Through its Title II program, USAID has traditionally provided its implementing partners with U.S. in-kind food aid, which its partners distribute to beneficiaries in need overseas. Figure 1 shows the locations of projects that received Title II funding in fiscal years 2012 through 2015. Congress has historically amended or reauthorized Title II program authorizations through farm bills enacted about every 5 years. To cover the costs associated with carrying out Title II projects, Congress authorizes USAID to provide implementing partners 202(e) and ITSH funding, with certain restrictions. Specifically, the 2014 Farm Bill increased the total amount of 202(e) funding USAID can provide from 13 percent to 20 percent of funds made available to implement Title II of the Food for Peace Act. The 2014 Farm Bill continued to allow USAID to use 202(e) funding to cover administrative-type costs but expanded the eligible uses of this funding beyond those authorized by the 2008 Farm Bill or previous farm bills, allowing the use of 202(e) funding to enhance existing projects. According to USAID, this provision permits the agency to use 202(e) funding to implement cash transfers, food vouchers, and local or regional procurement in Title II projects. Title II also authorizes USAID to use ITSH funding to cover costs that partners incur while moving and storing U.S. in-kind food aid after it reaches a destination country. (Fig. 2 shows images from a video depicting examples of USAID’s uses of 202(e) and ITSH funding for Title II projects.) In fiscal years 2012 through 2015, USAID obligated about $5.567 billion in Title II funding for its development and emergency projects. As figure 3 shows, USAID obligated about 44 percent of total Title II funding to 202(e) and ITSH during that period to cover the costs of implementing and supporting these projects. These obligations comprised about $889 million of 202(e) funding (16 percent of total Title II funding) and about $1.575 billion of ITSH funding (28 percent of Title II funding). USAID data for fiscal years 2012 through 2015 show that the agency provided about 4.5 million metric tons of food commodities. USAID obligated the remainder of Title II funding to cover the costs of purchasing the commodities in the United States (37 percent), transporting the commodities from the United States as ocean freight (12 percent), and transporting the commodities inland from the foreign port of entry to their destination in the country or to the border of another, landlocked country (7 percent). Title II also authorizes USAID to allow its implementing partners to monetize U.S.-sourced in-kind food aid—that is, to sell U.S.-donated commodities in local markets to generate funds for implementing the projects. However, according to USAID officials, it generally no longer encourages its implementing partners to monetize. Instead, according to USAID, it provides 202(e) funding, as authorized by the 2014 Farm Bill, and funding authorized by the Foreign Assistance Act of 1961 directly to its implementing partners to offset the revenue partners previously received from monetizing commodities. USAID uses funding from accounts authorized by the Foreign Assistance Act to operate multiple programs to combat food insecurity in development and emergency situations worldwide. Development Assistance funding. According to USAID documentation, the agency draws on its Development Assistance account—as authorized under section 103 of the Foreign Assistance Act of 1961, as amended—for community-level development activities to complement Title II projects and to reduce the need for monetization. According to USAID officials, these funds can be used alongside Title II funding and may fund many of the same types of items and activities covered by Title II 202(e) and ITSH. USAID provided about $62 million from its Development Assistance account in fiscal year 2015 to complement Title II projects. International Disaster Assistance funding. USAID’s Office of Food for Peace uses the agency’s IDA account, authorized by the Foreign Assistance Act of 1961, as amended, to fund the Emergency Food Security Program (EFSP). According to USAID, it provides most of its assistance for cash transfers, food vouchers, and local and regional purchases of food through EFSP to assist beneficiaries facing immediate food insecurity. According to USAID, it provided about $1.01 billion in fiscal year 2015 on EFSP projects implementing cash transfer, food voucher, local and regional procurement, and other activities. In 2014, USAID issued an information bulletin to its implementing partners outlining the 2014 Farm Bill’s changes to 202(e) and USAID’s policy regarding eligible and ineligible uses of 202(e) and ITSH funding. The bulletin states that 202(e) funding may be used for activities to establish and enhance Title II projects, including cash transfers, food vouchers, and local and regional procurement of food—modalities previously not authorized for Title II projects—as well as for traditional implementation costs such as the partner’s staff salaries, project overhead, project materials, and equipment, among others. USAID also instructs partners that ITSH funding is available only for in-country costs directly associated with the storage, movement, and distribution of U.S. in-kind commodities. In addition to outlining the eligible and ineligible uses for 202(e) and ITSH funding, and consistent with U.S. government-wide guidance issued by the Office of Management and Budget (OMB) concerning federal awards outlined in 2 C.F.R. § 200, the bulletin instructs partners that these funds must be reasonable and allocable. Food assistance projects are subject to numerous financial risks, including risks associated with costs to implement and support projects providing food commodities, cash transfers, or food vouchers. USAID requires its partners ensure that aid reaches its intended beneficiaries and that costs are reasonable, necessary, and allowable. Financial oversight of international food assistance projects includes managing program funds to ensure they are spent in accordance with award agreements by, among other things, assessing financial risks and implementing controls to mitigate those risks. The internal controls framework prescribed for federal agencies and widely used by international organizations comprises five components (see fig. 4). These controls apply to the tracking of costs to implement and support projects providing commodities, cash transfers, or food vouchers. For projects that include cash transfers and food vouchers, controls may include steps to prevent the negative impact on market prices as well as to prevent theft and diversion of cash or counterfeiting of vouchers. In fiscal years 2014 and 2015, USAID used most of the increased proportion of Title II funds authorized by the 2014 Farm Bill for 202(e) to provide cash transfers, food vouchers, and local or regional procurement, modalities the agency did not previously support through Title II. USAID has also used funding from other accounts to complement Title II projects. USAID obligations of 202(e) funding increased from about $171 million in fiscal year 2012 to about $268 million in fiscal year 2015. Obligations of 202(e) funding for cash transfers, food vouchers, and local and regional procurement in fiscal years 2014 and 2015 constituted 75 percent and 96 percent, respectively, of the additional authorized 202(e) funding that the agency utilized for those years. USAID has used funds from accounts authorized by the Foreign Assistance Act, along with Title II funding, to implement and support projects. Moreover, it has increasingly used funding from these accounts to cover the same types of costs as are covered by 202(e) and in some cases has used funding from these accounts as well as Title II to provide cash transfers, food vouchers, or local or regional procurement within a single project. USAID used most of the 2014 Farm Bill’s increase in authorized 202(e) funding (from 13 percent to 20 percent of total Title II appropriations) to provide cash transfers, food vouchers, and locally or regionally procured food for beneficiaries—modalities the agency did not previously support through Title II. USAID obligations of 202(e) funding rose from $171 million in fiscal year 2012 to $268 million in fiscal year 2015. As table 1 shows, in fiscal year 2014, USAID’s obligations for these modalities comprised 75 percent of the additional 202(e) amount it obligated under the 2014 Farm Bill; in fiscal year 2015, USAID’s obligations for these modalities comprised 96 percent of the additional obligated amount. Specifically, USAID obligated $73.7 million in 202(e) funding in fiscal year 2015 for cash transfers, food vouchers, and local or regional procurement—that is, 96 percent of the additional $77 million of 202(e) funding available to the agency authorized by the 2014 Farm Bill. As figure 5 shows, USAID obligations of 202(e) funding in fiscal years 2012 and 2015—including the portion of 202(e) funding provided for cash transfers, food vouchers, and local or regional procurement beginning in 2014—were within the applicable 202(e) spending limits designated by the 2008 (13 percent) and 2014 (20 percent) Farm Bills. In both fiscal years 2014 and 2015, the 202(e) obligations were lower than the 20 percent appropriation limit of $293 million. During this period, 202(e) obligations for commodity and development activities fluctuated slightly. In addition, 202(e) obligations for cash transfers, food vouchers, and local and regional procurement increased from about 21 percent of total 202(e) obligations in fiscal year 2014 to about 28 percent in fiscal year 2015. As table 2 shows, of the approximately $130 million of 202(e) funding that USAID obligated for cash transfers, food vouchers, and local and regional procurement in fiscal years 2014 and 2015, the majority was obligated for local and regional procurement. USAID’s obligations of 202(e) funding for local and regional procurement accounted for about 66 percent of its total obligations of 202(e) funding for the three modalities in fiscal years 2014 and 2015.