International Food Aid: Better Agency Collaboration Needed to Assess and Improve Emergency Food Aid Procurement System
Published: 2014-03-26T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: USDA and USAID spent about $9.2 billion to provide international emergency food aid during fiscal years 2007-2012. USDA developed WBSCM with USAID's input to manage domestic and international food aid procurements. USDA spent about $187 million to develop and implement the system. GAO was asked to examine the international emergency food aid procurement process.
This report examines (1) the extent to which agencies agree to use WBSCM to manage the process, (2) how the agencies' use of WBSCM and other systems affects USDA's ability to have accurate information, and (3) the extent to which the agencies are collaborating on how to use WBSCM. GAO reviewed the procurement process and observed WBSCM in use. We analyzed inventory spreadsheets used to compile USDA's financial reports. We compared agencies' efforts to collaborate against key elements for effective interagency collaboration.
section_title: What GAO Found
paragraphs: Although the U.S. Department of Agriculture (USDA) and U.S. Agency for International Development (USAID) jointly manage international emergency food aid procurement, the agencies disagree about the usefulness of the Web Based Supply Chain Management system (WBSCM) to manage the entire process. WBSCM had significant deficiencies when it was implemented in April 2011, which led USAID to discontinue using it to procure ocean freight for bulk commodities, manage prepositioned or stockpiled commodity inventory, and track food aid shipments. For example, WBSCM was slow and time consuming to use and its process to procure ocean freight for bulk commodities was not compatible with USAID's process to negotiate contracts with ocean freight vendors. USDA currently uses WBSCM to procure food aid commodities, while USAID procures ocean freight using other systems not connected to WBSCM. Since March 2012, USDA has made changes to WBSCM, and USDA officials assert that these changes address some of the problems that led to USAID's decision to discontinue use of the system.
Since USAID uses systems outside of WBSCM, USAID and USDA lack information on individual food aid shipments, which, in turn, hinders USDA's ability to use WBSCM to prepare reports and efficiently file claims against ocean carriers to recover U.S. government funds. GAO's Standards for Internal Control in the Federal Government state that information should be accurately recorded and communicated to those who need it and in a form that enables them to carry out their internal control and other responsibilities. USAID relies on freight forwarders to track and periodically provide information on shipments. In GAO's work for a recent report, we found that freight forwarders did not collect complete or consistent information on emergency food aid shipments. Without accurate information from its freight forwarders, USAID is limited in its ability to generate accurate information on food aid shipments. In addition, GAO found that USAID and its warehouse contractors did not always accurately record all prepositioned commodity inventory transactions. USAID provides this potentially inaccurate information to USDA officials who enter this information into WBSCM to generate quarterly financial statements. Moreover, USAID's data collection outside WBSCM makes it more difficult for USDA to file claims efficiently against ocean freight vendors and recover U.S. funds because USDA officials must manually enter USAID information. According to USDA officials, USDA filed 131 such claims in fiscal year 2012 valued at $1.2 million.
USDA and USAID are not collaborating effectively to resolve their disagreement on the usefulness of WBSCM. In prior work, GAO identified key elements of effective collaboration that can enhance and sustain collaboration among federal agencies. Although USDA and USAID's collaborative efforts have incorporated some of these elements to develop WBSCM, they have not incorporated others. Specifically, USDA and USAID do not agree on the roles and responsibilities of key participants in the process, do not share a defined outcome for their collaboration, and do not have a written agreement stating how the agencies will collaborate. An upcoming functional upgrade of WBSCM offers an opportunity to make substantial changes that are mutually agreeable.
section_title: What GAO Recommends
paragraphs: GAO recommended the agencies work together to ensure USDA receives accurate prepositioned inventory data, improve WBSCM's functionality by testing modified functions, and develop a written agreement that clearly outlines outcomes and roles and responsibilities for using WBSCM. USAID noted its view that prepositioned commodities move off USDA's books and onto those of USAID but agreed in general with our other two recommendations. USDA agreed with our recommendations and stated that the Commodity Credit Corporation retains ownership of prepositioned commodities.

section_title: Letter
paragraphs: The U.S. Department of Agriculture (USDA) and the U.S. Agency for  International Development (USAID) spent about $9.2 billion to procure  and deliver international emergency food aid during fiscal years 2007  through 2012 as authorized by Title II of the Food for Peace Act. USDA  and USAID have joint responsibility for the U.S. government response to  emergency food crises, such as the 2013 typhoon in the Philippines and  the persistent droughts in East Africa. In addition, USAID relies on  cooperating sponsors, such as the World Food Program, and their  contractors, to deliver food aid. Congress appropriates funds for the Food  for Peace program to USDA, which it uses to procure commodities.  USDA also allocates a portion of these funds to USAID to implement the  program and arrange ocean freight transportation. Although USDA is  responsible for adhering to financial reporting requirements with respect  to funds transferred to USAID, it is USAID’s responsibility to make every  effort within reason to track and account for these funds and to report this  information to USDA.
Between 2003 and 2011, USDA planned, designed, and implemented a  Web Based Supply Chain Management system (WBSCM, referred to as  “Web S-C-M”) with input from USAID to replace what it considered to be  an outdated food aid procurement system. USDA intended WBSCM to be  the procurement and supply chain management system for both the U.S.  government’s domestic and international food aid programs. As of the  end of fiscal year 2013, USDA had spent more than $187 million to  design, implement, operate, and maintain WBSCM.
The Senate Committee on Agriculture, Nutrition, and Forestry asked us to  examine USDA’s international food aid procurement process. This report  examines (1) the extent to which agencies agree to use WBSCM to  manage the international emergency food aid procurement process; (2)  how the agencies’ use of WBSCM and other systems affects USDA’s  ability to have accurate information about emergency international food  aid shipments; and (3) the extent to which the agencies are collaborating  on how to use WBSCM.
To examine the extent to which agencies agree to use WBSCM and other  systems to manage the international food aid procurement process for the  Food for Peace, Title II program, we collected information about how  WBSCM is used to procure commodities and ocean freight  transportation. We observed how USDA’s Farm Service Agency’s (FSA)  Commodity Operations Office and the USAID’s Office of Food for Peace  use WBSCM, and we observed how USAID uses its Food for Peace  Management Information System. We examined agency documents to  determine the roles and responsibilities of agency officials and their  international stakeholders. Stakeholders include cooperating sponsors  that implement emergency food aid programs on behalf of USAID; freight  forwarders that manage ocean freight logistics, commodity vendors,  ocean freight vendors, and contractors that manage the warehouses  where USAID prepositions or stockpiles commodities for emergencies  overseas.
To examine how the agencies use of WBSCM and other systems affects  USDA’s ability to have accurate information about food aid shipments, we  analyzed how Congress appropriates funds for this program to USDA’s  Commodity Credit Corporation (CCC). We also reviewed the Office of  Management and Budget’s Circular A-136 and USDA and USAID’s  Offices of Inspector General reports. We used this information to  determine the funding relationship between the agencies and the financial  responsibilities each has in accounting for U.S. government resources  and funds for this program. We also drew on work conducted for a  separate report to describe the systems that USAID relies upon to track  emergency food aid shipments. In that report, we also looked at how  USAID collects data on emergency food aid shipments and we  determined the data to be sufficiently reliable for our analysis. We  compared GAO’s Standards for Internal Control in the Federal  Government to USDA and USAID actions in the procurement process.
To examine the extent to which the agencies are collaborating on how to  use WBSCM, we compared U.S. agencies’ efforts to resolve their  disagreement on how to use WBSCM against key considerations that we  identified in 2012 for implementing effective interagency collaboration with  practices for enhancing and sustaining collaboration that we identified in  2005. Based on our analysis of the agencies’ actions, we found that clearly defining roles and responsibilities, defining a common outcome,  and having a written formal agreement to collaborate were the most  relevant practices to assess their efforts.
As part of this review, we obtained commodity and ocean freight funding  data for fiscal years 2007 through 2012 from USAID, and we determined  that the data were sufficiently reliable for our purposes. We also  interviewed agency officials at USAID’s Food for Peace and  Transportation Offices and at the USDA’s Agricultural Marketing Service,  the FSA, including the Commodity Operations Office, and the Foreign  Agriculture Service in Washington, D.C., and Kansas City, Missouri; as  well as cooperating sponsors and freight forwarders. For additional details  about our scope and methodology, see appendix I.
We conducted this performance audit from March 2013 to March 2014 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
subsections: section_title: U.S. Title II Emergency Food Aid Program, Cost, and Funding
paragraphs: Under Title II of the Food for Peace Act, the United States provides  agricultural commodities to address famine and food crises in foreign  countries. Between fiscal years 2007 and 2012, the United States spent  about $9.2 billion to provide emergency food aid to 57 countries through  its cooperating sponsors, such as the World Food Program, Catholic  Relief Services, and Save the Children Federation. The United States  annually spent between $1.1 billion and $2.0 billion to purchase and  deliver about 1 to 2 million metric tons of emergency food aid to recipients  in foreign countries.
U. S. agencies spend the largest percentage of food aid funds to procure  and transport commodities within the United States, and second largest  on the transport, storage, and handling of commodities in recipient  countries. Figure 1 illustrates this distribution of spending for fiscal year  2012. USAID and cooperating sponsors spent the third largest  percentage of funds on ocean freight contracts to transport commodities  across the ocean. USAID directed the remaining funds to cooperating  sponsors to develop and manage programs and deliver commodities from  discharge ports to landlocked recipient countries. Of the emergency food  aid funds directed to cooperating sponsors, the World Food Program  administered over 80 percent, while other cooperating sponsors  administered the rest. USAID and cooperating sponsors contracted with  seven ocean freight forwarders to act on behalf of USAID and its  cooperating sponsors to manage ocean transportation logistics  throughout the shipping process.
section_title: Various Entities Procure and Deliver Emergency Food Aid
paragraphs: USDA and USAID jointly manage Food for Peace emergency food aid  procurement. USDA procures commodities for the program and USAID or  its cooperating sponsors procure ocean transportation for the  commodities. The agencies use a three-phase procurement process: (1)  acquisition planning (reviewing and responding to food requests), (2)  contract formation (procuring commodities and transportation), and (3)  contract administration (delivering commodities and overseeing the  process). See figure 2 for an overview of the process to procure  packaged and bulk commodities and ocean freight.
USAID’s standard procurement process for emergency food aid is to  procure and ship commodities in response to a request from cooperating  sponsors for a specific food emergency. However, USAID may also  preposition commodities in domestic and overseas warehouses located  near regions of the world with historically high emergency food aid  needs. Using this approach, USAID requests commodities from USDA  and ships them to a warehouse before a need for the commodities is  identified. For the commodities shipped to warehouses, ocean freight  vendors submit invoices directly to USAID for payment, and USDA retains  ownership of the commodities until cooperating sponsors pick up the  commodities from the warehouses, according to USDA. As a result,  commodities in these warehouses remain on USDA’s accounting ledger  as inventory assets until cooperating sponsors make requests and take  possession of the commodities for their programs. Since USAID contracts  for the management of its domestic and overseas warehouses, USDA  requires USAID to provide it with information on the type, amount, and  value of commodities in each warehouse’s inventory.
In addition, USAID can divert commodities originally destined for a  prepositioned warehouse to respond to a cooperating sponsor’s  emergency food aid request. When diversion occurs, instead of  delivering commodities to a prepositioned warehouse as planned, ocean  freight vendors deliver to an alternate port that is specified on the ocean  freight contract or to a cooperating sponsor at the same foreign port as  the warehouse. As a result, the ship, foreign port, ocean bill of lading, and  cost of ocean freight can change from what was originally agreed to  under the initial ocean freight contract.
section_title: USDA Developed WBSCM to Manage Food Aid Procurement
paragraphs: The USDA’s Agricultural Marketing Service, which procures commodities  for USDA’s domestic food aid programs, funded most of WBSCM’s  design and currently manages the system. WBSCM replaced USDA’s  ordering, procurement, and inventory systems, some of which USDA  considered costly and outdated. These systems did not electronically  manage the entire food aid procurement process, provide accurate  inventory accounting, or track commodity shipments in real time. USDA  also could not use the systems to electronically process invoices and  payments. USDA expected WBSCM to integrate supply chain activities of  up to 40,000 users, process requests for 4.5 million metric tons of  domestic and international food aid each year, manage electronic  contracting for commodities and freight, track inventory, pay vendors, and  process claims. USDA intended that all stakeholders including those  participating in international food assistance would use WBSCM as a  supply chain management system. To do so, WBSCM uses data entered  during earlier steps of the process to complete some of the later steps.  Therefore, information needs to be entered in a sequential order for the  later functions of the system to work correctly.
USDA developed the business case for WBSCM in 2003 and awarded  the contract for developing the software in October 2006. To identify the  international food aid procurement functions, USDA established an  interagency project team that included representatives from USDA’s Farm  Service Agency (FSA) and Foreign Agriculture Service and USAID’s Food  for Peace and Transportation Offices. The interagency team started to  develop the system’s technical requirements for the food aid programs in  2007. Agencies began the initial testing phase of WBSCM in November  2009, and USDA began a phased rollout of WBSCM in June 2010,  focusing primarily on domestic food aid procurement.
section_title: USDA and USAID Disagree on WBSCM’s Usefulness in Managing the International Emergency Food Aid Procurement Process
paragraphs: USDA and USAID disagree about the usefulness of WBSCM to manage  the entire emergency food aid procurement process. Although USDA  created WBSCM with input from USAID, the system had deficiencies  when it was implemented in April 2011. Since August 2011, USAID has  not been using WBSCM as intended to procure ocean freight for bulk  commodities, manage commodity inventory in preposition warehouses, or  track food aid shipments. USAID manages its part of the procurement  process using other systems not connected to WBSCM. USDA officials  assert that, since March 2012, the agency has made significant  improvements to WBSCM that would address many of the problems that  led to USAID’s discontinued use of the system’s functions to procure bulk  commodity ocean freight, manage commodity inventory, and track food  aid shipments.
subsections: section_title: USAID Has Not Used WBSCM as Intended Because It Had Significant Deficiencies at Implementation
paragraphs: WBSCM had deficiencies when it was implemented in April 2011, so  USAID gradually discontinued using it to procure ocean freight for bulk  commodities, manage commodities for prepositioned warehouses, and  track food aid shipments between August 2011 and June 2012. When  USDA, USAID, and several international stakeholders, such as USAID’s  cooperating sponsors and freight forwarders, started to use WBSCM,  they immediately encountered significant problems. The USDA’s Foreign  Agricultural Service reported in an April 2011 memo that WBSCM might  not be ready to handle complex international food aid procurements  involving multiple delivery points and commodities. In June 2011, USAID  informed USDA in a letter that its stakeholders found WBSCM time  consuming to use. In addition, USAID stated that the system’s process to  procure international bulk ocean freight was not compatible with USAID’s  process and recommended that neither agency use WBSCM to procure  bulk ocean freight. For example, USAID informed USDA that WBSCM  could not account for key information—such as current market conditions,  available funding, alternate foreign ports, and available ships with  sufficient cargo space—that USAID needed to negotiate with vendors  when procuring ocean freight for bulk commodities. In addition, USAID  and its stakeholders experienced substantial performance problems and  indicated that the system was cumbersome and not user friendly. In a  July 2011 memo, USDA acknowledged deficiencies in WBSCM and  stated it was working to fix problems. For example, the USDA memo  acknowledged USAID’s difficulties in using WBSCM to procure bulk  freight.
Moreover, freight forwarders that manage ocean freight logistics for the  cooperating sponsors identified concerns they had about the additional  workload WBSCM required of them. For example, they noted in June  2011 that WBSCM required them to enter data historically completed by  stevedores (contractors who load or unload commodities) at U.S. load  ports, which increased the freight forwarders’ workload and created  confusion about what commodity was being delivered, loaded, and  unloaded at U.S. load ports. Furthermore, WBSCM’s initial inability to  track food aid shipments, such as recording when a shipment had been  diverted before the commodities arrived in a foreign location, posed a  problem for freight forwarders. As a result, the freight forwarders  experienced unnecessary delays in coordinating information with ocean  freight vendors and providing these vendors with required instructions for  shipping and unloading cargoes.
As a result of difficulties in using WBSCM, USAID discontinued using it  for certain functions. In August 2011, USAID issued a memo to  cooperating sponsors, freight forwarders, ocean transportation providers  and their brokers stating that, effective immediately, all bid offers for bulk  ocean freight transportation shipped under the Title II program did not  need to be submitted through WBSCM. USAID also decided it would not  use WBSCM to manage its prepositioned commodity inventories. At that  time, a USAID official informed USDA that USAID had a number of issues  with WBSCM that needed to be addressed for it to effectively manage  prepositioned commodity inventories using the system. The official further  stated that until these issues were fixed, USAID would continue to work  outside WBSCM to manage these inventories.
In response to concerns expressed about WBSCM, USDA and USAID  announced the formation of an interagency team in November 2011 to  address international stakeholders’ concerns with WBSCM. At that time,  the WBSCM program manager acknowledged that USDA had been  unable to implement timely solutions for the problems that the  international stakeholders had faced and that WBSCM had been  designed with insufficient input from the international stakeholders. During  November and December 2011, the agencies held meetings to identify  needs and priorities, created an action list, and assigned individual USDA  and USAID officials to specific tasks on the list.
Despite these efforts, USAID and international stakeholders continued to  have concerns about using WBSCM. USAID eventually decided in  February 2012 that WBSCM should only be used for USDA to procure  commodities. As a result, USAID awards ocean freight contracts for bulk  and packaged commodities outside of WBSCM. Furthermore, in June  2012, USAID and USDA agreed that freight forwarders did not need to  use WBSCM to update ocean freight contracts. Rather, freight forwarders  continue to update ocean freight contracts in their own separate systems.
section_title: USAID Manages Its Procurement Process Using Systems Not Connected to WBSCM
paragraphs: USAID and its international stakeholders currently perform most of the  functions required to procure bulk ocean freight in systems not connected  to WBSCM. For example, USAID receives bulk freight bids via email and  negotiates bulk ocean freight contracts directly with vendors. According to  USDA officials, USDA then manually enters the awarded ocean freight  contract information for bulk commodities in WBSCM. In addition, USAID  officials said they do not use WBSCM to record changes to ocean freight.  As a result, USDA does not receive updates in WBSCM when USAID  makes changes to the shipment, or when freight forwarders divert  commodities on USAID’s behalf.
USAID officials also said they do not use WBSCM to track inventory of  prepositioned commodities because key information required to track  commodities from the U.S. load port to overseas warehouses is not  entered in WBSCM. As we noted above, USAID informed USDA in  August 2011 that the agency would continue to track and allocate  prepositioned commodity inventory using other systems. Instead of using  WBSCM, USAID officials track prepositioned commodity inventory using  spreadsheets with information from USAID’s contractors at its  prepositioned warehouses. USAID officials send USDA a consolidated  spreadsheet, and USDA officials manually enter inventory data in  WBSCM to provide food aid information for the Commodity Credit  Corporation’s (CCC) quarterly financial statements.
section_title: USDA Asserts That It Has Made Significant Improvements to WBSCM
paragraphs: USDA officials have stated that, since March 2012, the agency has made  significant improvements to WBSCM that address many of its difficulties.  During the course of our review, USDA officials stated that several of  WBSCM’s shortcomings, such as poor functionality and ease of use,  have been addressed. They also noted that USDA’s Foreign Agriculture  Service currently uses WBSCM to manage all procurement functions for  its international food aid programs and requires stakeholders to manage  aspects of the programs, including updating ocean freight information, in  WBSCM. In addition, USDA officials noted that they have modified the  inventory management function of WBSCM that could be used to track  prepositioned inventory. They also said that they have modified WBSCM  sufficiently to facilitate tracking changes in freight information. For  example, these officials said that WBSCM had been modified so that it  can capture needed information when a shipment has been divided to  ship on multiple vessels.
According to USDA officials, the agency would like USAID to resume fully  using WBSCM, which would address USDA concerns regarding the lack  of current information about shipments after they depart U.S. ports and  inventory of prepositioned commodities. USAID officials from the Food for  Peace and Transportation Offices indicated in August 2013 that they are  currently able to manage their portion of the emergency food aid program  without expanding their use of WBSCM. They also indicated that they  would consider using WBSCM again if USDA made substantial  improvements that addressed their concerns. However, as of February  2014, USAID had not tested WBSCM’s ability to manage prepositioned  commodity inventory and track food aid shipments since USDA made  changes to the system.
section_title: USAID’s Use of Other Systems Hinders USDA’s Ability to Prepare Accurate Reports and Efficiently File Claims Against Ocean Carriers to Recover Government Funds
paragraphs: Since USAID uses systems outside of WBSCM, USAID and USDA lack  complete and accurate information on individual food aid shipments,  which, in turn, hinders USDA’s ability to use WBSCM to prepare accurate  financial reports and recover U.S. government funds. For example,  USAID’s systems cannot provide tracking information on some food aid  shipments. In addition, USAID’s current systems for tracking the inventory  of commodities that it has in prepositioning warehouses lack sufficient  internal controls, according to the USAID Inspector General, thus  hindering the agencies’ abilities to verify commodity inventories.
USAID’s data collection outside of WBSCM also makes it more difficult for  USDA to efficiently file claims to recover U.S. government funds.
subsections: section_title: USAID’s Systems Cannot Provide Information on Some Food Aid Shipments
paragraphs: In our work for a recent report on the impact of prepositioning on the  timeliness of emergency food aid, we found that some information on  emergency food aid shipments in WBSCM could not be used to assess  their delivery timeframes. USAID’s Office of Food for Peace informed  USDA in a February 2012 letter that USAID would rely on its  Transportation Office and the freight forwarders to track and periodically  provide information on shipments. In addition, in June 2012 USAID  informed freight forwarders that they no longer were expected to update  tracking information for emergency food aid shipments into WBSCM.  However, in our related GAO report on prepositioning food aid, we found  that USAID does not maintain tracking data on food aid shipments that  would allow it to assess the timeliness of deliveries. Rather, the freight  forwarders maintain tracking data in their own, separate systems from  which USAID can request data.
USDA has expressed concerns that it does not have complete and  accurate information it needs and it is unclear whether USAID has  sufficient internal controls over the data that freight forwarders collect on  individual shipments of emergency food aid. GAO’s Standards for Internal  Control requires that agencies implement appropriate control activities,  such as ensuring that transactions are recorded in a complete and  accurate manner. USDA’s FSA issued a memo in April 2012 outlining  the implications of USAID’s decision in February 2012 to not use WBSCM  to track food aid shipments. Specifically, FSA stated that administering  activities outside of WBSCM would increase the number of errors, be  more labor intensive, and create additional strain on FSA’s resources.  FSA also stated that by not using these features of WBSCM, USAID  would limit the government’s ability to track commodities from initial order  through final delivery. In addition, FSA officials have indicated that  USAID’s decision to stop requiring freight forwarders to enter updated  freight award information in WBSCM affects the accuracy of ocean freight  information in WBSCM, such as the price paid to transport commodities;  the foreign destination port; and the vessel used. FSA officials noted that  this is information they need to prepare reports on food aid shipments. In  addition, USAID has not provided guidance on the information that USAID  and USDA need collected on individual shipments. show dates that approximate the dates when the cooperating sponsors  requested the food from USAID.
section_title: USDA and USAID Have Been Unable to Verify Overseas Commodity Inventory Data
paragraphs: A recent USAID inspector general report and independent audits of the  Commodity Credit Corporation (CCC) raise concerns that USAID and  USDA’s current systems for tracking commodities that USAID has  prepositioned in warehouses may have insufficient internal controls,  hindering the agencies’ abilities to verify commodity inventories. Similarly,  we found that USAID’s commodity inventory spreadsheets contained  missing data and incorrect formulas to compile inventory information.
A January 2013 USAID inspector general report found that internal  control weaknesses in USAID’s prepositioning inventory records caused  irreconcilable discrepancies between the agency’s records and  warehouse inventory records. According to USAID’s Automated  Directives System, contract officer representatives must ensure that the  cooperating sponsor is performing in accordance with the terms  contained in the contract. However, the inspector general found that  USAID’s Transportation Office, foreign warehouses and others did not  have an adequate system in place to consistently identify and resolve  discrepancies in inventory records. Specifically, the audit found that the  amount of incoming and outgoing food at the Djibouti warehouse could  not be reconciled within the threshold established in the warehouse  contract. The audit stated that commodity differences can result from  changes in shipments or commodity losses. It also noted that  discrepancies in records resulted from a number of factors, including  incomplete records and incomplete survey reports conducted by an  independent contractor monitoring warehouse activities. According to the  report, reconciliations throughout the supply chain would improve the  system’s reliability and allow USAID to evaluate the performance of  warehouse contractors accurately. The inspector general recommended  that USAID implement a system of internal controls to reconcile its  records regularly with reports from warehouses and outgoing shipment  reports to identify and resolve differences in a timely manner.
Furthermore, independent audits of CCC’s financial activities showed  instances where USDA had insufficient internal controls to verify  commodity information that it received from USAID; as a result, the  independent audits reported significant deficiencies in CCC’s financial  statements. GAO’s Standards for Internal Control state that control  activities, such as reviews of management at the functional or activity  level, are an integral part of an entity’s accountability for government  resources. However, the audits reported USDA’s controls over foreign  prepositioned inventory distributed by USAID as a significant deficiency in  CCC’s financial statements for fiscal years 2012 and 2013. Specifically,  the fiscal year 2012 audit noted that the process USDA used to determine  the amount of inventory on hand at foreign warehouses consisted only of  an email sent from USAID to USDA outlining the levels of inventory by  commodity. It found that CCC had no evidence of adequate controls or  policy and procedures over the warehouse inventory information to  determine whether the balances reported by USAID are reasonable prior  to entries by CCC. During the course of our review, USDA officials  responsible for entering inventory information into WBSCM to produce  CCC’s financial reports confirmed that they cannot verify the inventory  information they receive from USAID.
In addition, we found that some of the spreadsheets that USAID used to  compile inventory information were missing data and contained incorrect  formulas. We reviewed spreadsheets for 6 warehouses where USAID  prepositions commodities and found errors in 3 of them. For example, we  found that the spreadsheet that the contractors used to track inventory at  the prepositioning warehouse in Djibouti contained errors. It showed eight  instances in which contractors documented commodities leaving the  warehouse before the same commodities were documented as entering  the warehouse. We also found two instances in which contractors  recorded commodities leaving the warehouse 4 months after they had left  the warehouse. To determine inventory levels, contractors at each  warehouse submit inventory information to USAID, which consolidates  the information into a single spreadsheet that it provides to USDA. As a  result, inaccuracies in a single warehouse inventory spreadsheet create  inaccuracies in USAID’s consolidated spreadsheets. USDA officials enter  information provided by USAID into WBSCM to generate various reports,  including CCC’s quarterly financial statements to the Office of  Management and Budget.
section_title: USAID’s Data Collection Outside WBSCM Impedes USDA’s Process to Recover U.S. Government Funds Efficiently
paragraphs: USAID’s data collection outside WBSCM impedes USDA’s process to file  claims against ocean freight vendors and recover U.S. funds. When an  ocean freight vendor loses or damages a portion of the commodities  loaded onto its vessels, the vendor is liable for the funds it received to  transport that portion of the shipment in addition to the value of the lost or  damaged commodities. According to USDA officials, USDA filed 131  claims against vendors in fiscal year 2012, valued at $1.2 million. Since  USAID and cooperating sponsors use freight forwarders to manage  logistics for ocean freight services, USDA requires information from  USAID, cooperating sponsors, and freight forwarders to process ocean  freight claims.
USDA’s ability to file claims against ocean freight vendors depends on  having accurate information about changes that USAID makes to ocean  freight shipments after contracts are awarded. USAID can authorize  changes in a shipment that can result in changes to both deliveries and  the amounts USAID may pay to an ocean freight vendor. For example,  USAID may approve the substitution of one ocean freight vessel for  another or split a shipment onto two or more vessels. We found that  USAID diverted 60 percent of shipments destined for prepositioning  warehouses between fiscal year 2007 and 2012, potentially incurring  freight rates different from what the vendor would have charged to deliver  the commodities to the original destinations. According to USDA officials,  since freight forwarders do not regularly update freight information in  WBSCM, USDA officials must do additional work to determine changes  made to each freight award.
Additionally, USDA officials process ocean freight claims using  information in WBSCM, but they upload information they need to process  claims themselves since USAID and freight forwarders do not use the  system to track shipments or store freight information. USDA’s ability to  file claims against ocean freight vendors depends on having accurate  information on ocean freight shipment details, confirmation of each  delivery, and the amounts that USAID pays for ocean freight in WBSCM.  According to USDA officials, WBSCM did not have the capability to  process ocean freight claims when the system was first implemented, so  USDA requested USAID, cooperating sponsors, freight forwarders, and  others to submit claims documentation outside of WBSCM. Although  USDA officials say claims could be processed through WBSCM since  November 2012, USAID and freight forwarders continue to provide  documents via email, and regular mail instead of uploading documents  into WBSCM.
USDA’s guidance also required freight forwarders to provide freight contracts and  discharge/delivery surveys, among other documents. In addition, the guidance required  cooperating sponsors to sign off their rights to have USDA to pursue a claim on their  behalf. accurate information on the amount USAID actually paid. During the  course of GAO’s work, USAID contacted USDA and made arrangements  to provide the necessary documents to assist USDA in its claims process.  As of February 2014, USAID had provided USDA with at least 190 freight  vouchers to process ocean freight claims since July 2013.
section_title: USDA and USAID Have Not Resolved Their Disagreement about WBSCM, but Planned System Upgrades Provide an Opportunity to Collaborate More Effectively
paragraphs: USDA and USAID have been unable to collaborate effectively to resolve  their disagreement on the suitability of WBSCM for emergency food aid  procurement. In prior work, we have identified practices that can enhance  and sustain collaboration among federal agencies, thereby improving  performance and results. Although USDA’s and USAID’s collaborative  efforts have incorporated some of these elements to develop WBSCM,  they have not incorporated others. Nevertheless, an upcoming functional  upgrade of WBSCM offers the agencies an opportunity to make  substantial, mutually agreeable changes to WBSCM.
subsections: section_title: USDA and USAID Have Not Been Able to Collaborate to Resolve Disagreements over WBSCM
paragraphs: USDA and USAID have not collaborated effectively to resolve their  disagreement on the suitability of WBSCM for emergency food aid  procurement. Although USDA’s and USAID’s efforts have incorporated  some practices to enhance and sustain collaboration they have not  incorporated others. As we mentioned above, the agencies held weekly  meetings to identify needs and priorities, created an action list, and  assigned relevant individual USDA and USAID officials to specific tasks  on the list between November and December 2011. However, by March  2012, the agencies could not agree on how to move forward with using  WBSCM to procure bulk ocean freight and USAID has not tested changes  that USDA has made to the system since March 2012. Specifically, USDA  and USAID do not agree on the roles and responsibilities of key  participants in the international food aid procurement process, do not  share a defined outcome for their collaboration, and do not have a written  agreement stating how the agencies will collaborate.
Clarify roles and responsibilities. While USDA and USAID have  designated some roles and responsibilities between themselves, they  do not agree on the role and responsibilities that the freight forwarders  should have in entering and updating information in WBSCM. Our  prior work found that a key factor of effective collaboration is that  agencies clarify the roles and responsibilities of those participating in  the collaborative effort. During the design phase of WBSCM, the  agencies assigned the freight forwarders responsibility for entering  information about individual shipments and updating the information  whenever there were changes. However, freight forwarders we  interviewed have said they were not consulted by either agency and,  after WBSCM was rolled out, they expressed concerns about the  amount of information they needed to update, according to agency  documents and officials. They noted that entering such information  into WBSCM was redundant with their own systems, cumbersome,  and time consuming given the system problems WBSCM was  experiencing. As we previously noted, USAID informed USDA in June  2012 that they would no longer require the freight forwarders to  update shipment information in WBSCM for USAID’s international  food aid shipments. The lack of updated information has created  challenges for USDA in processing claims and ensuring that they  have accurate inventory information.
Agree on common goals. USDA and USAID established some joint  action items for WBSCM, but they do not agree on a common goal for  its further development and use of WBSCM. Our prior work has found  that most experts we interviewed in collaborative resource  management emphasize the importance of collaborative groups  having clear goals. Experts noted that participants may not have the  same interests, but establishing common goals provides them a  reason to participate in the process. After the rollout, as problems  arose, USDA and USAID agreed that USAID would suspend using the  system for bulk freight procurement, and then for tracking  prepositioned food aid inventory. They also agreed that freight  forwarders would not be required to update freight information as  changes in the shipments occurred. While the agencies collaborated  to resolve some problems, such as creating a role for the stevedores  in WBSCM, they have not resolved whether USAID would resume  trying to use WBSCM fully for bulk freight procurement, tracking and  updating information on shipments, and recording prepositioned food  aid inventory. As we noted above, as of February 2014, USAID had  not agreed to test the changes that USDA made to the system since  March 2012 to improve its performance and functionality to procure  emergency food aid. In its response to this report, USAID stated that it  would test the international procurement functions of WBSCM.
Written collaborative agreements. USDA and USAID have not  documented how they would further develop and use WBSCM, or  how they would resolve their outstanding issues. Our prior work found  that agencies that articulate their agreements in formal documents  can strengthen their commitment to working collaboratively. As we  have previously reported, having a clear and compelling rationale to  work together is a key factor in successful collaborations. Agencies  can overcome significant differences when such a rationale and  commitment exist. USDA and USAID have a memorandum of  understanding (MOU) concerning the emergency food aid program  that FSA and USAID signed in 1991. FSA and USAID have drafted,  but not yet signed, an updated MOU that USDA’s General Counsel is  currently reviewing. According to USDA officials, both MOUs generally  cover USAID’s and USDA’s roles and responsibilities in carrying out  emergency food aid operations. However, neither MOU specifies the  roles and responsibilities of either agency or desired outcome  regarding their collaboration on WBSCM.
section_title: Planned WBSCM Upgrades Provide an Opportunity to Address System Deficiencies
paragraphs: USDA officials said in August 2013 that they have addressed several of  WBSCM’s performance and functional issues; however, they note that  reconfiguring WBSCM to fully address USAID’s needs will require  additional technical and functional upgrades. In September 2013, USDA  began a technical upgrade of WBSCM to replace some system  components and software that are obsolete and are increasingly difficult  to maintain. According to USDA officials, the technical upgrade should  also result in some benefits for users, such as improved performance,  and allow users to better segregate and identify the cost of split  shipments. In addition, the technical upgrade will enable users to access  the system using the most current versions of Internet Explorer, which is  a widely used Internet browser. A USDA official cautioned, however, that  because USDA has just begun making this upgrade, it cannot be sure of  the full scope of the improvements that will occur.
The technical upgrade will be the foundation for a more extensive,  functional upgrade that USDA plans to conduct in fiscal years 2015  through 2017, according to USDA officials. To make WBSCM a more  effective system, USDA intends to change the functionality of WBSCM to  align with current commercial business practices. Therefore, as part of  the functional upgrade effort, USDA plans to examine domestic and  international commercial food business trends and best practices and the  extent to which its food aid procurement processes reflect them.  According to USDA officials, the planned functional upgrade would  provide an opportunity to fully address USAID’s concerns. For example,  the functional upgrade could allow USDA to re-configure WBSCM so that  it fits USAID’s bulk ocean freight procurement needs. As mentioned  previously, USAID officials told us that they are willing to use WBSCM to  procure bulk ocean freight and manage inventory if USDA is able to  address the deficiencies that they and others have identified.
section_title: Conclusions
paragraphs: USDA and USAID have joint responsibility to carry out the Food for  Peace program and respond to global emergency food crises. Toward  that end, USDA developed a web-based system with USAID’s input to  manage the procurement of food aid. However, because of WBSCM’s  deficiencies, USAID discontinued use of the system starting in 2011. The  agencies are currently at an impasse. USDA has made modifications to  the system, but it is unclear if these would fully respond to USAID’s  concerns, and USAID has not tested the modifications. Their continued  disagreement on the usefulness of WBSCM is hindering USDA’s ability to  prepare accurate financial reports and efficiently file claims to recover  funds. USDA’s planned major upgrade of the system affords USDA and  USAID an opportunity to revisit their collaboration on WBSCM and  improve the system so that it meets the needs of all users and to ensure  that USDA has reliable and accurate data to prepare its financial  statements and account for U.S. government funds.
section_title: Recommendations for Executive Action
paragraphs: To improve the efficiency and accountability of the emergency food aid  procurement process, we recommend the Secretary of Agriculture and  Administrator of USAID direct their staffs to work together to take steps  to:  improve USDA’s ability to account for U.S. government funds by  ensuring that USAID provides USDA with accurate prepositioned  commodity inventory data that USDA can independently verify; and assess WBSCM’s functionality by testing the international  procurement functions that have been modified since April 2011 and  documenting the results.
In preparation for WBSCM’s functional upgrade, we recommend the  Secretary of Agriculture and Administrator of USAID direct their staffs to  work together to take steps to: develop a written agreement signed by both agencies that clearly  outlines the desired outcomes of their collaboration and the roles and  responsibilities of participants, such as freight forwarders.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to USDA and USAID for comment.  USDA and USAID provided written comments on the draft, which are  reprinted in appendixes II and III, respectively. We also received technical  comments from USDA and USAID, which we incorporated throughout our  report as appropriate. USDA generally agreed with our recommendations  and expressed willingness to continue to initiate improvements in the  efficiency and accountability of the emergency food aid procurement  process. USAID agreed to test WBSCM’s current functionality and to  clarify the roles and responsibilities of participants in a written agreement  with USDA. Regarding our recommendation to ensure that USAID  provides USDA with accurate prepositioned commodity inventory data  that can be independently verified, USAID stated it is of the view that  commodities move off USDA’s books and onto those of USAID when a  contractor takes possession, on USAID’s behalf, of the commodities in  question. However, according to USDA and its independent auditor, the  CCC retains the ownership of the commodity inventory until USAID  distributes it from the warehouse. USAID did not comment on the  concerns we identified about the quality of USAID’s internal controls and  inventory data, which need to be addressed regardless of which agency  includes the data in its financial reporting.
In addition to providing copies of this report to your offices, we will send  copies to interested congressional committees, the Secretary of  Agriculture, and the Administrator of USAID. We will make copies  available to others on request. In addition, the report is also available at  no charge on the GAO website at http://www.gao.gov.
If you or your staff has 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 IV.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: Our review focused on the procurement process for the Title II emergency  food aid program managed by the U.S. Department of Agriculture (USDA)  and the U.S. Agency for International Development (USAID). This report  examines (1) the extent to which agencies agree to use WBSCM to  manage the international emergency food aid procurement process; (2)  how the agencies’ use of WBSCM and other systems affects USDA’s  ability to have accurate information about emergency international food  aid shipments; and (3) the extent to which the agencies are collaborating  on how to use WBSCM.
To provide context and background on the Title II emergency food aid  procurement process, we analyzed the total food aid expenditures and  tonnage data for fiscal years 2007 through 2012. The data that we  obtained included USAID commodity and ocean freight funding data for  fiscal years 2007 through 2012. These data were presented for context  and background purposes only, and we determined they were reliable for  our purposes. We also analyzed budget processes, financial reporting  requirements, contract documents, cooperating sponsor cooperative  agreements and transfer authorizations, legislation, acquisition  regulations, and past GAO food aid reports to understand the emergency  food aid procurement process.
To examine the extent to which the two agencies use the Web Based  Supply Chain Management system (WBSCM) to manage the international  emergency process to procure commodities and ocean freight  transportation, we interviewed USDA and USAID officials and reviewed  documentation. At USDA, we met with officials of the Agricultural  Marketing Service; Foreign Agricultural Service, and Farm Service  Agency, including officials in the Farm Service Agency’s Commodity  Operations Office in Kansas City, Missouri. At USAID, we met with  officials of the Office of Food for Peace and the Transportation Office in  Washington, D.C. Documents we reviewed included agency procurement  schedules, organizational charts, policies and procedures, and flow  charts, as well as contract documents, legislation, and acquisition  regulations. We also obtained and analyzed USDA and USAID memos,  briefings, and newsletters that discuss what WBSCM was designed to do  and concerns surrounding the use of WBSCM. We observed how both  agencies use WBSCM, and USAID officials explained or demonstrated  some of the systems that they use separately from WBSCM to procure  and manage emergency food aid, including USAID’s Food for Peace  Management Information System.
In addition to conducting interviews with agency officials and obtaining  agency documentation, we conducted interviews with and obtained  documentation from officials of the World Food Program and private  voluntary organizations. We also interviewed and obtained documentation  from six of the seven freight forwarders that manage the transportation of  food aid from the U.S. load port to the foreign destination or overseas  prepositioned warehouse port. We did not test the system ourselves  because it was beyond the scope of this review to simulate multiple food  aid procurements, including the variances that occur during the shipping  process, and simulate the interface for multiple users. We did not assess  the extent to which USDA uses WBSCM for its domestic and international  food aid programs, or whether WBSCM performs these functions  effectively because that was beyond the scope of this engagement.
To examine how the agencies use of WBSCM and other systems affects  USDA’s ability to have accurate information as well as USDA’s ability to  efficiently recover U.S. government funds from lost or damaged  commodities during ocean transit, we interviewed officials from USDA’s  Commodity Operations Office and USAID’s Office of Food for Peace,  Transportation Office and Office of the Chief Financial Officer. To  examine how USAID’s use of systems outside of WBSCM affects USDA’s  ability to report and account for U.S. government funds, we obtained and  analyzed USDA and USAID documentation and spreadsheets used to  track foreign prepositioned commodity inventory levels and how these are  used to provide information for financial statements. The documentation  that we obtained and analyzed included warehouse inventory reports  prepared by each of the contractors that manage USAID’s foreign  prepositioned warehouses, as well as a consolidated warehouse  inventory spreadsheet that USAID has provided to USDA to comply with  USDA’s request for inventory data to use in complying with applicable  financial reporting requirements.
We also drew on work conducted for a recent report to describe the  systems that USAID relies upon to track emergency food aid shipments.
For that report, we collected data on emergency food aid shipments from  fiscal years 2007 through 2012 from the World Food Program and six  freight forwarders. We assessed the reliability of these data by asking the  World Food Program and the six freight forwarders that manage the  transportation of Title II emergency food aid for cooperating sponsors how  they collected the data, the quality checks that they perform, and the  internal controls they have in place to ensure the accuracy of the data.  We also tested some of the data for missing data, outliers, and obvious  errors. In total, we assessed the records for 5,142 emergency food aid  shipments during this period. Based on our assessments, we found that  data for 1,357 shipments were not sufficiently reliable to determine how  prepositioning and diverting food aid affects the timeliness of food aid  deliveries. See appendix II in GAO-14-277 for the results of this analysis.
To understand the applicable quarterly financial reporting requirements  that USDA must address to account for overseas prepositioned food aid  inventories, we analyzed how Congress appropriates funding for this  program. We also obtained and analyzed applicable Office of  Management and Budget (OMB) circulars, such as the OMB Circular A- 136 and other federal regulations. We also identified the internal control  requirements applicable to federal agencies. These are contained in  GAO’s Standards for Internal Control in the Federal Government. We  compared the internal control standards identified in this report with  USDA and USAID’s actions in the procurement process. We also  reviewed internal control deficiencies identified in a January 2013 USAID  regional inspector general report, as well as in audits of the Commodity  Credit Corporation prepared by an independent auditor. We did not  independently audit the Commodity Credit Corporation’s financial  statements, but the USDA Inspector General did not find instances where  the auditor did not comply, in all material respects, with government  auditing standards and the OMB Bulletin 07-04, Audit Requirements for  Federal Financial Statements, as amended. To assess the extent to  which the use of WBSCM and other systems affects USDA’s ability to  process ocean freight claims and efficiently recover U.S. government  funds, we obtained and analyzed USDA and USAID documents and  emails that describe the claims documentation submission process that  the two agencies agreed to implement in June 2012. We also examined  the extent to which USDA and USAID are sharing claims-related  information by analyzing e-mails and freight vouchers submitted by  USAID to USDA from June 2013 through February 2014.
To examine the extent to which USDA and USAID collaborate on how to  use WBSCM, we obtained documentation from both agencies and  developed a timeline of events. The documentation obtained included  annual performance reports, letters, memos, emails, information bulletins,  updates to USDA’s risk management plan, and meeting notes. We also  obtained a copy of a post-implementation review conducted by an  independent contractor that documented a number of findings related to  WBSCM. We interviewed officials from the USDA’s Agriculture Marketing  Service, Foreign Agriculture Service, and Farm Service Agency, as well  as officials from USAID’s Food for Peace and Transportation Offices. We  also interviewed six of the seven freight forwarders that manage the  transportation of food aid for USAID and cooperating sponsors. After  reviewing GAO’s 2005 and 2012 reports on practices to improve  interagency collaboration, we compared the practices with USDA and  USAID actions from April 2011 to August 2013 and determined that five of  the practices were the most relevant in describing the agencies’ efforts to  resolve their concerns about WBSCM. We determined that the two  agencies did follow two leading practices. However, we also determined  that there were three collaboration practices that they had not followed.  Our 2005 and 2012 reports highlighted the need for agencies’ to  document their agreement to collaborate through memorandums of  understanding or other similar documents. Also, our reports demonstrated  the benefits of ensuring that collaborating agencies agree and are clear  with respect to their roles and responsibilities. This includes agreeing on  the role of the contractors that implement the program. In addition, our  reports highlighted the importance of ensuring that collaborating agencies  have clearly defined goals.
We conducted this performance audit from March 2013 to March 2014 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
section_title: Appendix II: Comments from the U.S. Department of Agriculture
section_title: Appendix III: Comments from the U.S. Agency for International Development
subsections: section_title: GAO Comment
paragraphs: USAID stated it is of the view that commodities move off USDA’s books  and onto those of USAID when a USAID contractor takes possession of  the commodities in question. However, according to USDA and its  independent auditor, CCC retains ownership of the inventory when it is in  USAID’s possession. Nevertheless, we identified concerns about the  quality of USAID’s internal controls and inventory data, which need to be  addressed regardless of which agency includes the data in its financial  reporting.
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the person named above, Valérie L. Nowak (Assistant  Director), Rhonda Horried, Mark Needham, José M. Peña III, Ashley  Chaifetz, Fang He, Martin De Alteriis, Mark Dowling, Etana Finkler, Karen  Deans, and Carol Bray made significant contributions to this report.
section_title: Related GAO Products
paragraphs: International Food Aid: Prepositioning Speeds Delivery of Emergency Aid,  but Additional Monitoring of Time Frames and Costs Is Needed. GAO-14- 277. Washington, D.C.: March 5, 2014.
World Food Program: Stronger Controls Needed in High-Risk Areas.  GAO-12-790. Washington, D.C.: September 13, 2012.
Farm Bill: Issues to Consider for Reauthorization. GAO-12-338SP.  Washington, D.C.: April 24, 2012.
USDA Systems Modernization: Management and Oversight  Improvements Are Needed. GAO-11-586. Washington D.C.: July 20,  2011.
International Food Assistance: Better Nutrition and Quality Control Can  Further Improve U.S. Food Aid. GAO-11-491. Washington, D.C.: May 12,  2011.
International Food Assistance: A U.S. Governmentwide Strategy Could  Accelerate Progress toward Global Food Security. GAO-10-212T.  Washington, D.C.: October 29, 2009.
International Food Assistance: Key Issues for Congressional Oversight.  GAO-09-977SP. Washington, D.C.: September 30, 2009.
Foreign Assistance: Various Challenges Limit the Efficiency and  Effectiveness of U.S. Food Aid. GAO-07-905T. Washington, D.C.: May  24, 2007.
Foreign Assistance: Various Challenges Impede the Efficiency and  Effectiveness of U.S. Food Aid. GAO-07-560. Washington, D.C.: April 13,  2007.