Food Aid: Experience of U.S. Programs Suggests Opportunities for 
Improvement (04-JUN-02, GAO-02-801T).				 
                                                                 
The United States spent $50 billion (2002 dollars) on food aid	 
between 1979 and 2003. Notwithstanding these sizable donations	 
and donations by other countries, the need for food aid in the	 
developing world far exceeds available supply. U.S. food aid is  
provided through six programs administered by the Department of  
Agriculture A and U.S. Agency for International Development	 
(USAID). These programs use various methods for providing	 
resources and have different ways of delivering aid to the	 
recipient nations. USAID manages the largest program---P.L. 480, 
Title II---using annual appropriations to purchase commodities	 
that are then donated to recipient nations principally through	 
private voluntary organizations and the World Food Program. The  
large fluctuations in U.S. food aid since 1990 are the result of 
three key factors: U.S. food aid policies, agricultural 	 
surpluses, and international events. The success of food aid	 
programs in meeting their objectives is hampered by the competing
objectives of the programs and by management weaknesses such as a
lack of management attention to monitoring and accountability in 
food aid programs.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-801T					        
    ACCNO:   A03502						        
  TITLE:     Food Aid: Experience of U.S. Programs Suggests	      
Opportunities for Improvement					 
     DATE:   06/04/2002 
  SUBJECT:   Agricultural assistance				 
	     Developing countries				 
	     Federal aid to foreign countries			 
	     Food relief programs				 
	     Foreign aid programs				 
	     Foreign economic assistance			 
	     Internal controls					 
	     International food programs			 
	     International relations				 
	     Program management 				 
	     Child Nutrition Program				 
	     Global Food for Education Initiative		 
	     Honduras						 
	     North Korea					 
	     Pakistan						 
	     UN World Food Program				 
	     USDA Food for Progress Program			 

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GAO-02-801T
     
Testimony Before the Subcommittee on Oversight of Government Management,
Restructuring and the District of Columbia, Committee on Governmental
Affairs, U. S. Senate

United States General Accounting Office

GAO For Release on Delivery Expected at 2: 00 p. m., EST Tuesday, June 4,
2002 FOOD AID

Experience of U. S. Programs Suggests Opportunities for Improvement

Statement of Loren Yager, Director, International Affairs and Trade

GAO- 02- 801T

Page 1 GAO- 02- 801T

Mr. Chairman and Members of the Subcommittee: I am pleased to be here today
to discuss the management and operation of U. S. food aid programs. The
United States is by far the largest provider of food aid in the world, 1 and
U. S. food aid programs account for a considerable portion of U. S.
development assistance. Between 1979 and 2003, the United States spent
nearly $50 billion (2002 dollars) on food aid, and U. S. food aid
represented about 19 percent of U. S. official development assistance in
2000. Notwithstanding these sizable donations by the United States, as well
as donations by other countries, the need for food aid in the developing
world far exceeds available supply. The United Nations Food and Agriculture
Organization estimates 777 million people are chronically undernourished in
the developing world. 2 According to its data, there has been limited
progress in meeting the 1996 World Food Summit goal of halving the number of
hungry people in developing countries by the year 2015.

To contribute to a better understanding of food aid and how to maximize its
effectiveness, I will address the following key issues: (1) the structure of
U. S. food aid, (2) policies and events contributing to the fluctuations in
U. S. food aid, and (3) how well U. S. food aid objectives are being met.

My observations are based on recent interviews with and documents from U. S.
Department of Agriculture (USDA), U. S. Agency for International Development
(USAID), U. S. Department of State, and Office of Management and Budget
officials, and from GAO?s series of reports on food aid over the last
decade. (See app. I for related GAO products.)

U. S. food aid is provided through six programs administered by two
different agencies. These programs use a variety of methods for providing
resources to the programs, and also have different ways of delivering the
aid to the recipient nations. The largest program is P. L. 480 Title II,
which is managed by USAID. This program uses regular, annual appropriations
to purchase commodities, and donates these commodities to recipient nations
principally through private voluntary organizations (PVO) and the World Food
Program.

1 During 1999 and 2000, the United States provided nearly two- thirds of
world food aid, according to USDA. 2 Estimate for the period 1997- 99.
Summary

Page 2 GAO- 02- 801T

The large fluctuations in U. S. food aid since 1990 are the result of three
key factors: U. S. food aid policies, U. S. agricultural surpluses, and
international events. Continuing previous food aid policies, the current
administration is reducing the use of food aid to promote U. S. agricultural
exports through sales at low interest rates with long repayment periods. It
also intends to significantly reduce the role of surplus agricultural
commodities in its food aid programs. The availability of surplus
commodities at various times during the last decade has enabled the United
States to sharply increase shipments. International events can also impact
U. S. food aid. For example, with the Asian financial crisis, U. S.
commercial agricultural exports did not increase as expected, resulting in
large surpluses that the government purchased and made available as food
aid. These surpluses became a principal inducement for the United States to
provide large quantities of food aid to Russia in 1999 and 2000.

The success of food aid programs in meeting their objectives is hampered by
the competing objectives of the programs and by management weaknesses. The
food aid objectives include humanitarian goals of feeding hungry people,
economic development goals for the recipient nations such as strengthening
private enterprise, and a new goal of reducing conflict. Certain programs
also have foreign policy goals. In one case, the United States continued to
provide emergency food aid to North Korea for humanitarian purposes even
though the North Korean government prevented the World Food Program (WFP)
from effectively monitoring whether the food aid reached the intended
recipients. In that situation, the United States weighed foreign policy
considerations against the assurance that food aid was achieving its
humanitarian purposes. 3 At the same time, management weaknesses impede
efforts to assess the results of food aid programs. For example, the USDA?s
implementation of the Global Food for Education pilot program did not build
on lessons learned from previous experience, which prevented USDA from
focusing on those populations most likely to benefit from the program. As a
result, our reviews and those of the administration find many opportunities
to improve the management of food aid.

3 See U. S. General Accounting Office, Foreign Assistance: North Korea
Restricts Food Aid Monitoring, GAO/ NSIAD- 00- 35 (Washington, D. C.: Oct.
8, 1999).

Page 3 GAO- 02- 801T

In the last decade, the United States has principally employed five programs
to deliver food aid: P. L. 480 Titles I, II, and III; Food for Progress; and
Section 416( b). 4 The May 2002 Farm Bill 5 authorized creation of a sixth -
the McGovern- Dole International Food for Education and Child Nutrition
Program. Table 1 provides a summary of the overall structure of the
principal food aid programs. (App. II provides additional information on the
programs.)

Table 1: Structure of U. S. Food Aid Programs a Program P. L. 480 Title I P.
L. 480 Title II P. L. 480

Title III Food for Progress Food for

Education & Child Nutrition b Section 416( b) Managing agency USDA USAID
USAID USDA President shall

designate one or more federal agencies

USDA

Program structure Concessional

sales of agricultural commodities.

Donation of commodities to meet emergency and non emergency needs.
Commodities may be sold in country for development purposes.

Donation of commodities to least developed country governments.

Sale on credit terms or donation of commodities to developing countries and/
or emerging democracies.

Donation of commodities and provision of financial and technical assistance
in foreign countries.

Donations of CCC c surplus commodities to carry out purposes of P. L. 480
Title II and Title III and Food for Progress programs.

Intermediaries Governments, private entities. Governments, public

or private entities, PVOs, cooperatives, intergovernmental organizations
(such as the World Food Program).

Governments. Governments, agricultural trade organizations,
intergovernmental organizations, PVOs, cooperatives.

Governments, private entities, intergovern mental organizations.

See intermediaries for P. L. 480 Title II and Title III and Food for
Progress programs.

Total budget allocation, 1992- 2001 (billions of 2002 dollars)

$4.38 $9.62 $1.34 $1.33 NA $2.41

Note: NA means not applicable.

4 U. S. international food assistance flows from programs authorized by
three major laws: P. L. 480 (the Agricultural Trade Development and
Assistance Act of 1954, as amended, 7 USC sect. 1701 et seq.); the Food for
Progress Act of 1985, as amended, 7 USC sect. 1736o; and Section 416( b) of the
Agricultural Act of 1949, as amended, 7 USC sect. 1431.

5 Farm Security and Rural Investment Act of 2002 (PL 107- 171). U. S. Food
Aid Is

Delivered Through Multiple Programs

Page 4 GAO- 02- 801T

a We do not include the Bill Emerson Humanitarian Trust. Information on this
trust is provided in appendix. II. b This program was authorized by the May
2002 Farm Bill.

c Commodity Credit Corporation Source: GAO analysis of authorizing
legislation for the various programs and agency program documentation.

USAID and USDA have historically shared program management responsibilities.
USAID is responsible for managing P. L. 480 Titles II and III programs. USDA
currently has responsibility for P. L. 480 Title I, Food for Progress, and
the Section 416( b) program. When 416( b) surplus commodities are used for
P. L. 480 Title II and P. L. 480 Title III type programs, this creates
considerable duplication since USDA becomes the managing agency rather than
USAID. Regarding the new food for education program, the President shall
designate one or more federal agencies to manage it.

The programs use different methods for securing commodities. For example, P.
L. 480 Titles I, II, and III and Food for Progress are funded by annual and
supplemental appropriations. Section 416( b), however, is funded by U. S.
surplus commodities when surpluses exist and a decision is made to donate
some of those surpluses overseas. USDA, as manager of the Section 416( b)
program, can use the donations to carry out the purposes of P. L. 480 Title
II, Title III, and Food for Progress. For example, when USDA uses 416( b)
commodities for a Title II program, it does not provide the commodities to
USAID but rather implements the Title II- type program itself.

U. S. food aid programs also use different methods for providing aid to
recipient nations. Under P. L. 480 Title I, the United States sells the
commodities to the recipients under concessional terms. Financing is at low
interest rates, with payments made over periods of up to 30 years, with
maximum grace periods on payments of principal of up to 5 years. The Title
II program is based on the donation of commodities for emergency or
developmental purposes. In the latter case, the commodities can be sold in
the country to raise funds for other developmental activities. Under the
Food for Progress program, U. S. commodities can be either donated or sold
on credit terms.

USDA and USAID frequently rely on other entities, including private
voluntary organizations and international organizations, such as the World
Food Program, to deliver the food aid and, if called for in agreements with
USDA or USAID, to use the food in implementing development programs.

Page 5 GAO- 02- 801T

The large fluctuations in U. S. food aid spending since 1990 can be
attributed to three key factors: the government?s food aid policies,
agricultural surpluses, and international events. As figure 1 indicates,
total food aid has generally decreased since the early 1990s, with average
spending of $2.36 billion from 1990- 1994, $1.63 billion from 1995- 1999,
and $1.65 billion from 2000- 2003 (2002 dollars). The general trend toward
reduced food aid occurred as the U. S. government reduced Title I and III
programs and more recently the 416( b) program. This policy shift was driven
to some extent by concerns over the absence of evidence supporting the
success of Title I and Title III. It was also fueled by criticisms that the
Title I and III programs created disincentives for agricultural and economic
reform in recipient countries. The current administration also plans to
dramatically cut back on the use of surplus commodities for food aid and to
partially offset the reduction by a $300 million increase in the Title II
appropriation. 6 As a result, the Title II program dominates the funding for
food aid programs in 2003.

6 The administration intends to use the Bill Emerson Humanitarian Trust (see
app. II) for cases where there is an increased need for emergency food aid.
Large- scale use of the 416( b) surplus disposal food aid program would
occur only as a last resort. Policy, Surpluses, and

International Events Drive U. S. Food Aid

Page 6 GAO- 02- 801T

Figure 1: U. S. Food Aid Exports, 1990- 2003

Source: GAO analysis of USDA data.

The level of U. S. surpluses has also contributed to the changing levels of
food aid over the past decade. For example, a high level of stocks in the
early 1990s contributed to high levels of food aid shipments during this
period. In contrast, stocks reached a 20- year low in 1996 as U. S.
commercial exports hit record levels, and food aid levels at this time
dropped sharply. As figure 2 indicates, the volume of food aid shipments
fluctuates even more than the dollar volume, as lower commodity prices
during periods of surplus allow more to be purchased with the same budgetary
resources.

Page 7 GAO- 02- 801T

Figure 2: Food Aid Tonnage and Expenditures, 1992- 2001a

Source: GAO analysis of USDA data.

International events also affected food aid shipments during this period.
For example, the Asian financial crisis of the late 1990s reduced U. S.
prospects for exports to that region and increased the availability of U. S.
stocks. The spread of the financial crisis to Russia, combined with a poor
Russian harvest in 1999, created the demand for food aid in that country.
These two conditions led the United States to a make donation to Russia that
was one of the largest single food aid transfers in U. S. history.

Page 8 GAO- 02- 801T

The success of food aid programs in achieving their objectives is limited by
the challenges of meeting multiple objectives and the weaknesses in program
management.

U. S. food aid programs contain a range of objectives, including
humanitarian and developmental goals for the recipient nations and trade
objectives for the United States. In addition, recent legislation has added
the prevention of conflict as an objective of the P. L. 480 food aid
programs. Table 2 provides a list of the programs and their associated
objectives. Success of Food Aid

Programs Is Hampered by Multiple Objectives and Management Weaknesses

Competing Objectives Complicate Program Implementation

Page 9 GAO- 02- 801T

Table 2: Objectives of U. S. Food Aid Programs Program P. L. 480 Title I a
P. L. 480 Title II a P. L. 480 Title III a Food for

Progress Food for

Education & Child Nutrition Section 416( b) Humanitarian objectives Combat
world

hunger and malnutrition and their causes.

Address famine or other urgent relief requirements, especially in children
and mothers.

Combat world hunger and malnutrition and their causes.

Carry out maternal, infant, and child nutrition and preschool and school
programs to improve food security and reduce hunger.

See objectives for P. L. 480 Title II, P. L. 480 Title III, and Food for
Progress.

Development objectives Promote broad based

sustainable development, including agricultural development.

Promote economic and community development; promote sound environmental
policies.

Use revenue generated by sale of donated commodities for economic
development.

Support efforts to expand free enterprise elements in agricultural
economies.

Carry out preschool and school programs to improve literacy and primary
education, especially for girls.

See objectives for P. L. 480 Title II, P. L. 480 Title III, and Food for
Progress.

Private enterprise and democracy

Foster and encourage development of private enterprise and democracy.

Foster and encourage development of private enterprise and democracy.

Foster and encourage development of private enterprise and democracy.

Expand free enterprise elements in the agricultural economy.

See objectives for P. L. 480 Title III and Food for Progress.

Market development objectives

Develop and expand export markets for U. S. agricultural commodities.

Develop and expand export markets for U. S. agricultural commodities.

Develop and expand export markets for U. S. agricultural commodities.

Strengthen private enterprises.

See objectives for P. L. 480 Title II.

International trade objective

Expand international trade.

Expand international trade.

Expand international trade.

See objective for P. L. 480 Title III.

Conflict objective b Prevent conflict. Prevent conflict. Prevent conflict.

a According to the Trade Development and Assistance Act of 1954, as amended,
the United States is to use its abundant agricultural productivity to
promote U. S. foreign policy by enhancing food security in the developing
world. b This objective was established in the May 2002 Farm Bill.

Source: GAO analysis of authorizing legislation for the various programs and
agency program documentation.

The multiple objectives of food aid programs as well as the foreign policy
goals of particular programs can complicate effective program management.
While certain goals can be complementary and not impede program
effectiveness, in other situations, goals and objectives can conflict or
make it more difficult to determine the primary goals and

Page 10 GAO- 02- 801T

achieve them. Some examples of problems GAO has identified stemming from
multiple or conflicting objectives include the following:

 P. L. 480 loans to Honduras were backed by the State Department and USAID
to support foreign policy and economic development objectives. However, USDA
raised concerns about these sales displacing U. S. commercial sales in those
countries. 7

 Between 1996 and 1999, the United States provided emergency food aid to
North Korea, valued at $365 million, that was intended primarily for
children, women, and the elderly at schools, hospitals, and other
institutions. State, USAID, and others reported that North Korea prevented
effective monitoring of food aid donations, but the food aid continued in
part because State believed the donations might improve bilateral relations.
8

 Title I assistance to Pakistan was reinstated in fiscal year 1993 after a
2- year suspension because of U. S. concerns over the country?s nuclear
armament capabilities. While the on- again off- again nature of Title I
assistance in response to foreign policy considerations is contrary to
sustaining important components of a successful market development strategy
(i. e., demonstrate a long- term commitment and be a consistent supplier),
the over- arching goal of the 1990 act 9 -to promote the U. S. foreign
policy objective- was being fulfilled. 10

 One of the goals of P. L. 480 Title I assistance is to develop and expand
export markets for U. S. commodities. However, we found that achieving this
goal is hindered in part by requiring that the Title I cargo be carried on
U. S. flag ships (referred to as Cargo Preference), which in some instances
reduced the funds available to purchase commodities and in other cases led
to changes away from the most desired commodity. 11

GAO has found a lack of management attention to issues such as monitoring
and accountability in the implementation of food aid programs. Some examples
of our findings are as follows:

7 U. S. General Accounting Office, Food Aid: Competing Goals and
Requirements Hinder Title I Program Results, GAO/ GGD- 95- 68 (Washington,
D. C.: June 26, 1995). 8 GAO/ NSIAD- 00- 35.

9 Food, Agriculture, Conservation and Trade Act (PL 101- 624). 10 GAO/ GGD-
95- 68. 11 GAO/ GGD- 94- 215. Management Weaknesses

Impede Monitoring and Accountability Efforts

Page 11 GAO- 02- 801T

 In a general review of the P. L. 480 Title I Program, we found that USDA
had not evaluated the program?s performance against its objectives. Our
analysis concluded that while Title I assistance could be making a
meaningful, short- term contribution to the food supply in some recipient
countries, its importance in helping develop long- term U. S. agricultural
markets had not been demonstrated. 12

 USDA?s implementation of the Global Food for Education pilot program did
not incorporate many of the lessons learned from successful school feeding
programs in the design of its program. As a result, program managers did not
require interested applicants to provide information that would enable
program administrators to select programs with the greatest chance of
success. 13

 USDA?s lack of internal controls in providing food assistance to Russia in
1999 limited the agency?s ability to effectively manage the distribution
process, identify discrepancies, and minimize the potential for fraud and
abuse. 14 USDA stated that it has not conducted a comprehensive evaluation
of food aid programs that it manages.

 In a 1993 GAO review of the P. L. 480 Title II and Title III programs, we
found that USAID had not systematically collected relevant data or developed
appropriate methodologies to assess the impact of its programs on food
security in recipient countries nor ensured accountability for its food aid.
15 Since that report, USAID has placed a significantly greater emphasis on
the evaluation of its food aid programs, particularly P. L. 480 Title II. 16

 GAO?s 1999 review of U. S. food aid to North Korea found weaknesses in
USAID?s oversight over the food aid delivered through the World Food Program
and private voluntary organizations. Notwithstanding the

12 GAO/ GGD- 95- 68. 13 U. S. General Accounting Office, Foreign Assistance:
Global Food for Education Initiative Faces Challenges for Successful
Implementation, GAO- 02- 328 (Washington, D. C.: Feb. 28, 2002).

14 U. S. General Accounting Office, Foreign Assistance: U. S. Food Aid
Program to Russia Had Weak Internal Controls, GAO/ NSIAD/ AIMD- 00- 329
(Washington, D. C.: September 29, 2000).

15 U. S. General Accounting Office, Food Aid: Management Improvements Are
Needed to Achieve Program Objectives, GAO/ NSIAD- 93- 168 (Washington, D.
C.: July 23, 1993). 16 USAID has conducted or commissioned several major
studies on the effectiveness of its Title II programs. These studies cite a
considerable number of positive accomplishments, but also identify program
weaknesses affecting the quality of individual programs as well as USAID?s
overall ability to monitor and evaluate its programs.

Page 12 GAO- 02- 801T

constraints presented by the North Korean government, we concluded that
USAID could have done more to encourage the World Food Program to provide
timely reporting on food aid distributions in North Korea. 17

In 2001 the President?s management review identified U. S. food aid programs
as 1 of 14 of the government?s areas most in need of reform. A number of the
problems it identified are consistent with the findings mentioned in my
testimony. For example, the management review commented on the fact that six
different programs are administered by two government agencies with similar
bureaucracies. In addition, the review observes that humanitarian purposes
were often eroded by other uses having little to do with food aid. Finally,
the report cited the lack of management oversight in stating that food aid
programs are affected by waste and questionable spending.

Prior GAO studies have noted the importance of similar issues and have
suggested a number of actions.

 With regard to overlapping efforts of the two agencies, we noted in our
report on GFEI that USDA did not have the expertise to implement the
program, and that Congress should ensure that the administering agency has
the expertise and staff resources to effectively administer GFEI.

 With regard to the challenges created by competing objectives in food aid
programs, we recommended better performance measurement and evaluation,
which may help to illustrate the difficulties and tradeoffs associated with
multiple objectives.

 With regard to the potential for fraud and abuse, we have frequently
emphasized the importance of monitoring and accountability of food aid
programs to ensure that the intended recipients receive the food.

We believe that increased attention to these issues by the Congress and the
administration will continue the improvement in food aid management and help
meet the immediate needs of hungry people as well as enhance food security
over the longer term.

Mr. Chairman and members of the Committee, this concludes my prepared
statement. I will be pleased to answer any questions you may have.

17 GAO/ NSIAD- 00- 35. Observations on the

President?s Management Review of Food Aid

Page 13 GAO- 02- 801T

For future contacts regarding this testimony, please call Loren Yager or
Phillip Thomas at (202) 512- 4128. Individuals making key contributions to
this testimony included Wayne Ferris, Bruce Kutnick, and Janey Cohen.
Contacts and

Acknowledgments

Page 14 GAO- 02- 801T

Foreign Assistance: Global Food for Education Initiative Faces Challenges
for Successful Implementation. GAO- 02- 328. Washington, D. C.: February 28,
2002.

Foreign Assistance: U. S. Food Aid Program to Russia Had Weak Internal
Controls. GAO/ NSIAD/ AIMD- 00- 329. Washington, D. C.: September 29, 2000.

Foreign Assistance: U. S. Bilateral Food Assistance to North Korea Had Mixed
Results. GAO/ NSIAD- 00- 175. Washington, D. C.: June 15, 2000.

Foreign Assistance: Donation of U. S. Planting Seed to Russia in 1999 Had
Weaknesses. GAO/ NSIAD- 00- 91. Washington, D. C.: March 9, 2000.

Foreign Assistance: North Korean Restricts Food Aid Monitoring.

GAO/ NSIAD- 00- 35. Washington, D. C.: October 8, 1999.

Food Aid: Competing Goals and Requirements Hinder Title I Program Results.
GAO/ GGD- 95- 68. Washington, D. C.: June 26, 1995.

Foreign AID: Actions Taken to Improve Food Aid Management.

GAO/ NSIAD- 95- 74. Washington, D. C.: March 23, 1995.

Cargo Preference Requirements: Objectives Not Significantly Advanced When
Used in U. S. Food Aid Programs. GAO/ GGD- 94- 215. Washington, D. C.:
September 29, 1994.

Food Aid: Management Improvements Are Needed to Achieve Program Objectives.
GAO/ NSIAD- 93- 168. Washington, D. C.: July 23, 1993. Appendix I: Related
GAO Products on Food

Aid

Page 15 GAO- 02- 801T

This appendix provides a brief description of the various U. S. food aid
programs.

Title I, which is administered by USDA, has been characterized by the
government as a concessional sales program to promote exports of
agricultural commodities from the United States and to foster broad- based
sustainable development in recipient countries. Repayments for agricultural
commodities may be made either in U. S. dollars or in local currencies on
concessional credit terms. The program provides export financing over
payment periods of up to 30 years, low interest rates, and maximum grace
periods on payments of principal of up to 5 years. Private entities such as
the World Bank and agricultural trade organizations, as well as developing
country governments, are authorized to participate in the program.

The program?s market development focus is geared primarily toward developing
countries experiencing a shortage of foreign exchange earnings and
difficulty meeting all of their food needs through commercial channels. The
factors that determine priorities for country allocations include food
needs, potential for becoming a commercial U. S. market, and the undertaking
of economic development to improve food security and agricultural
development. The allocations take into account changing economic and foreign
policy situations, market development opportunities, existence of adequate
storage facilities, and possible disincentives to local agricultural
production.

Title I agreements also stipulate development activities the recipient
country will undertake. Local currencies received under Title I sales
agreements may be used for activities in the recipient country such as
developing new markets for U. S. agricultural commodities on a mutually
beneficial basis, paying U. S. obligations, and supporting agricultural
development or research. However, according to USDA, the local currency
provisions have not been implemented for budgetary reasons.

Title II programs, administered by USAID, have two main functions: food aid
to vulnerable groups in emergency situations and long- term development for
non- emergency aid. Emergency food aid is designed to meet critical food
needs of targeted vulnerable groups, such as refugees, internally displaced
families, or those who lose their land or livelihoods because of natural or
complex humanitarian emergencies. USAID relies on Appendix II: Summary of
Food Aid Programs

P. L. 480 Title I- Concessional Sales of Commodities

P. L. 480 Title II- Donation of Commodities for Emergency and Development
Food Needs

Page 16 GAO- 02- 801T

the World Food Program (WFP) and U. S. PVOs to distribute most of the aid,
with most food going to women and children.

Commodities can be monetized (i. e., sold for cash) to generate local
currency for development activities or used as humanitarian assistance in
needy countries for direct feeding of individuals unable to take advantage
of development activities- orphans, the elderly, patients in hospices and
hospitals, and HIV/ AIDS victims/ families.

The P. L. 480 Title III program, administered by USAID, seeks to enhance
food security in the least developed countries by supporting economic
development. Under Title III the U. S. government donates agricultural
commodities to the recipient country and arranges for and pays the costs of
purchasing, processing, and transporting the commodities to the port or
point of entry in the recipient country. The donated commodities are sold on
the domestic market, and revenue generated from the sale in the recipient
countries is used to support programs of economic development.

The Food for Progress (FFP) program, authorized under the Food for Progress
Act of 1985, as amended, allows the Commodity Credit Corporation (CCC) to
finance the sale and export of agricultural commodities on credit terms, or
on a grant basis, to support developing countries and countries that are
emerging democracies that have made commitments to introduce or expand free
enterprise elements into their agricultural economies. Commodities may be
provided under the authority of P. L. 480 or Section 416( b). Under certain
conditions, CCC may also purchase commodities for use in Food for Progress
programs if the commodities are currently not held by CCC in stocks. For
commodities furnished on a grant basis, the CCC may pay, in addition to
acquisition costs and ocean transportation, such related commodity and
delivery charges. Food for Progress agreements can be signed with
governments or with PVOs, nonprofit agriculture organizations, cooperatives,
intergovernmental organizations, or other private entities.

The Agricultural Act of 1949, as amended, authorizes the donation of surplus
food and feed grain acquired by the CCC for carrying out assistance programs
in developing countries and friendly countries under P. L. 480 Titles II and
III and under the Food for Progress Act. However, the act also authorizes
USDA to manage all of the Section 416( b) food aid. As a result, in recent
years, USDA has managed P. L. 480 Title II and Title III P. L. 480 Title
III- Food

Donations Through Government- toGovernment Agreements

Food for Progress- Food Donations for Developing Countries and Emerging
Democracies Moving to Free Enterprise in Agriculture

Section 416( b)- Donations of Surplus Commodities to Developing and Friendly
Countries

Page 17 GAO- 02- 801T

type programs, when surplus commodities are involved, even though USAID
manages such programs when they are financed by regular appropriations. 18

The May 2002 Farm Bill authorizes the President to establish a permanent
program to continue a food for education and preschool nutrition pilot
program that was established by USDA in 2000 using Section 416( b) surplus
commodities. The new program goes beyond the pilot by authorizing maternal
and infant nutrition programs for pregnant women, nursing mothers, and
infants. The law directs the President to use $100 million of CCC funds for
the new program for fiscal year 2003. It authorizes appropriating such sums
as are necessary to carry out the program for fiscal years 2004 through
2007.

The law authorizes the President to designate one or more federal agencies
to implement the program and ensure that it is consistent with U. S. foreign
policy and development assistance objectives. Private voluntary
organizations, cooperatives, intergovernmental organizations, governments of
developing countries and their agencies, and other organizations can be used
to carry out the program.

The Emerson Trust 19 is a food security commodity trust, consisting of up to
4 million metric tons of grains. It exists to meet emergency humanitarian
food needs in developing countries. Authorized commodities for the trust
include wheat, corn, grain sorghum, and rice. In any fiscal year, the
Secretary of Agriculture is authorized to release up to 500,000 metric tons
of wheat or the equivalent value of eligible commodities other than wheat,
and up to 500,000 metric tons of any eligible commodities that could have
been released in prior fiscal years, but were not. At this point, the
reserve holds 2.5 million tons of wheat.

18 Under an interagency agreement, USDA used USAID to administer its
overseas Section 416( b) activities until 1992. 19 The trust was formerly
known as the Food Security Wheat Reserve and the Food Security Commodity
Reserve (7USC sect. 1736f- 1). McGovern- Dole

International Food for Education and Child Nutrition Program

Bill Emerson Humanitarian Trust

(320119)
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