Foreign Assistance: Multiple Challenges Hinder the Efficiency and Effectiveness of U.S. Food Aid
Published: 2007-10-02T00:00:00

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 between 2001 and 2006. These costs represent 65 percent of total emergency food aid, highlighting the need to maximize its efficiency and effectiveness. This testimony is based on a recent GAO report that examined 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. Factors that cause inefficiencies include (1) insufficiently planned food and transportation procurement, reflecting uncertain funding processes, that increases delivery costs and 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 in tracking and responding to food and delivery problems. U.S. agencies have taken some steps to address timeliness concerns. USAID has been stocking or prepositioning food domestically and abroad, and USDA has implemented a new transportation bid process, but the long-term cost effectiveness of these initiatives has not yet been measured. The current practice of using food aid to generate cash for development projects--monetization--is also inherently inefficient. 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) difficulties in identifying vulnerable groups and causes of their food insecurity; and (4) resource constraints that adversely affect the timing and quality of assessments, as well as the quantity of food and other assistance. Furthermore, some impediments to improving the nutritional quality of U.S. food aid may reduce its benefits 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: I am pleased to appear today to discuss ways to improve the efficiency and  effectiveness of U.S. food aid. 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 from 2001 to 2006. 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.
My testimony is based on a report that we issued on April 13, 2007. Today,  I will focus on the need to (1) increase the efficiency of U.S. food aid  programs in terms of the amount, timeliness, and quality of food provided;  and (2) ensure the effectiveness of U.S. food aid so that it reaches the most  vulnerable populations and does not cause negative market impact. We  define efficiency as the extent to which a program is acquiring, protecting,  and using its resources in the most productive manner. We define  effectiveness as the extent to which U.S. food aid programs are being used  to achieve their goals and objectives.
In preparing this testimony, we relied on our completed review of the  efficiency and effectiveness of U.S. food aid. To address our objectives, we  analyzed food aid procurement and transportation data provided by the  U.S. Department of Agriculture’s (USDA) Kansas City Commodity Office  (KCCO); reviewed food aid proposals and funding data provided by USDA  and the U.S. Agency for International Development (USAID); conducted  interviews with U.S. agencies, U.S.- and foreign-flag ocean carriers,  nongovernmental organizations (NGO), freight forwarders, and  agricultural commodity groups; conducted fieldwork in Rome, Ethiopia,  Kenya, and Zambia; and visited ports in Texas, South Africa and Kenya, as  well as prepositioning sites in Louisiana and Dubai. We also discussed our  preliminary findings with a roundtable of 15 food aid experts and  practitioners. We conducted the work for our report and this testimony  between May 2006 and March 2007 in accordance with generally accepted  government auditing standards.
subsections: section_title: Background
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 are more effective and  efficient, the largest international food aid organization, the United  Nations (UN) World Food Program (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 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, with Nonemergency Funding Declining
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. 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.
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.
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; these programs  serve a range of objectives, including humanitarian goals, economic  assistance, foreign policy, market development, and international trade.   (For a summary of the six programs, see app. I.) 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. The Bill Emerson Humanitarian Trust, a  reserve of up to 4 million metric tons of grain, can be used to fulfill P.L.  480 food aid commitments to meet unanticipated emergency needs in  developing countries or when U.S. domestic supplies are short.  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.
section_title: Multiple Challenges Hinder the Efficiency of U.S. Food Aid Programs
paragraphs: Multiple challenges in logistics hinder the efficiency of U.S. food aid  programs by reducing the amount, timeliness, and quality of food  provided. 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  lengthen time frames include uncertain funding processes and inadequate  planning, ocean transportation contracting practices, legal requirements,  and inadequate coordination in tracking and responding to food delivery  problems. While U.S. agencies are pursuing initiatives to improve food aid  logistics, such as prepositioning food commodities and using a new  transportation bid process, their long-term cost-effectiveness has not yet  been measured. In addition, the current practice of selling commodities to  generate cash resources for development projects—monetization—is an  inherently inefficient yet expanding use of food aid.
subsections: section_title: Monetization Is an Inefficient, Expanding Practice and Agencies’ Lack of Electronic Data Impedes Their Monitoring Ability
paragraphs: The current practice of selling commodities as a means to generate  resources for development projects—monetization—is an inherently  inefficient yet expanding 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 from their core missions. However, the permissible use of  revenues generated from this practice and the minimum level of  monetization allowed by the law have expanded. 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.
Despite these inefficiencies, U.S. agencies do not collect or maintain data  electronically 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. 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 USDA nor USAID was able to provide us with data on the  revenues generated through monetization. These 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.
section_title: Various Challenges Reduce the Effective Use of Food Aid
paragraphs: Various challenges to implementation, improving nutritional quality, and  monitoring reduce the effectiveness of food aid programs in alleviating  hunger. Since U.S. food aid assists only about 11 percent of the estimated  hungry population worldwide, it is critical that donors and implementers  use it effectively by ensuring that it reaches the most vulnerable  populations and does not cause negative market impact. However,  challenging operating environments and resource constraints limit  implementation efforts in terms of developing reliable estimates of food  needs and responding to crises in a timely manner with sufficient food and  complementary assistance. Furthermore, some impediments to improving  the nutritional quality of U.S. food aid, including lack of interagency  coordination in updating 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: 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.
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. 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.  USDA administers a smaller proportion of food aid programs than USAID  and its field-level monitoring of food aid programs is more limited.  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 remain to ensure that limited resources for U.S. food  aid are not vulnerable to waste, are put to their most effective use, and  reach the most vulnerable populations on a timely basis.
To improve the efficiency of U.S. food aid—in terms of its amount,  timeliness, and quality—we recommended in our previous report that the  Administrator of USAID and the Secretaries of Agriculture and  Transportation (1) improve food aid logistical planning through cost- benefit analysis of supply-management options; (2) work together and  with stakeholders to modernize ocean transportation and contracting  practices; (3) 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; (4) establish a coordinated system for tracking and  resolving food quality complaints; and (5) develop an information  collection system to track monetization transactions.
To improve the effective use of food aid, we recommended that the  Administrator of USAID and the Secretary of Agriculture (1) 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; (2) determine  ways to provide adequate nonfood resources in situations where there is  sufficient evidence that such assistance will enhance the effectiveness of  food aid; (3) develop a coordinated interagency mechanism to update food  aid specifications and products to improve food quality and nutritional  standards; and (4) improve monitoring of food aid programs to ensure  proper management and implementation.
DOT, USAID, and USDA—the three U.S. agencies to whom we directed  our recommendations—have submitted written statements to  congressional committees, as required by law, to report actions they have  taken or begun to take to address our recommendations.  In May 2007,  these agencies established an interagency Executive Working Group to  identify ways to respond to several of our recommendations.  DOT stated  that it strongly supported the transportation-related initiatives we  recommended, noting that they offer the potential to help U.S. agencies  achieve efficiencies and reduce ocean transportation costs while  supporting the U.S. merchant fleet.  USAID outlined actions it is  considering, has initiated, or intends to take to address each of our nine  recommendations.  USDA stated that in general it found our  recommendations to be helpful and cited some of its ongoing efforts to  improve its food aid programs.  However, USDA questioned some of our  conclusions that it believed were the result of weaknesses in our  methodology.  For example, USDA does not agree that the current practice  of monetization as a means to generate cash for development projects is  an inherently inefficient use of resources.  We maintain that it is an  inherently inefficient use of resources because it requires food to be  procured, shipped, and eventually sold, and the revenues from  monetization may not recover shipping, handling, and other costs.   Furthermore, U.S. agencies do not electronically collect data on  monetization revenues, without which their ability to adequately monitor  the degree to which revenues cover costs is impeded.  We stand by our  conclusions and recommendations, which are 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.
Madam Chair and Members of the Subcommittee, this concludes my  prepared statement. I would be pleased to answer any questions that you  may have.
section_title: GAO Contact and Staff Acknowledgments
paragraphs: Should you have any questions about this testimony, please contact  Thomas Melito, Director, at (202) 512-9601 or MelitoT@gao.gov. Other  major contributors to this testimony were Phillip 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.
section_title: Appendix I: Program Authorities
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 1 provides a summary of these food aid programs.