCO officials have told us that the team is limited in its ability to  respond to all of the complaints on food quality that it receives. USDA  officials have also stated that food quality inspection officials like  USDA’s Federal Grain Inspection Service do not have responsibilities  overseas and are limited to inspecting only some food aid commodities  and that while those officials can be hired to conduct overseas  inspections, it would be expensive to do so.  10.  Limitations in the availability and use of nonfood resources to conduct  credible assessments and to use these assessments to inform program  proposals apply both to USAID- and USDA-administered programs.  However, we specifically note in response to agency comments that  some limitations, such as legal restrictions on the use of funding, apply  specifically to Title II-funded programs. As indicated by USDA, the  McGovern-Dole Food for Education and Child Nutrition program has a  cash component of 13 percent, as indicated by USDA, which is higher  than the upper limit of 10 percent cash allowed as 202(e) funding to  implementing organizations for USAID Title-II funded programs.  However, Food for Education accounts for only 4 percent of U.S. food  aid funding; therefore, our overall finding about limited complementary  nonfood resources still applies broadly to U.S. food aid programs.  Additionally, the majority of Food for Progress commodities are  monetized rather than used for direct distribution to beneficiaries, as  shown in figure 12 in our report. Therefore, the need for nonfood  resources to enhance the effectiveness of the use of food aid is less  relevant in the case of Food for Progress. Moreover, as we note in our  report, the use of monetization to generate funds for development  projects is an inefficient use of food aid resources in general.
section_title: Appendix VIII: GAO Contact and Staff Acknowledgments
subsections: section_title: Acknowledgments
paragraphs: In addition to the person named above, Phillip J. Thomas (Assistant  Director), Carol Bray, Ming Chen, Debbie Chung, Martin De Alteriis, Leah  DeWolf, Mark Dowling, Etana Finkler, Kristy Kennedy, Joy Labez, Kendall  Schaefer, and Mona Sehgal made key contributions to this report.
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Maritime Security Fleet: Many Factors Determine Impact of Potential  Limits on Food Aid Shipments, GAO-04-1065. Washington, D.C.: Sept. 13,  2004.
Foreign Assistance: Lack of Strategic Focus and Obstacles to  Agricultural Recovery Threaten Afghanistan’s Stability, GAO-03-607.  Washington, D.C.: June 30, 2003.
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Foreign Assistance: U.S. Bilateral Food Assistance to North Korea Had  Mixed Results, GAO/NSIAD-00-175. Washington, D.C.: June 15, 2000.
Foreign Assistance: Donation of U.S. Planting Seed to Russia in 1999  Had Weaknesses, GAO/NSIAD-00-91. Washington, D.C.: Mar. 9, 2000.
Foreign Assistance: North Korean Constraints Limit Food Aid  Monitoring, GAO/T-NSIAD-00-47. Washington, D.C.: Oct. 27, 1999.
Foreign Assistance: North Korea Restricts Food Aid Monitoring, GAO- NSIAD-00-35. Washington, D.C.: Oct. 8, 1999.
Food Security: Preparations for the 1996 World Food Summit,  GAO/NSIAD-97-44. Washington, D.C.: Nov. 1996.
Food Security: Factors That Could Affect Progress Toward Meeting World  Food Summit Goals, GAO/NSIAD-99-15. Washington, D.C.: Mar. 1999.
International Relations: Food Security in Africa, GAO/T-NSIAD-96-217.  Washington, D.C.: Jul. 31, 1996.
Food Aid: Competing Goals and Requirements Hinder Title I Program  Results, GAO/GGD-95-68. Washington, D.C.: June 26, 1995.
Foreign Aid: Actions Taken to Improve Food Aid Management,  GAO/NSIAD-95-74. Washington, D.C.: Mar. 23, 1995.
Maritime Industry: Cargo Preference Laws Estimated Costs and Effects,  GAO/RCED-95-34. Washington, D.C.: Nov. 30, 1994.
Private Voluntary Organizations’ Role in Distributing Food Aid,  GAO/NSIAD-95-35. Washington, D.C.: Nov. 23, 1994.
Cargo Preference Requirements: Objectives Not Met When Applied to  Food Aid Programs, GAO/GGD-94-215. Washington, D.C.: Sept. 29, 1994  Public Law 480 Title I: Economic and Market Development Objectives  Not Met, GAO/T-GGD-94-191. Washington, D.C.: Aug. 3, 1994.
Multilateral Assistance: Accountability for U.S. Contributions to the  World Food Program, GAO/ T-NSIAD-94-174. Washington, D.C.: May 5,  1994.
Foreign Assistance: Inadequate Accountability for U.S. Donations to the  World Food Program, GAO/NSIAD-94-29. Washington, D.C.: Jan. 28, 1994.
Foreign Assistance: U.S. Participation in FAO’s Technical Cooperation  Program, GAO/NSIAD-94-32. Washington, D.C.: Jan. 11, 1994.
Food Aid: Management Improvements Are Needed to Achieve Program  Objectives, GAO/NSIAD-93-168. Washington, D.C.: July 23, 1993.
Cargo Preference Requirements: Their Impact on U.S. Food Aid  Programs and the U.S. Merchant Marine, GAO/NSIAD-90-174.  Washington, D.C.: June 19, 1990.
Status Report on GAO’s Reviews on P.L. 480 Food Aid Programs, GAO/T- NSIAD-90-23. Washington, D.C.: Mar. 21, 1990.
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