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

Letter

Background

U.S. Title II Emergency Food Aid Program, Cost, and Funding

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.

Various Entities Procure and Deliver Emergency Food Aid

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.

USDA Developed WBSCM to Manage Food Aid Procurement

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.

USDA and USAID Disagree on WBSCM’s Usefulness in Managing the International Emergency Food Aid Procurement Process

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.

USAID Has Not Used WBSCM as Intended Because It Had Significant Deficiencies at Implementation

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.

USAID Manages Its Procurement Process Using Systems Not Connected to WBSCM

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.

USDA Asserts That It Has Made Significant Improvements to WBSCM

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.

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

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.

USAID’s Systems Cannot Provide Information on Some Food Aid Shipments

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.

USDA and USAID Have Been Unable to Verify Overseas Commodity Inventory Data

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.

USAID’s Data Collection Outside WBSCM Impedes USDA’s Process to Recover U.S. Government Funds Efficiently

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.

USDA and USAID Have Not Resolved Their Disagreement about WBSCM, but Planned System Upgrades Provide an Opportunity to Collaborate More Effectively

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.

USDA and USAID Have Not Been Able to Collaborate to Resolve Disagreements over WBSCM

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.

Planned WBSCM Upgrades Provide an Opportunity to Address System Deficiencies

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.

Conclusions

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.

Recommendations for Executive Action

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.

Agency Comments and Our Evaluation

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.

Appendix I: Objectives, Scope, and Methodology

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.

Appendix II: Comments from the U.S. Department of Agriculture

Appendix III: Comments from the U.S. Agency for International Development

GAO Comment

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.

Appendix IV: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

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.

Related GAO Products

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.