    Foreign Assistance: U.S. Agencies Face Challenges to Improving
    the Efficiency and Effectiveness of Food Aid (21-MAR-07,
    GAO-07-616T).

    The United States is the largest provider of food aid in the
    world, accounting for over half of all global food aid supplies
    intended to alleviate hunger. Since the 2002 reauthorization of
    the Farm Bill, Congress has appropriated an average of $2 billion
    per year for U.S. food aid programs, which delivered an average
    of 4 million metric tons of agricultural commodities per year.
    Despite growing demand for food aid, rising business and
    transportation costs have contributed to a 43-percent decline in
    average tonnages delivered over the last 5 years. For the largest
    U.S. food aid program, these costs represent approximately 65
    percent of total food aid expenditures, highlighting the need to
    maximize the efficiency and effectiveness of food aid. To inform
    Congress as it reauthorizes the 2007 Farm Bill, GAO examined some
    key challenges to the (1) efficiency of delivery and (2)
    effective monitoring of U.S. food aid.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-07-616T
        ACCNO:   A67092
      TITLE:     Foreign Assistance: U.S. Agencies Face Challenges to
    Improving the Efficiency and Effectiveness of Food Aid
         DATE:   03/21/2007
      SUBJECT:   Agricultural programs
    	     Cost analysis
    	     Food relief programs
    	     Foreign aid programs
    	     International food programs
    	     International relations
    	     Monitoring
    	     Performance measures
    	     Program evaluation
    	     Strategic planning
    	     Transportation
    	     Transportation costs
    	     Cost growth
    	     Program costs
    	     Timeliness
    	     Africa
    	     UN World Food Program

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    GAO-07-616T

         * [1]Summary
         * [2]Background

              * [3]Countries Provide Food Aid through In-Kind or Cash Donations
              * [4]Most U.S. Food Aid Goes to Africa
              * [5]Emergencies Represent an Increasing Share of U.S. Food Aid
              * [6]U.S. Food Aid Is Delivered Through Multiple Programs with Mu
              * [7]Multiple U.S. Government Agencies and Stakeholders Participa

         * [8]Multiple Challenges Hinder the Efficiency of Delivery of U.S

              * [9]Food Aid Procurement and Transportation are Costly and Time-
              * [10]Various Factors Cause Inefficiencies in Food Aid Logistics

                   * [11]Funding and Planning Processes Increase Costs and
                     Lengthen T
                   * [12]Transportation Contracting Practices Increase Delivery
                     Costs
                   * [13]Legal Requirements Can Increase Delivery Costs and Time
                     Fram
                   * [14]Inadequate Coordination Limits Agencies' and
                     Stakeholders' R

              * [15]While Agencies Have Taken Steps to Improve Efficiency, Their

                   * [16]Prepositioning and Transportation Procurement Could
                     Improve
                   * [17]New Transportation Bid Process Could Reduce Procurement
                     Time

         * [18]Various Challenges Prevent Effective Monitoring of Food Aid

              * [19]U.S. Agencies Do Not Sufficiently Monitor Food Aid Programs

                   * [20]Limited Staff Constrain Monitoring of Food Aid Programs
                     in R
                   * [21]Limited Resources and Restrictions in Their Use Further
                     Cons

         * [22]Objectives, Scope, and Methodology
         * [23]Conclusions
         * [24]Agency Comments and Our Evaluation
         * [25]GAO Contact and Staff Acknowledgments
         * [26]GAO's Mission
         * [27]Obtaining Copies of GAO Reports and Testimony

              * [28]Order by Mail or Phone

         * [29]To Report Fraud, Waste, and Abuse in Federal Programs
         * [30]Congressional Relations
         * [31]Public Affairs

    Testimony

    Before the Committee on Agriculture, Nutrition, and Forestry
    U.S. Senate

    United States Government Accountability Office

    GAO

    For Release on Delivery Expected at 9:30 a.m. EDT
    Wednesday, March 21, 2007

    FOREIGN ASSISTANCE

    U.S. Agencies Face Challenges to Improving the Efficiency and
    Effectiveness of Food Aid

    Statement of Thomas Melito, Director
    International Affairs and Trade

    GAO-07-616T

    Chairman Harkin, Ranking Member Chambliss, and Members of the Committee:

    I am pleased to be here today to discuss ways to improve the efficiency
    and effectiveness of U.S. food aid. The United States is the largest
    provider of food aid in the world, accounting for over half of all global
    food aid supplies intended to alleviate hunger and support development in
    low-income countries. Since its last reauthorization of the Farm Bill in
    2002, Congress has appropriated an average of $2 billion per year in
    annual and supplemental funding for U.S. international food aid programs,
    which delivered an average of 4 million metric tons of agricultural
    commodities per year. In 2006, U.S. food aid benefited over 70 million
    people through emergency and development-focused programs. However, about
    850 million people in the world are undernourished in 2007--a number that
    has remained relatively unchanged since the early 1990s, according to
    United Nations (UN) Food and Agriculture Organization (FAO) estimates.^1
    Furthermore, the number of food and humanitarian emergencies has doubled
    from an average of about 15 per year in the 1980s to more than 30 per year
    since 2000, due in large part to increasing conflicts and natural
    disasters around the world. Despite growing demand for food aid, rising
    transportation and business costs have contributed to a 43 percent decline
    in average tonnages delivered over the last 5 years.^2 For the largest
    U.S. food aid program, Title II of the Food for Peace program, these costs
    now account for approximately 65 percent of expenditures, highlighting the
    need to maximize the efficiency and effectiveness of U.S. food aid.

    My testimony is based on a report that we expect to issue in April 2007.
    Today, I will primarily focus on the need to improve the efficiency of
    delivery of U.S. food aid. I will also focus on the importance of efforts
    to monitor U.S. food aid programs in order to enhance their effectiveness.
    In addition to these issues, our April report will address monetization,
    assessments, targeting, and commodity quality and nutritional standards.

    ^1According to FAO's 2006 The Sate of Food and Agrcuure report, conditions
    in Asia have improved while those in Africa have worsened.

    ^2While we acknowledge that commodity prices also affect tonnages, there
    has been no clear trend in total average commodity prices for food aid
    programs from fiscal year 2002 to fiscal year 2006.

    We conducted the work for the forthcoming report and this testimony
    between April 2006 and March 2007 in accordance with generally accepted
    U.S. government auditing standards.

    Summary

    Multiple challenges combine to hinder the efficiency of delivery of U.S.
    food aid by reducing the amount, timeliness, and quality of food provided.
    These challenges include

               o funding and planning processes that increase delivery costs and
               lengthen time frames. These processes make it difficult to time
               food procurement and transportation to avoid commercial peaks in
               demand, often resulting in higher prices than if such purchases
               were more evenly distributed throughout the year.
               o transportation and contracting practices that differ from
               commercial practices and create high levels of risk for ocean
               carriers, increasing food aid costs. For example, food aid
               transportation contracts often hold ocean carriers responsible for
               costly delays that may result when food aid cargo is not ready for
               loading onto an ocean vessel, or when a destination port is not
               ready to receive cargo. Ocean carriers factor these costs into
               their freight rates, driving up the cost of food aid.
               o legal requirements that result in the awarding of food aid
               contracts to more expensive providers and contribute to delivery
               delays. For example, cargo preference laws require 75 percent of
               food aid to be shipped on U.S.-flag carriers, which are generally
               more costly than foreign-flag carriers. The Department of
               Transportation (DOT) reimburses certain transportation costs, but
               the sufficiency of these reimbursements varies.
               o inadequate coordination between U.S. agencies and stakeholders
               in tracking and responding to food delivery problems. For example,
               while food spoilage has been a long-standing concern, the U.S.
               Agency for International Development (USAID) and the U.S.
               Department of Agriculture (USDA) lack a shared, coordinated system
               to track and respond to food quality complaints systematically.

               However, to enhance the efficiency of delivery of food aid, U.S.
               agencies have taken measures to improve their ability to provide
               food aid on a more timely basis. Specifically, USAID has been
               stocking food commodities, or prepositioning them, in Lake Charles
               (Louisiana) and Dubai (United Arab Emirates) for the past several
               years and is in the process of expanding this practice.
               Additionally, in February 2007, USAID and USDA implemented a new
               transportation bid process in an attempt to increase competition
               and reduce procurement time frames. Although both efforts may
               result in food aid reaching vulnerable populations more quickly in
               an emergency, their long-term cost effectiveness has not yet been
               measured.

               Despite the importance of ensuring the effective use of food aid
               to alleviate hunger, U.S. agencies' efforts to monitor food aid
               programs in recipient countries are insufficient. Given limited
               food aid resources and increasing emergencies, ensuring that food
               reaches the most vulnerable populations, such as poor women who
               are pregnant or children who are malnourished, is critical to
               enhancing its effectiveness and avoiding negative market impact.
               However, USAID and USDA do not sufficiently monitor food aid
               programs, particularly in recipient countries, due to limited
               staff, competing priorities, and restrictions in the use of food
               aid resources. For example, although USAID has some non-Title II
               staff assigned to monitoring, it had only 23 Title II-funded staff
               assigned to missions and regional offices in just 10 countries to
               monitor programs costing about $1.7 billion in 55 countries in
               fiscal year 2006. USDA has even less of a field presence for
               monitoring than USAID. As a result, U.S. agencies may not be
               sufficiently accomplishing their goals of getting the right food
               to the right people at the right time.

               In our draft report, which is under review by U.S. agencies, we
               recommend that the Administrator of USAID, the Secretary of
               Agriculture, and the Secretary of Transportation take actions to
               improve the efficiency and effectiveness of U.S. food aid. These
               actions include (1) improving food aid logistical planning; (2)
               modernizing transportation contracting practices; (3) minimizing
               the cost impact of cargo preference regulations on food aid
               transportation expenditures; (4) tracking and resolving food
               quality complaints systematically; and (5) improving the
               monitoring of food aid programs.

               USAID, USDA, and DOT reviewed a draft of this testimony statement
               and provided us with oral comments, including technical comments
               that we have incorporated as appropriate. We also provided DOD,
               State, FAO, and WFP an opportunity to provide technical comments,
               which we have incorporated as appropriate.

    			  Background

               Food aid comprises all food-supported interventions by foreign
               donors to individuals or institutions within a country. It has
               helped to save millions of lives and improve the nutritional
               status of the most vulnerable groups, including women and
               children, in developing countries. Food aid is one element of a
               broader global strategy to enhance food security^3 by reducing
               poverty and improving availability, access to, and use of food in
               low-income, less-developed countries. Donors provide food aid as
               both a humanitarian response to address acute hunger in
               emergencies and as a development-focused response to address
               chronic hunger. Large-scale conflicts, poverty, weather
               calamities, and severe health-related problems are among the
               underlying causes of both acute and chronic hunger.

    			  Countries Provide Food Aid through In-Kind or Cash Donations,
    			  with the United States as the Largest Donor

               Countries provide food aid through either in-kind donations or
               cash donations for local procurement. In-kind food aid is food
               procured and delivered to vulnerable populations,^4 while cash
               donations are given to implementing organizations for the purchase
               of food in local markets. U.S. food aid programs are all in-kind,
               and no cash donations are allowed under current legislation.
               However, the Administration has proposed legislation to allow up
               to 25 percent of appropriated food aid funds for purchase of
               commodities in locations closer to where they are needed. Other
               food aid donors have also recently moved from providing less
               in-kind to more or all cash donations for local, regional, or
               donor-market procurement. While there are ongoing debates as to
               which form of assistance is more effective and efficient, the
               largest international food aid organization, the World Food
               Program (WFP), continues to accept both.^5 The United States is
               both the largest overall and in-kind provider of food aid,
               supplying over one-half of all global food aid.

    			  Most U.S. Food Aid Goes to Africa

               In fiscal year 2006, the United States delivered food aid to over
               50 countries, with about 78 percent of its funding allocations for
               in-kind food donations going to Africa, 12 percent to Asia and the
               Near East, 9 percent to Latin America, and 1 percent to Eurasia.
               Of the 78 percent of the food aid funding going to Africa, 30
               percent went to Sudan, 27 percent to the Horn of Africa, 17
               percent to Southern Africa, 14 percent to West Africa, and 12
               percent to Central Africa.

    			  Emergencies Represent an Increasing Share of U.S. Food Aid

               Food aid is used for both emergency^6 and non-emergency purposes.
               Over the last several years, the majority of U.S. food aid has
               shifted from a non-emergency to an emergency focus. In fiscal year
               2005, the United States directed approximately 80 percent or $1.6
               billion of its $2.1 billion expenditure for international food aid
               programs to emergencies. In contrast, in fiscal year 2002, the
               United States directed approximately 40 percent or $678 million of
               its $1.7 billion food aid expenditure to emergency programs (see
               fig. 1).

               Figure 1: Emergencies Represent an Increasing Share of U.S. Food
               Aid Funding from Fiscal Year 2002 to Fiscal Year 2005

               ^a These data represent all food aid programs administered by
               USAID and USDA.

    			  U.S. Food Aid Is Delivered Through Multiple Programs with
    			  Multiple Mandates

               U.S. food aid is funded under four program authorities and
               delivered through six programs administered by USAID and USDA,^7
               which serve a range of objectives including humanitarian goals,
               economic assistance, foreign policy, market development and
               international trade (see app. I).^8 The largest program, Public
               Law (P.L.) 480 Title II, is managed by USAID and averaged
               approximately 74 percent of total in-kind food aid allocations
               over the past 4 years, most of which funded emergency programs
               (see fig. 2). In addition, P.L. 480, as amended, authorizes USAID
               to preposition food aid both domestically and abroad with a cap on
               storage expenses of $2 million per fiscal year.

               Figure 2: Average Shares of Total Funding for U.S. International
               Food Aid by Program Authority from Fiscal Year 2002 to Fiscal Year
               2006 (Dollars in millions)

               ^aThis includes the Bill Emerson Humanitarian Trust.

               U.S. food aid programs also have multiple legislative and
               regulatory mandates that affect their operations. One mandate that
               governs U.S. food aid transportation is cargo preference, which is
               designed to support a U.S.-flag commercial fleet for national
               defense purposes. Cargo preference requires that 75 percent of the
               gross tonnage of all government-generated cargo be transported on
               U.S.-flag vessels. A second transportation mandate, known as the
               "Great Lakes Set Aside," requires that up to 25 percent of Title
               II bagged food aid tonnage be allocated to Great Lakes ports each
               month.^9 Other mandates require that a minimum of 2.5 million
               metric tons of food aid be provided through Title II programs, and
               that of this amount, a "sub-minimum" of 1.825 million metric tons
               be provided for non-emergency programs.^10 (For a summary of
               congressional mandates for P.L. 480, see app. I.)

    			  Multiple U.S. Government Agencies and Stakeholders Participate
    			  in U.S. Food Aid Programs

               U.S. food aid programs involve multiple U.S. government agencies
               and stakeholders. For example, USAID and USDA administer the
               programs, USDA's Kansas City Commodity Office (KCCO) manages the
               purchase of all commodities, and the U.S. Maritime Administration
               (MARAD) of DOT is involved in supporting their ocean transport on
               U.S. vessels. These and other government agencies coordinate food
               aid programs through the Food Assistance Policy Council, which
               oversees the Bill Emerson Humanitarian Trust, an emergency food
               reserve.^11 Other stakeholders include donors, implementing
               organizations such as WFP and NGOs, agricultural commodity groups,
               and the maritime industry. Some of these stakeholders are members
               of the Food Aid Consultative Group, which is led by USAID's Office
               of Food for Peace and addresses issues concerning the
               effectiveness of the regulations and procedures that govern food
               assistance programs.

    			  Multiple Challenges Hinder the Efficiency of Delivery of U.S. Food
    			  Aid

               Multiple challenges reduce the efficiency of U.S. food aid,
               including logistical constraints that impede food aid delivery and
               reduce the amount, timeliness, and quality of food provided. While
               agencies have tried to expedite food aid delivery in some cases,
               the majority of food aid program expenditures is on logistics, and
               the delivery of food from vendor to village is generally too
               time-consuming to be responsive in emergencies. Factors that
               increase logistical inefficiencies include uncertain funding and
               inadequate planning; transportation contracting practices that
               disproportionately increase risks for ocean carriers (who then
               factor those risks into freight rates); legal requirements; and
               inadequate coordination to systematically track and respond to
               logistical problems, such as food spoilage or contamination. While
               U.S. agencies are pursuing initiatives to improve food aid
               logistics, such as prepositioning food commodities, their
               long-term cost effectiveness has not yet been measured.

    			  Food Aid Procurement and Transportation are Costly and Time-
    			  Consuming

               Transportation costs represent a significant share of food aid
               expenditures. For the largest U.S. food aid program (Title II),
               approximately 65 percent of expenditures are on inland
               transportation (to the U.S. port for export), ocean
               transportation, in-country delivery, associated cargo handling
               costs, and administration. According to USAID, these non-commodity
               expenditures have been rising in part due to the increasing number
               of emergencies and the expensive nature of logistics in such
               situations. To examine procurement costs (expenditures on
               commodities and ocean transportation)^12 for all U.S. food aid
               programs, we obtained KCCO procurement data for fiscal years 2002
               through 2006. KCCO data also suggest that ocean transportation has
               been accounting for a larger share of procurement costs with
               average freight rates rising from $123 per metric ton in fiscal
               year 2002 to $171 per metric ton in fiscal year 2006 (see fig.
               3).^13 Further, U.S. food aid ocean transportation costs are
               relatively expensive compared with those of some other donors. WFP
               transports both U.S. and non-U.S. food aid worldwide at reported
               ocean freight costs averaging around $100 per metric ton--
               representing less than 20 percent of its total procurement
               costs.^14 At current U.S. food aid budget levels, every $10 per
               metric ton reduction in freight rates could feed about 1.2 million
               more people during a typical hungry season.^15

               Figure 3: U.S. Food Aid Ocean Transportation Costs

               Note: Total procurement costs include commodity and ocean
               transportation costs. Costs incurred to transport the cargo to the
               U.S. port for export are included in the commodity and ocean
               transportation costs, dependent on contract terms.

               Delivering U.S. food aid from vendor to village is also a
               relatively time-consuming task, requiring on average 4 to 6
               months. Food aid purchasing processes and example time frames are
               illustrated in figure 4. While KCCO purchases food aid on a
               monthly basis, it allows implementing partners' orders to
               accumulate for 1 month prior to purchase in order to buy in scale.
               KCCO then purchases the commodities, receives transportation
               offers, and awards transportation contracts over the following
               month. Commodity vendors bag the food and ship it to a U.S. port
               for export during the next 1 to 2 months.^16 After an additional
               40 to 50 days for ocean transportation to Africa, ^17 for example,
               the food arrives at an overseas port, where it is trucked or
               railroaded to the final distribution location over the next few
               weeks. While agencies have tried to expedite food aid delivery in
               some cases, the entire logistics process often lacks the
               timeliness required to meet humanitarian needs in emergencies and
               may at times result in food spoilage. Additionally, the largest
               tonnages of U.S. food aid are purchased during the months of
               August and September. Average tonnages purchased during the fourth
               quarter of the last 5 fiscal years have exceeded those purchased
               during the second and third quarters by more than 40 percent.
               Given a 6-month delivery window, these tonnages do not arrive in
               country until the end of the peak hungry season (from October
               through January in southern Africa, for example) in most cases.^18

    ^3Food security exists when all people at all times have both physical and
    economic access to sufficient food to meet their dietary needs for a
    productive and healthy life.

    ^4In-kind food aid usually comes in two forms: non-processed foods and
    value-added foods. Non-processed foods consist of whole grains such as
    wheat, corn, peas, beans, and lentils. Value-added foods consist of
    processed foods that are manufactured and fortified to particular
    specifications, and include milled grains such as cornmeal and bulgur, and
    fortified milled products such as corn soy blend (CSB) and wheat soy blend
    (WSB).

    ^5WFP relies entirely on voluntary contributions to finance its
    humanitarian and development projects, and national governments are its
    principal source of funding. More than 60 governments fund the
    humanitarian and development projects of WFP.

    ^6WFP defines emergencies as "urgent situations in which there is clear
    evidence that an event or series of events has occurred which causes human
    suffering or imminently threatens human lives or livelihoods and which the
    government concerned has not the means to remedy; and it is a demonstrably
    abnormal event or series of events which produces dislocation in the life
    of a community on an exceptional scale."

    ^7The authority for these U.S. international food aid programs is provided
    through P.L. 480 (the Agricultural Trade Development and Assistance Act of
    1954, as amended, 7 USC S 1701 et seq.); the Food for Progress Act of
    1985, as amended, 7 USC S 1736o; section 416(b) of the Agricultural Act of
    1949, as amended, 7 USC S 1431; and the Farm Security and Rural Investment
    Act of 2002 (P.L. 107-171). Funding sources for U.S. international food
    assistance other than these six USAID- and USDA-administered food aid
    programs include (1) International Disaster and Famine Assistance funds
    and (2) State's Bureau of Population, Refugees, and Migration. (See app. I
    for a description of these sources of funding.)

    ^8See GAO, Food Aid: Experience of U.S. Programs Suggests Opportunities
    forImprovement, [32]GAO-02-801T (Washington, D.C.: June 4, 2002).

    ^9P.L. 104-239, 110 Stat. 3138. See GAO, Maritme Security Fleet: Many
    Facors DetermineImpact of Potential Limts on Food Aid Shipments,
    [33]GAO-04-1065 (Washington, D.C.: Sept. 13, 2004).

    ^10Due to increasing emergency food aid needs, USAID has not met this
    sub-minimum requirement since 1995 and has regularly requested and
    received a waiver from Congress.

    ^11The Bill Emerson Humanitarian Trust, a reserve of up to 4 million
    metric tons of grain, can be used to help fulfill P.L. 480 food aid
    commitments to meet unanticipated emergency needs in developing countries
    or when U.S. domestic supplies are short. The Secretary of Agriculture
    authorizes the use of the Trust in consultation with the Food Assistance
    Policy Council, which includes senior USAID representatives. The Trust, as
    presently constituted, was enacted in the 1998 Africa Seeds of Hope Act
    (P.L. 105-385) and replaced the Food Security Wheat Reserve of 1980.

    ^12Inland transportation costs are included in commodity and ocean
    transportation contracts.

    ^13In addition to rising fuel prices and greater global demand for
    shipping, one factor contributing to the rise in freight rates is the
    rising share of U.S. tonnage sent to Africa, which had a slightly higher
    average cost of $180 per metric ton in 2006.

    ^14World Food Program, WFP in Statistics, July, 2006 and Review of
    Indirect Support CostsRate, Report WFP/DB/A.2006/6-C1 (Rome, Italy: May
    2006).

    ^15In this testimony, we use USAID's estimate that 1 metric ton can feed
    approximately 1,740 people per day. Given that the current average U.S.
    program cost for 1 metric ton of food aid is $585, if that average cost
    had been reduced by $10 per metric ton through a reduction in ocean
    transportation freight rates, the fiscal year 2006 food-aid budget could
    have funded an additional 62,500 metric tons--enough to feed approximately
    1.2 million people for a typical peak hungry season lasting 3 months.

    ^16KCCO data suggest that there is some variation in the time required
    from the contract award date until the commodity reaches a U.S. port for
    export. For example, for fiscal years 2002 through 2006, this time period
    varied from less than 30 days for several shipments to more than 90 days
    for several others.

    ^17Ocean transportation time frames may include loading and unloading of
    vessels.

    ^18GAO has previously reported on the poor timing of food aid delivery.
    See Famine in Africa Improving U.S. Response Time for Emergency Reief,
    [34]GAO/NSIAD-86-56 (Washington, D.C.: Apr. 3, 1986).

    Figure 4: An Example of a U.S. Food Aid Purchase and Its Delivery from
    Vendor to Village

    Various Factors Cause Inefficiencies in Food Aid Logistics

    Food aid logistics are costly and time-consuming for a variety of reasons.
    First, uncertain funding processes for emergencies can result in bunching
    of food aid purchases, which increases food and transportation costs and
    lengthens delivery time frames. Many experts, officials, and stakeholders
    emphasized the need for improved logistical planning. Second,
    transportation contracting practices--such as freight and payment terms,
    claims processes and time penalties--further increase ocean freight rates
    and contribute to delivery delays. A large percentage of the carriers we
    interviewed strongly recommended taking actions to address these
    contracting issues. Third, legal requirements such as cargo preference can
    increase delivery costs. Although food aid agencies are reimbursed by DOT
    for certain transportation expenditures, the sufficiency of reimbursement
    levels varies. Fourth, when food delivery problems arise, such as food
    spoilage or contamination, U.S. agencies and stakeholders lack adequately
    coordinated mechanisms to systematically track and respond to complaints.

      Funding and Planning Processes Increase Costs and Lengthen Time Frames

    Uncertain funding processes, combined with reactive and insufficiently
    planned procurement, increase food aid delivery costs and time frames.
    Food emergencies are increasingly common and now account for 80 percent of
    USAID program expenditures. To respond to sudden emergencies--such as
    Afghanistan in 2002, Iraq in 2003, Sudan, Eritrea, and Ethiopia in 2005,
    and Sudan and the Horn of Africa in 2006--U.S. agencies largely rely on
    supplemental appropriations and the Bill Emerson Humanitarian Trust (BEHT)
    to augment annual appropriations by up to a quarter of their budget.
    Figure 5, for example, illustrates that USAID supplemental appropriations
    have ranged from $270 million in fiscal year 2002 and $350 million in
    fiscal year 2006 to over $600 million in fiscal years 2003 and 2005.
    Agency officials and implementing partners told us that the uncertainty of
    whether, when, and at what levels supplemental appropriations would be
    forthcoming hampers their ability to plan both emergency and non-emergency
    food aid programs on a consistent, long-term basis and to purchase food at
    the best price. Although USAID and USDA instituted multi-year planning
    approaches in recent years, according to agency officials, uncertain
    supplemental funding has caused them to adjust or redirect funds from
    prior commitments.

    Figure 5: Funding for U.S. Food Aid Programs, Annual and Supplemental
    Appropriations, Fiscal Year 2002 to Fiscal Year 2006 (Dollars in millions)

    Agencies and implementing organizations also face uncertainty about the
    availability of Bill Emerson Humanitarian Trust funds. As of January 2007,
    the Emerson Trust held about $107.2 million in cash and about 915,350
    metric tons of wheat valued at $133.9 million--a grain balance that could
    support about two major emergencies based on an existing authority to
    release up to 500,000 metric tons per fiscal year and another 500,000 of
    commodities that could have been, but were not, released from previous
    fiscal years. Although the Secretary of Agriculture and the USAID
    Administrator have agreed that the $341 million combined value of
    commodity and cash currently held in the trust is more than adequate to
    cover expected usage over the period of the current authorization, the
    authorization is scheduled to expire on September 30, 2007. Resources have
    been drawn from the Emerson Trust on 12 occasions since 1984. For example,
    in fiscal year 2005, $377 million from the trust was used to procure
    700,000 metric tons of commodities for Ethiopia, Eritrea, and Sudan.
    However, experts and stakeholders with whom we met noted that the trust
    lacks an effective replenishment mechanism--withdrawals from the trust
    must be reimbursed by the procuring agency or by direct appropriations for
    reimbursement, and legislation establishing the Emerson Trust capped the
    annual replenishment at $20 million.^19

    Inadequately planned food and transportation procurement reflects the
    uncertainty of food aid funding. As previously discussed, KCCO purchases
    the largest share of food aid tonnage during the last quarter of each
    fiscal year. This "bunching" of procurement occurs in part because USDA
    requires 6 months to approve programs and/or because funds for both USDA
    and USAID programs may not be received until mid-fiscal year (after OMB
    has approved budget apportionments for the agencies) or through a
    supplemental appropriation. USAID officials stated that they have reduced
    procurement bunching through improved cash flow management.^20 Although
    USAID has had more stable monthly purchases in fiscal years 2004 and 2005,
    food aid procurement in total has not been consistent enough to avoid the
    higher prices associated with bunching. Higher food and transportation
    prices result from procurement bunching as suppliers try to smooth
    earnings by charging higher prices during their peak seasons and as food
    aid contracts must compete with commercial demand that is seasonally high.
    According to KCCO data for fiscal years 2002 through 2006, average
    commodity and transportation prices were each $12 to $14 per metric ton
    higher in the fourth quarter than in the first quarter of each year.^21
    Procurement bunching also stresses KCCO operations and can result in
    costly and time-consuming congestion for ports, railways, and trucking
    companies.

    While agencies face challenges to improving procurement planning given the
    uncertain nature of supplemental funding in particular, stakeholders and
    experts emphasized the importance of such efforts. For example, 11 of the
    14 ocean carriers we interviewed reported that reduced procurement
    bunching could greatly reduce transportation costs. When asked about
    bunching, agency officials, stakeholders and experts suggested the
    following potential improvements:

    ^19Additionally, Congress can appropriate funds to augment the Trust. The
    Emergency Wartime Supplemental Appropriations Act, 2003 (Pub. L. 108-11)
    appropriated $69 million for that purpose.

    ^20USAID has taken steps to improve its management of (1) committed and
    anticipated cash outflows for development and emergency programs,
    prepositioning, and other accounts; and (2) anticipated cash inflows from
    annual and supplemental budgets, DOT reimbursements, and other carryover
    accounts. However, according to a KCCO study, though both USDA and USAID
    experience an upsurge in purchasing at the end of the year (particularly
    in September), USDA's is more pronounced.

    ^21These figures exclude prices for non-fat dry milk and vegetable oil.

               o Improved communication and coordination. KCCO and WFP
               representatives suggested that USAID and USDA improve coordination
               of purchases to reduce bunching. KCCO has also established a
               web-based system for agencies and implementing organizations to
               enter up to several years' worth of commodity requests. However,
               implementing organizations are currently only entering purchases
               for the next month. Additionally, since the Food Aid Consultative
               Group (FACG) does not include transportation stakeholders, DOT
               officials and ocean carriers strongly recommended establishing a
               formal mechanism for improving coordination and transportation
               planning.
               o Increased flexibility in procurement schedules. USAID expressed
               interest in an additional time slot each month for food aid
               purchases. Several ocean carriers expressed interest in shipping
               food according to cargo availability rather than through pre-set
               shipping windows that begin 4 weeks and 6 weeks after each monthly
               purchase. Although KCCO has established shipping windows to avoid
               port congestion, DOT representatives believe that carriers should
               be able to manage their own schedules within required delivery
               time frames.
               o Increased use of historical analysis. DOT representatives,
               experts, and stakeholders emphasized that USAID and USDA should
               increase their use of historical analysis and forecasting to
               improve procurement. USAID has examined historical trends to
               devise budget proposals prepared 2 years in advance, and it is now
               beginning to use this analysis to improve timing of procurement.
               However, neither USAID nor USDA has used historical analysis to
               establish more efficient transportation practices, such as
               long-term agreements commonly used by DOD.^22 Furthermore, WFP is
               now using forecasting to improve purchasing patterns through
               advanced financing but is unable to use this financing for U.S.
               food aid programs due to legal and administrative constraints.

    			  Transportation Contracting Practices Increase Delivery Costs and
    			  Contribute to Delays

               Transportation contracting practices are a second factor
               contributing to higher food aid costs. DOT officials, experts, and
               ocean carriers emphasized that commercial transportation contracts
               include shared risk between buyers, sellers, and ocean carriers.
               In food aid transportation contracts, risks are disproportionately
               placed on ocean carriers, discouraging participation and resulting
               in expensive freight rates.^23 Examples of costly contracting
               practices include:

               o Non-commercial and non-standardized freight terms. Food aid
               contracts define freight terms differently than commercial
               contracts and place increased liability on ocean carriers.^24 For
               example, food aid contracts hold ocean carriers responsible for
               logistical problems such as improperly filled containers that may
               occur at the load port before they arrive. Food aid contracts also
               hold ocean carriers responsible for logistical problems such as
               truck delays or improper port documentation that may occur at the
               discharge port after they arrive. Further, several carriers
               reported that food aid contracts are not sufficiently
               standardized. Although USAID and USDA created a standard contract
               for non-bulk shipments, contracts for bulk shipments (which
               currently account for 63 percent of food aid tonnage delivered)
               have not yet been standardized. To account for risks that are
               unknown or outside their control, carriers told us that they
               charge higher freight rates.
               o Impractical time requirements. Food aid contracts may include
               impractical time requirements, although agencies disagree on how
               frequently this occurs. Although USAID officials review contract
               time requirements and described them as reasonable, they also
               indicated that transportation delays are a common result of poor
               carrier performance and the diminishing number of ocean carriers
               participating in food aid programs.^25 Several implementing
               organizations also complained about inadequate carrier
               performance. WFP representatives, for example, provided several
               examples of ocean shipments in 2005 and 2006 that were more than
               20 days late. While acknowledging that transportation delays
               occur, DOT officials indicated that some contracts include time
               requirements that are impossible for carriers to meet. For
               example, one carrier complained about a contract that required the
               same delivery date for four different ports. When carriers do not
               meet time requirements, they must pay costly penalties. Carriers
               reported that they review contracts in advance and, where time
               requirements are deemed implausible, factor the anticipated
               penalty into the freight rate.^26 While agencies do not
               systematically collect data on time requirements and penalties
               associated with food aid contracts, DOT officials examined a
               subset of contracts from December 2005 to September 2006 and
               estimated that 13 percent of them included impractical time
               requirements. Assuming that the anticipated penalties specified in
               the contracts analyzed were included in freight rates, food aid
               costs may have increased by almost $2 million (monies that could
               have been used to provide food to an additional 66,000
               beneficiaries).
               o Lengthy claims processes. Lengthy processes for resolving
               transportation disputes discourage both carriers and implementing
               organizations from filing claims. According to KCCO officials,
               obtaining needed documentation for a claim can require several
               years and disputed claims must be resolved by the Department of
               Justice. USAID's Inspector General reported that inadequate and
               irregular review of claims by USAID and USDA has also contributed
               to delayed resolution.^27 Currently, KCCO has over $6 million in
               open claims, some of which were filed prior to fiscal year 2001.
               For ocean carriers, the process is burdensome and encourages them
               to factor potential losses into freight rates rather than pursue
               claims. Incentives for most implementing organizations are even
               weaker given that monies recovered from claims reimburse the
               overall food aid budget rather than the organization that
               experienced the loss.^28 According to KCCO and WFP officials,
               transportation claims are filed for less than 2 percent of cargo.
               However, several experts and implementing organizations suggested
               that actual losses are likely higher. In 2003, KCCO proposed a new
               administrative appeals process for ocean freight claims that would
               establish a hearing officer within USDA and a 285-day timeframe.
               While DOT and some carriers agreed that a faster process was
               needed, DOT officials suggested that the process for claims review
               should include hearing officers outside of USDA to ensure
               independent findings. To date, KCCO's proposed process has not
               been implemented.

               o Lengthy payment time frames and burdensome administration.
               Payment of food aid contracts is slow and paperwork is
               insufficiently streamlined. When carriers are not paid for several
               months, they incur large interest costs that are factored into
               freight rates. While USDA now provides freight payments within a
               few weeks, several ocean carriers complained that USAID often
               requires 2 to 4 months to provide payment. USDA freight payments
               are timelier due to a new electronic payment system, ^29 but USAID
               officials said this system is too expensive, so they are
               considering other payment options. In addition, a few carriers
               suggested that paperwork in general needs streamlining and
               modernization. The 2002 Farm Bill required both USDA and USAID to
               pursue streamlining initiatives that the agencies are in the
               process of implementing. KCCO officials indicated that they are
               updating food aid information technology systems (to be in place
               in fiscal year 2009).

               Through structured interviews, ocean carriers confirmed the cost
               impact of food aid transportation contracting practices. For
               example, 9 (60 percent) and 14 (100 percent) of the carriers
               reported that "inefficient claims processes" and "liabilities
               outside the carriers' control" increase costs, respectively. To
               quantify the impact, two carriers estimated that non-standardized
               freight terms increase costs by 5 percent (about $8 per metric
               ton) while another carrier suggested that slow payment increases
               costs by 10 percent (about $15 per metric ton). Over 70 percent of
               the carriers strongly recommended actions to address contracting
               practices.

    			  Legal Requirements Can Increase Delivery Costs and Time Frames

               Legal requirements governing food aid procurement are a third
               factor that can increase delivery costs and time frames, with
               program impacts dependent on the sufficiency of associated
               reimbursements. In awarding contracts, KCCO must meet various
               procurement requirements such as cargo preference and the Great
               Lakes Set Aside. Each requirement may result in higher commodity
               and freight costs. Cargo preference laws, for example, require 75
               percent of food aid to be shipped on U.S.-flag carriers, which are
               generally more expensive than foreign-flag carriers by an amount
               that is known as the ocean freight differential (OFD). The total
               annual value of this cost differential between U.S.- and
               foreign-flag carriers averaged $134 million from fiscal years 2001
               to 2005. Additionally, since only a relatively small percentage of
               cargo can be shipped on foreign-flag vessels, agency and port
               officials believe that cargo preference regulations discourage
               foreign-flag participation in the program and result in delays
               when a U.S.-flag carrier is not available. DOT officials emphasize
               that USAID and USDA receive reimbursements for most if not all of
               the total OFD cost--DOT reimbursements varied from $126 million in
               fiscal year 2002 to $153 million in fiscal year 2005. ^30 However,
               USAID officials expressed concern that the OFD calculations do not
               fully account for the costs of cargo preference or the
               uncertainties regarding its application. For example, OFD
               reimbursements do not account for the additional costs of shipping
               on U.S.-flag vessels that are older than 24 years (approximately
               half of these vessels) or shipments for which a foreign-flag
               vessel has not submitted a bid.^31 USAID officials estimate that
               the actual cost of cargo preference in fiscal year 2003 exceeded
               the total OFD cost by about $50 million due to these factors.
               Finally, USAID and DOT officials have not yet agreed on whether
               cargo preference applies to shipments from prepositioning sites.

    			  Inadequate Coordination Limits Agencies� and Stakeholders�
    			  Response to Food Delivery Problems

               U.S. agencies and stakeholders do not coordinate adequately to
               respond to food and delivery problems when they arise. USAID and
               USDA lack a shared, coordinated system to systematically track and
               respond to food quality complaints, and food aid working groups
               and forums are not inclusive of all stakeholders.^32 Food quality
               concerns have been long-standing issues provoking the concern of
               both food aid agencies and the U.S. Congress.^33 In 2003, for
               example, USAID's Inspector General reported some Ethiopian
               warehouses in poor condition, with rodent droppings near torn bags
               of corn soy blend (CSB), rainwater seepage, pigeons flying into
               one warehouse, and holes in the roof of another. Implementing
               organizations we spoke with also frequently complained about
               receiving heavily infested and contaminated cargo. For example, in
               Durban, South Africa we saw 1,925 metric tons of heavily infested
               cornmeal that arrived late in port because it had been erroneously
               shipped to the wrong countries first. This food could have fed
               over 37,000 people. When food arrives heavily infested, NGOs hire
               a surveyor to determine how much is salvageable for human
               consumption or for use as animal feed, and destroy what is deemed
               unfit.

               When such food delivery problems arise, U.S. agencies and food aid
               stakeholders face a variety of coordination challenges in
               addressing them. For example:

               o KCCO, USDA and USAID have disparate quality complaint tracking
               mechanisms that monitor different levels of information. As a
               result, they are unable to determine the total quantity of and
               trends in food quality problems. In addition, because implementing
               organizations track food quality concerns differently, if at all,
               they cannot coordinate to share concerns with each other and with
               U.S. government agencies. For example, since WFP--which accounts
               for 60 percent of U.S. food aid shipments--independently handles
               its own claims, KCCO officials are unable to track the quality of
               food aid delivery program-wide. Agencies and stakeholders have
               suggested that food quality tracking and coordination could be
               improved if USAID and USDA shared the same database and created an
               integrated food quality complaint reporting system.
               o Agency country offices are often unclear about their roles in
               tracking food quality, creating gaps in monitoring and reporting.
               For example, USAID has found that some missions lack clarity on
               their responsibilities in independently verifying claims stemming
               from food spoilage, often relying on the implementing organization
               to research the circumstances surrounding losses. One USAID
               country office also noted that rather than tracking all food
               quality problems reported, it only recorded and tracked commodity
               losses for which an official claim had been filed. Further, in
               2004, the Inspector General for USAID found that USAID country
               offices were not always adequately following up on commodity loss
               claims to ensure that they were reviewed and resolved in a timely
               manner. To improve food quality monitoring, agencies and
               stakeholders have suggested updating regulations to include
               separate guidance for complaints, as well as developing a secure
               website for all agencies and their country offices to use to track
               both complaints and claims.
               o When food quality issues arise, there is no clear and
               coordinated process for seeking assistance, creating costly delays
               in response. For example, when WFP received 4,200 metric tons of
               maize in Angola in 2003 and found a large quantity to be wet and
               moldy, it did not receive a timely response from USAID officials
               on how to handle the problem. WFP incurred $176,000 in costs in
               determining the safety of the remaining cargo, but was later
               instructed by USAID to destroy the whole shipment. WFP claims it
               lost over $640,000 in this case, including destruction costs and
               the value of the commodity. Although KCCO established a hotline to
               provide assistance on food quality complaints, KCCO officials
               stated that it was discontinued because USDA and USAID officials
               wanted to receive complaints directly, rather than from KCCO.
               Nevertheless, agencies and stakeholders have suggested that
               providing a standard questionnaire to implementing organizations
               would ensure more consistent reporting on food quality issues.

    			  While Agencies Have Taken Steps to Improve Efficiency, Their
    			  Costs and Benefits Have Not Yet Been Measured

               To improve timeliness in food aid delivery, USAID has been
               prepositioning commodities in two locations and KCCO is
               implementing a new transportation bid process. Prepositioning
               enabled USAID to respond more rapidly to the 2005 Asian tsunami
               emergency than would have been otherwise possible. KCCO's bid
               process is also expected to reduce delivery time frames and ocean
               freight rates. However, the long-term cost effectiveness of both
               initiatives has not yet been measured.

    			    Prepositioning and Transportation Procurement Could Improve
    				 Timeliness

               USAID has prepositioned food aid on a limited basis to improve
               timeliness in delivery.^34

               USAID has used warehouses in Lake Charles (Louisiana) since 2002
               and Dubai (United Arab Emirates) since 2004 to stock commodities
               in preparation for food aid emergencies and it is now adding a
               third site in Djibouti, East Africa. USAID has used prepositioned
               food to respond to recent emergencies in Lebanon, Somalia, and
               Southeast Asia, among other areas. Prepositioning is beneficial
               because it allows USAID to bypass lengthy procurement processes
               and to reduce transportation timeframes. USAID officials told us
               that diverting food aid cargo to the site of an emergency before
               it reaches a prepositioning warehouse further reduces response
               time and eliminates storage costs.^35 When the 2005 Asian tsunami
               struck, for example, USAID quickly provided 7,000 metric tons of
               food to victims by diverting the carrier at sea, before it reached
               the Dubai warehouse. According to USAID officials, prepositioning
               warehouses also offer the opportunity to improve logistics when
               USAID is able to begin the procurement process before an emergency
               occurs, or if it is able to implement long-term agreements with
               ocean carriers for tonnage levels that are more certain.^36

               Despite its potential for improved timeliness, prepositioning has
               not yet been studied in terms of its long-term cost effectiveness.
               Table 1 shows that over fiscal years 2005 and 2006, USAID
               purchased about 200,000 metric tons of processed food for
               prepositioning (about 3 percent of total food aid tonnage),
               diverted about 36,000 metric tons en route, and incurred contract
               costs of about $1.5 million for food that reached the warehouse
               (averaging around $10 per metric ton). In addition to contract
               costs, ocean carriers generally charge higher freight rates for
               prepositioned cargo to account for additional cargo loading or
               unloading, additional days at port, and additional risk of damage
               associated with cargo that has undergone extra handling. USAID
               officials have suggested that average freight rates for
               prepositioned cargo could be $20 per metric ton higher.

               Table 1: USAID Tonnage and Costs for Prepositioning, Fiscal Year
               2005 to Fiscal Year 2006

                                                          Lake Charles      Dubai
    Tonnage purchased for prepositioning sites            99,630 MT 100,520 MT
          o Tonnage shipped to prepositioning site           99,630 MT  64,606 MT
          o Tonnage diverted before reaching                      0 MT  35,644 MT
          prepositioning site
    Contract costs for storage and cargo handling          $839,380   $715,668
    services

               Source: USAID.

               In addition to costs of prepositioning, agencies face several
               challenges to their effective management of this program,
               including the following:

               o Food aid experts and stakeholders expressed mixed views on the
               appropriateness of current prepositioning locations.^37 Only 5 of
               the 14 ocean carriers we interviewed rated existing sites
               positively and most indicated interest in alternative sites. KCCO
               officials and experts also expressed concern with the quality of
               the Lake Charles warehouse and the lack of ocean carriers
               providing service to that location. For example, many carriers
               must move cargo by truck from Lake Charles to Houston before
               shipping it, which adds as much as an extra 21 days for delivery.

               o Inadequate inventory management increases risk of cargo
               infestation. KCCO and port officials suggested that USAID had not
               consistently shipped older cargo out of the warehouses first.
               USAID officials emphasized that inventory management has been
               improving but that limited monitoring and evaluation funds
               constrain their oversight capacity.^38 For example, the current
               USAID official responsible for overseeing the Lake Charles
               prepositioning stock was able to visit the site only once in
               fiscal year 2006--at his own expense.

               o Agencies have had difficulties ensuring phytosanitary
               certification for prepositioned food because they do not know the
               country of final destination when they request phytosanitary
               certification from APHIS.^39 According to USDA, since
               prepositioned food is not imported directly from a U.S. port, it
               requires either a U.S.-reissued phytosanitary certificate or a
               foreign-issued phytosanitary certificate for re-export. USDA
               officials told us they do not think that it is appropriate to
               reissue these certificates, as once a food aid shipment leaves the
               United States, they cannot make any statements about the
               phytosanitary status of the commodities, which may not meet the
               entry requirements of the country of destination. USDA officials
               are concerned that USAID will store commodities for a considerable
               period of time during which their status may change, thus making
               the certificate invalid. Although USDA and USAID officials are
               willing to let foreign government officials issue these
               certificates, U.S. inspection officials remain concerned that the
               foreign officials might not have the resources or be willing to
               recertify these commodities. Without phytosanitary certificates,
               food aid shipments could be rejected, turned away, or destroyed by
               recipient country governments.
               o Certain regulations applicable to food aid create challenges for
               improving supply logistics. For example, food aid bags must
               include various markings reflecting contract information, when the
               commodity should be consumed, and whether the commodity is for
               sale or direct distribution. Marking requirements vary by country
               (some require markings in local language), making it difficult for
               USAID to divert cargo. Also, due to the small quantity of total
               food aid tonnage (about 3 percent) allocated for the
               prepositioning program, USAID is unable to use the program to
               consistently purchase large quantities of food aid earlier in the
               fiscal year.

    			    New Transportation Bid Process Could Reduce Procurement Time
    				 Frames

               In addition to prepositioning, KCCO is implementing a new
               transportation bid process to reduce procurement time frames and
               increase competition between ocean carriers. In the prior two-step
               system, during a first procurement round, commodity vendors bid on
               contracts and ocean carriers indicated potential freight rates.
               Carriers provided actual rate bids during a second procurement
               round, once the location of the commodity vendor had been
               determined. In the new 1-step system, ocean carriers will bid at
               the same time as commodity vendors. KCCO expects the new system to
               cut 2 weeks from the procurement process and potentially provide
               average annual savings of $25 million in reduced transportation
               costs. KCCO also expects this new bid process will reduce cargo
               handling costs as cargo loading becomes more consolidated. When
               asked about the new system, many carriers reported uncertainty as
               to what its future impact would be, while several expressed
               concern that USDA's testing of the system had not been
               sufficiently transparent.

    			  Various Challenges Prevent Effective Monitoring of Food Aid

               Despite the importance of ensuring the effective use of food aid
               to alleviate hunger, U.S. agencies' efforts to monitor food aid
               programs are insufficient. Limited food aid resources make it
               important for donors and implementers to ensure that food aid
               reaches the most vulnerable populations, thereby enhancing its
               effectiveness. However, USAID and USDA do not sufficiently monitor
               food aid programs, particularly in recipient countries, due to
               limited staff, competing priorities, and legal restrictions in use
               of food aid resources.

    			  U.S. Agencies Do Not Sufficiently Monitor Food Aid Programs

               Although USAID and USDA require implementing organizations to
               regularly monitor and report on the use of food aid, these
               agencies have undertaken limited field-level monitoring of food
               aid programs. Agency inspectors general have reported that
               monitoring has not been regular and systematic, and that in some
               cases intended recipients have not received food aid or the number
               of recipients could not be verified. Our audit work also indicates
               that monitoring has been insufficient due to various factors
               including limited staff, competing priorities, and restrictions in
               use of food aid resources.

               USAID and USDA require NGOs and WFP to conduct regular monitoring
               of food aid programs. USAID Title II guidance for multi-year
               programs requires implementing organizations to provide a
               monitoring plan, which includes information such as the percentage
               of the target population reached, as well as mid-term and final
               evaluations of program impact. USDA requires implementing
               organizations to report semi-annually on commodity logistics and
               the use of food. According to WFP's agreement with the U.S.
               government, WFP field staff should undertake periodic monitoring
               at food distribution sites to ensure that commodities are
               distributed according to an agreed-upon plan. Additionally, WFP is
               to provide annual reports for each of its U.S.-funded programs.

               In addition to monitoring by implementing organizations, agency
               monitoring is important to ensure targeting of food aid is
               adjusted to changes in conditions as they occur, and to modify
               programs to improve their effectiveness, according to USAID
               officials. However, various USAID and USDA Inspectors General
               reports have cited problems with agencies' monitoring of programs.
               For example, according to various USAID Inspector General reports
               on non-emergency programs in 2003, while food aid was generally
               delivered to intended recipients, USAID officials did not conduct
               regular and systematic monitoring.^40 One such assessment of
               direct distribution programs in Madagascar, for example, noted
               that as a result of insufficient and ad hoc site visits, USAID
               officials were unable to detect an NGO reallocation of significant
               quantities of food aid to a different district that, combined with
               late arrival of U.S. food aid, resulted in severe shortages of
               food aid for recipients in a USAID-approved district. The
               Inspector General's assessment of food aid programs in Ghana
               stated that the USAID mission's annual report included data, such
               as number of recipients, that were directly reported by
               implementing organizations without any procedures to review the
               completeness and accuracy of this information over a 3-year
               period. As a result, the Inspector General concluded, the mission
               had no assurance as to the quality and accuracy of this data.

    			  Limited Staff Constrain Monitoring of Food Aid Programs in
    			  Recipient Countries

               Limited staff and other demands in USAID missions and regional
               offices have constrained their field-level monitoring of food aid
               programs.^41 In fiscal year 2006, although USAID has some
               non-Title II staff assigned to monitoring, it had only 23 Title
               II-funded staff assigned to missions and regional offices in just
               10 countries to monitor programs costing about $1.7 billion in 55
               countries.^42 For example, USAID's Zambia mission had only one
               Title-II funded foreign-national and one U.S.-national staff to
               oversee $4.6 million in U.S. food aid funding in fiscal year 2006.
               Moreover, the U.S.-national staff only spent about one-third of
               his time on food aid activities and two-thirds on the President's
               Emergency Plan for AIDS Relief program.

               USAID regional offices' monitoring of food aid programs has also
               been limited. These offices oversee programs in multiple
               countries, especially where USAID missions lack human-resource
               capacity. For example, USAID's East Africa regional office, which
               is located in Kenya, is responsible for oversight in 13 countries
               in East and Central Africa, of which 6 had limited or no capacity
               to monitor food aid activities, according to USAID officials.^43
               This regional office, rather than USAID's Kenya mission, provided
               monitoring staff to oversee about $100 million in U.S. food aid to
               Kenya in fiscal year 2006.^44 While officials from the regional
               office reported that their program officers monitor food aid
               programs, according to an implementing organization official we
               interviewed, USAID officials visited the project site only 3 times
               in 1 year. USAID officials told us that they may have multiple
               project sites in a country and may monitor selected sites based on
               factors such as severity of need and level of funding. In another
               case, monitoring food aid programs in the Democratic Republic of
               Congo (DRC) from the USAID regional office had been difficult due
               to poor transportation and communication infrastructure, according
               to USAID officials. Therefore, USAID decided to station one
               full-time employee in the capital of the DRC to monitor U.S. food
               aid programs that cost about $51 million in fiscal year 2006.

    			  Limited Resources and Restrictions in Their Use Further Constrain
    			  Monitoring Efforts

               Field-level monitoring is also constrained by limited resources
               and restrictions in their use. Title II resources provide only
               part of the funding for USAID's food aid monitoring activities and
               there are legal restrictions on the use of these funds for
               non-emergency programs. Other funds, such as from the agency's
               overall operations expense and development assistance accounts,
               are also to be used for food aid activities such as monitoring.
               However, these additional resources are limited due to competing
               priorities and their use is based on agency-wide allocation
               decisions, according to USAID officials. As a result, resources
               available to hire food aid monitors are limited. For example,
               about 5 U.S.-national and 5 foreign-national staff are responsible
               for monitoring all food aid programs in 7 countries in the
               Southern Africa region, according to a USAID food aid regional
               coordinator. Moreover, because its operations expense budget is
               limited and Title II funding only allows food monitors for
               emergency programs, USAID relies significantly on Personal
               Services Contractors (PSCs) --both U.S.-national and
               foreign-national hires--to monitor and manage food aid programs in
               the field.^45 For example, while PSCs can use food aid project
               funds for travel, USAID's General Schedule staff cannot.
               Restrictions in the use of Title II resources for monitoring
               non-emergency programs further reduce USAID's monitoring of these
               programs.

               USDA administers a smaller proportion of food aid programs than
               USAID, and its field-level monitoring of food aid programs is more
               limited than for USAID-funded programs. In March 2006, USDA's
               Inspector General reported that USDA's Foreign Agricultural
               Service (FAS) had not implemented a number of recommendations made
               in a March 1999 report on NGO monitoring. Furthermore, several
               NGOs informed GAO that the quality of USDA oversight from
               Washington, D.C. is generally limited in comparison to oversight
               by USAID. USDA has fewer overseas staff who are usually focused on
               monitoring agricultural trade issues and foreign market
               development. For example, the agency assigns a field attache--with
               multiple responsibilities in addition to food aid monitoring--to
               U.S. missions in some countries. However, FAS officials informed
               us that in response to past USDA Inspector General and GAO
               recommendations, a new monitoring and evaluation unit has been
               established recently with an increased staffing level to monitor
               the semiannual reports, conduct site visits, and evaluate
               programs.

               Without adequate monitoring from U.S. agencies, food aid programs
               are vulnerable to not effectively directing limited food aid
               resources to those populations most in need. As a result, agencies
               may not be sufficiently accomplishing their goals of getting the
               right food to the right people at the right time.

    			  Objectives, Scope, and Methodology

               To address these objectives, we analyzed food aid procurement and
               transportation data provided by USDA's KCCO and food aid budget
               data provided by USDA, USAID and WFP. We determined that the food
               aid data obtained was sufficiently reliable for our purposes. We
               reviewed economic literature on the implications of food aid on
               local markets and recent reports, studies, and papers issued on
               U.S. and international food aid programs. We conducted a
               structured interview of the 14 U.S.- and foreign-flag ocean
               carriers that transport over 80 percent of U.S. food aid tonnages.
               We supplemented our structured interview evidence with information
               from other ocean carriers and shipping experts. In Washington,
               D.C., we interviewed officials from USAID, USDA, the Departments
               of State (State), DOD, DOT, and the Office of Management and
               Budget (OMB). We also met with a number of officials representing
               NGOs that serve as implementing partners to USAID and USDA in
               carrying out U.S. food aid programs overseas; freight forwarding
               companies; and agricultural commodity groups. In Rome, we met with
               officials from the U.S. Mission to the UN Agencies for Food and
               Agriculture, the UN World Food Program headquarters, and FAO. We
               also conducted field work in three countries that are recipients
               of food aid--Ethiopia, Kenya, and Zambia--and met with officials
               from U.S. missions, implementing organizations, and relevant host
               government agencies in these countries and South Africa. We
               visited a port in Texas from which food is shipped; two food
               destination ports in South Africa and Kenya; and two sites in
               Louisiana and Dubai where U.S. food may be stocked prior to
               shipment to destination ports. For the countries we visited, we
               also reviewed numerous documents on U.S. food aid, including all
               the proposals that USDA approved from 2002 to 2006 for the food
               aid programs it administers, and approximately half of the
               proposals that USAID approved from 2002 to 2006 for the food aid
               programs it administers.^46 Finally, in January 2007, we convened
               a roundtable of 15 experts and practitioners including
               representatives from academia, think tanks, implementing
               organizations, the maritime industry, and agricultural commodity
               groups to further delineate, based on GAO's initial work, some key
               challenges to the efficient delivery and effective use of U.S.
               food aid and to explore options for improvement. We took the
               roundtable participants' views into account as we finalized our
               analysis of these challenges and options. We conducted our work
               between April 2006 and March 2007 in accordance with generally
               accepted U.S. government auditing standards.

    			  Conclusions

               U.S. international food aid programs have helped hundreds of
               millions of people around the world survive and recover from
               crises since the Agricultural Trade Development and Assistance Act
               (P.L. 480) was signed into law in 1954. Nevertheless, in an
               environment of increasing emergencies, tight budget constraints,
               and rising transportation and business costs, U.S. agencies must
               explore ways to optimize the delivery and use of food aid. U.S.
               agencies have taken some measures to enhance their ability to
               respond to emergencies and streamline the myriad processes
               involved in delivering food aid. However, opportunities for
               further improvement in such areas as logistical planning and
               transportation contracting remain. Moreover, inadequate
               coordination among food aid stakeholders has hampered ongoing
               efforts to address some of these logistical challenges. Finally,
               U.S. agencies' lack of monitoring leaves U.S. food aid programs
               vulnerable to wasting increasingly limited resources, not putting
               them to their most effective use, or not reaching the most
               vulnerable populations on a timely basis.

               In a draft report that is under review by U.S. agencies, we
               recommend that to improve the efficiency of U.S. food aid--in
               terms of amount, timeliness, and quality--USDA, USAID, and DOT
               work together and with stakeholders to

               o improve food aid logistical planning through cost-benefit
               analysis of supply-management options, such as long-term
               transportation agreements and prepositioning--including
               consideration of alternative methods, such as those used by WFP;
               o modernize transportation contracting procedures to include, to
               the extent possible, commercial principles of shared risks,
               streamlined administration, and expedited payment and claims
               resolution;
               o seek to minimize the cost impact of cargo preference regulations
               on food aid transportation expenditures by updating implementation
               and reimbursement methodologies to account for new supply
               practices, such as prepositioning, and potential costs associated
               with older vessels or limited foreign-flag participation; and
               o establish a coordinated system for tracking and resolving food
               quality complaints.

               To optimize the effectiveness of food aid, we recommend that USAID
               and USDA improve monitoring of food aid programs to ensure proper
               management and implementation.

    ^22Several years ago, USAID asked DOD to calculate the cost for a sample
    set of food aid shipments using long-term transportation agreements
    managed by DOD. This analysis indicated a lack of potential savings.
    However, DOD and DOT officials subsequently found that the analysis
    contained flaws and they recommend that a new analysis be conducted. DOD
    officials suggested that USAID conduct a pilot program using DOD's
    Universal Service Contract. DOT officials indicated that cost savings
    could be realized if USAID were to manage its own contracts, and that they
    had offered to assist USAID in doing so. DOT also provided examples of
    contracts that would not discourage cargo consolidation or reduce
    competition.

    ^23Various factors distinguish food aid shipments from commercial
    shipments, making freight rates between these activities not directly
    comparable. Nonetheless, KCCO data suggest that average food aid freight
    rates from the Gulf of Mexico to Djibouti, East Africa were over $150 per
    ton in 2006. Average commercial freight rates for grain shipments from
    these ports were about one-third the price at $55 per ton.

    ^24International commercial terms (InCo terms) are internationally
    accepted terms defining responsibilities of exporters and importers in
    shipments. InCo terms define free alongside ship ("FAS"), for example, as
    a contract where cargo is placed at the load port under the seller's
    responsibility and any vessel loading charges, freight, and other costs
    incurred including "detention and demurrage" (costs for detaining vessel
    or equipment at a discharge port longer than specified in the contract)
    are the buyer's responsibility. For food aid programs, FAS contracts
    specify that cargo is loaded and discharged at the carrier's time, risk,
    and expense.

    ^25We reported in 2004 that, between fiscal years 1999 and 2003, there was
    an annual average of 108 U.S.-flag vessels participating in U.S. food aid
    programs (see [36]GAO-04-1065 ). According to DOT estimates, fewer than 90
    U.S.-flag vessels participated in food aid programs in fiscal year 2006.
    Due to fleet changes, USAID officials estimate that there are now even
    fewer U.S.-flag vessels available to carry U.S. food aid.

    ^26Various stakeholders questioned whether penalties are effective. USAID
    officials emphasized that penalties are their most practical tool to
    compel ocean carrier performance because FAR regulations make it very
    difficult to suspend carriers from participating in food aid programs due
    to poor performance.

    ^27See USAID, Office of Inspector General Report No. 4-663-04-002-P
    (Washington, D.C.: Nov. 21, 2003).

    ^28WFP handles food aid claims independently through an insurance program.

    ^29This system is entitled "PowerTrack" and is also currently used by DOD.
    According to DOD, PowerTrack has provided the government with visibility
    of payment history, reduced administrative and handling costs and
    expedited vendor payments. However, ocean carriers are responsible for
    paying transaction fees and USAID officials believe these fees - which are
    a percentage of the contract value -may be too expensive for large
    contracts. They are researching whether they can find a similar service
    with a fixed transaction fee.

    ^30The Food Security Act of 1985 requires DOT to reimburse food aid
    agencies for the portion of the OFD cost and for ocean transportation
    costs that exceed 20 percent of total program costs. Reimbursement
    methodologies are governed by a 1987 interagency memorandum of
    understanding. According to DOT officials, the OFD cost was relatively low
    in fiscal year 2005 due to high global demand for freight services and
    relatively high foreign-flag freight rates. These factors raised ocean
    transport costs as a percentage of program costs, however, such that DOT's
    total reimbursement was higher as well.

    ^31USAID and USDA are required to apply cargo preference regulations for
    vessels of any age. However, total OFD costs are based on an average OFD
    for vessels that are 24 years or younger. USAID officials argue that the
    cost difference between U.S.-flag and foreign-flag rates is larger for
    older vessels. Further, since opportunities for foreign-flag participation
    are limited, USAID argues that they are not reimbursed for the higher cost
    of shipping on a U.S.-flag vessel when foreign-flag bids are not received.
    Using KCCO data, we found that 14 percent of food aid commodity requests
    in fiscal year 2005 received no foreign-flag bid.

    ^32Food quality pertains to the degree of food spoilage, infestation,
    contamination and/or damage that can result from factors such as
    inadequate fumigation, poor warehouse conditions, and transportation
    delays.

    ^33In a report accompanying H.R. 5522, the 2007 Department of State,
    Foreign Operations, and Related Programs Appropriations Act, the Senate
    Foreign Relations Committee stated its concern for reports that food aid
    distribution overseas had been disrupted, suspended and in some instances
    rejected due to quality concerns, and supported efforts by USAID and other
    agencies to investigate these concerns. S. Rept. 109-277, p. 61. GAO has
    also reported on food quality issues. See Foreign Assistance: US. Food Aid
    Program to Russia Had Weak Internal Controls, [37]GAO/NSIAD/AIMD-00-329 .
    (Washington, D.C.: Sept. 29, 2000).

    ^34P.L. 480 authorizes USAID to preposition food aid both domestically and
    abroad with a cap on storage expenses of $2 million per fiscal year.

    ^35Purchases for the Lake Charles prepositioning site must reach the
    warehouse and may not be diverted in advance.

    ^36USAID representatives suggested they might consider pursuing a
    long-term transportation agreement for prepositioned tonnage to Djibouti.
    KCCO officials suggested that, as part of such a program, earlier
    purchases of food could also reduce commodity prices.

    ^37USAID chooses prepositioning locations based on three factors: (1)
    storage and warehouse costs; (2) technical criteria such as the port's
    plan of operations and personnel capacity, and the frequency of service
    provided by ocean carriers; and (3) past performance.

    ^38USAID is considering building inventory management into warehouse
    contracts and establishing standard operating procedures.

    ^39A phytosanitary certificate is a document required by many states and
    foreign countries for the import of non-processed, plant products. As
    specified by the importing country or state, exported products must meet
    various plant health requirements pertaining to pests, plant diseases,
    chemical treatments and weeds.

    ^40USAID Inspector General, Aud of USAID/Madagascar's Distributon of PL
    480 Tile IINon-Emergency Asssance in Suppor of its Direct Food Aid
    Distribution Program, 2003. See also Audit of USAID/Ghana's Distribution
    of P.L. 480 Title II NonEmergency Asssance in Suppor of Its Drect Food Aid
    Disrbution Program, 2003; and Audit ofUSAID/Ethiopia's Dsrbution of P.L.
    480 Title II Non-Emergency Asssance in Support ofIts Drect Food Ad
    Disrbution Program, 2003.

    ^41As part of the 2002 Farm Bill, the Congress directed USAID to
    streamline program management as well as procedures and guidelines,
    including "information collection and reporting systems by identifying
    critical information that needs to be monitored and reported on by
    eligible organizations." In its report to the Congress in 2003, USAID
    identified actions to help achieve legislative directives, which included
    a re-examination of its staffing and human resources requirements to
    ensure timeliness and efficiency, especially due to the workload imposed
    by a $1.4 billion Title II program. However, USAID did not conduct a
    systematic assessment of its workload and staffing requirements for the
    Office of Food for Peace to determine appropriate levels to monitor its
    operations in over 50 countries.

    ^42In addition to Title II-funded positions, USAID missions and regional
    offices have positions that are funded through other sources such as
    development assistance or operating budgets for these offices. Although
    these staff in this positions may monitor food aid programs, they would
    also be responsible for monitoring other programs.

    ^43In 2005, USAID's East Africa regional office had oversight
    responsibilities for $1.3 billion in food aid distributed in the region,
    including about $377 million from the Bill Emerson Humanitarian Trust to
    meet emergency needs in Ethiopia, Eritrea, and Sudan.

    ^44In contrast, while USAID's mission in Ethiopia also comes under the
    purview of USAID's East Africa regional office, it has its own staff to
    monitor its food aid programs. Specifically, 2 U.S.-national and 4
    foreign-national staff manage and monitor U.S. food aid programs in
    Ethiopia, funded at $143 million in 2006.

    ^45USAID hires U.S. and foreign nationals under personal service contracts
    to complement its workforce of U.S. foreign service and civil service
    personnel. These personal service contractors, or PSCs, serve in USAID's
    overseas offices or missions and are generally considered to be more
    cost-effective by the agency.

    ^46USDA administers Public Law (P.L.) 480 Title I, Food for Progress,
    Section 416(b), and the McGovern-Dole International Food for Education and
    Child Nutrition programs. USAID administers P.L. 480 Title II.

    			  			  Agency Comments and Our Evaluation

               USAID, USDA, and DOT provided oral comments on a draft of this
               statement and we incorporated them as appropriate. We also
               provided DOD, State, FAO, and WFP an opportunity to offer
               technical comments that we have incorporated as appropriate.

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

    			  GAO Contact and Staff Acknowledgments

               Should you have any questions about this testimony, please contact
               Thomas Melito, Director, at (202) 512-9601 or MelitoT@gao.gov
               . Other major contributors to this testimony were Phillip Thomas
               (Assistant Director), Carol Bray, Ming Chen, Debbie Chung, Martin
               De Alteriis, Leah DeWolf, Mark Dowling, Etana Finkler, Kristy
               Kennedy, Joy Labez, Kendall Schaefer, and Mona Sehgal.

    			  Appendix I: Program Authorities and Congressional Mandates

               The United States has principally employed six programs to deliver
               food aid: P.L. 480 Titles I, II, and III; Food for Progress;
               McGovern-Dole Food for Education and Child Nutrition; and Section
               416(b). Table 2 provides a summary of these food aid programs by
               program authority.

    Appendix I: Program Authorities and Congressional Mandates

    Table 2: U.S. Food Aid by Program Authority

                                  P.L. 480
                                                                               McGovern-Dole
                                                                               Food for
                                                                               Education and     Section
    Program       Title I       Title II      Title III      Food for Progress Child Nutrition   416(b)
    Total         $20 million   $1,668        0^b            $195.1 million    $89.5 million     $76.3
    funding                     million                                                          million^c
    allocation^a
    Managing      USDA          USAID         USAID          USDA              USDA^d            USDA
    agency
    Year          1954          1954          1954           1985              2003              1949
    established
    Description   Concessional  Donation of   Donation of    Donation or       Donation of       Donations of
    of            sales of      commodities   commodities    credit sale of    commodities and   surplus
    assistance    agricultural  to meet       to             commodities to    provision of      commodities
                  commodities   emergency and governments    developing        financial and     to carry out
                                non-emergency of least       countries and/or  technical         purposes of
                                needs;        developed      emerging          assistance in     P.L. 480
                                commodities   countries      democracies       foreign countries (Title II and
                                may be sold                                                      Title III)
                                in-country                                                       and Food for
                                for                                                              Progress
                                development                                                      programs
                                purposes
    Type of       Non-emergency Emergency and Non-emergency  Emergency and     Non-emergency     Emergency and
    assistance                  non-emergency                non-emergency                       non-emergency
    Implementing  Governments   World Food    Governments    Governments,      Governments,      See
    partners      and private   Program and                  agricultural      private entities, implementing
                  entities      NGOs                         trade             and               partners for
                                                             organizations,    intergovernmental Title II,
                                                             intergovernmental organizations     Title III,
                                                             organizations,                      and Food for
                                                             NGOs, and                           Progress
                                                             cooperatives                        programs

    Source: GAO analysis based on USAID and USDA data.

    aFunding data are for fiscal year 2005. USDA data represents programmed
    funding, while USAID data represents appropriated funds.

    bThis program has not been funded in recent years.

    cThis program is currently inactive due to the unavailability of
    government-owned commodities. Because it is permanently authorized, it
    does not require reauthorization under the Farm Bill.

    dUSDA administers this program as stipulated by law, which states that the
    President shall designate one or more federal agencies.

    In addition to these programs, resources for U.S. food aid can be provided
    through other sources, which include the following:

               o International Disaster and Famine Assistance funds, designated
               for famine prevention and relief, as well as mitigation of the
               effects of famine by addressing its root causes. Over the past 3
               years, USAID has programmed $73.8 million in famine prevention
               funds. Most of these funds have been programmed in the Horn of
               Africa, where USAID officials told us that famine is now
               persistent. According to USAID officials, experience thus far
               demonstrates that one of the advantages of these funds is that
               they enable USAID to combine emergency responses with development
               approaches to address the threat of famine. Approaches should be
               innovative and catalytic, while providing flexibility in assisting
               famine-prone countries or regions. Famine prevention assistance
               funds should generally be programmed for no more than 1 year and
               seek to achieve significant and measurable results during that
               time period. Funding decisions are made jointly by USAID's
               regional bureaus and the Bureau for Democracy, Conflict and
               Humanitarian assistance, and are subject to OMB concurrence and
               congressional consultations. In fiscal year 2006, USAID programmed
               $19.8 million to address the chronic failure of the pastoralist
               livelihood system in the Mandera Triangle--a large, arid region
               encompassing parts of Ethiopia, Somalia, and Kenya that was the
               epicenter of that year's hunger crisis in the Horn of Africa. In
               fiscal year 2005, USAID received $34.2 million in famine
               prevention funds for activities in Ethiopia and six Great Lakes
               countries. The activities in Ethiopia enabled USAID to intervene
               early enough in the 2005 drought cycle to protect the
               livelihoods--as well as the lives--of pastoralist populations in
               the Somali Region, which were not yet protected by Ethiopia's
               Productive Safety Net program. In fiscal year 2004, the USAID
               mission in Ethiopia received $19.8 million in famine prevention
               funds to enhance and diversify the livelihoods of the chronically
               food insecure.
               o State's Bureau of Population, Refugees, and Migration (PRM),
               which provides limited amounts of cash to WFP to purchase food
               locally and globally in order to remedy shortages in refugee
               feeding pipeline breaks. In these situations, PRM generally
               provides about 1 month's worth of refugee feeding needs--PRM will
               not usually provide funds unless USAID's resources have been
               exhausted. Funding from year to year varies. In fiscal year 2006,
               PRM's cash assistance to WFP to fund operations in 14 countries
               totaled about $15 million, including $1.45 million for
               humanitarian air service. In addition, PRM also funds food aid and
               food security programs for Burmese refugees in Thailand. In fiscal
               year 2006, PRM provided $7 million in emergency supplemental
               funding to the Thailand-Burma Border Consortium, most of which
               supported food-related programs. PRM officials told us that they
               coordinate efforts with USAID as needed.

               Table 3 lists congressional mandates for the P.L. 480 food aid
               programs and the target for fiscal year 2006.

               Table 3: Congressional Mandates for P.L. 480

    Mandate              Description                            FY 2006 target
    Minimum              Total approved metric tons programmed  2.5 million MT
                            under Title II
    Subminimum           Metric tons for approved non-emergency 1.875 million
                            programs                               MT
    Monetization         Percentage of approved non-emergency   15%
                            Title II programs that are
                            monetization programs
    Value-added          Percentage of approved non-emergency   75%
                            program commodities that are
                            processed, fortified, or bagged
    Bagged in the United Percentage of approved non-emergency   50%
    States               whole grain commodities that are
                            bagged in the United States

               Source: GAO analysis, based on USAID data.

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    Highlights of [71]GAO-07-616T , a testimony before the Chairman and
    Ranking Minority Member, Senate Committee on Agriculture, Nutrition, and
    Forestry

    March 2007

    FOREIGN ASSISTANCE

    U.S. Agencies Face Challenges to Improving the Efficiency and
    Effectiveness of Food Aid

    The United States is the largest provider of food aid in the world,
    accounting for over half of all global food aid supplies intended to
    alleviate hunger. Since the 2002 reauthorization of the Farm Bill,
    Congress has appropriated an average of $2 billion per year for U.S. food
    aid programs, which delivered an average of 4 million metric tons of
    agricultural commodities per year. Despite growing demand for food aid,
    rising business and transportation costs have contributed to a 43-percent
    decline in average tonnages delivered over the last 5 years. For the
    largest U.S. food aid program, these costs represent approximately 65
    percent of total food aid expenditures, highlighting the need to maximize
    the efficiency and effectiveness of food aid. To inform Congress as it
    reauthorizes the 2007 Farm Bill, GAO examined some key challenges to the
    (1) efficiency of delivery and (2) effective monitoring of U.S. food aid.

    [72]What GAO Recommends

    In a draft report that is under review by U.S. agencies, GAO recommends
    that the Administrator of USAID and the Secretaries of Agriculture and
    Transportation work together to enhance the efficiency and effectiveness
    of U.S. food aid, by instituting measures to improve logistical planning,
    transportation contracting, and monitoring of food aid programs, among
    other actions.

    Multiple challenges combine to hinder the efficiency of delivery of U.S.
    food aid by reducing the amount, quality, and timeliness of food provided.
    These challenges include (1) funding and planning processes that increase
    delivery costs and lengthen time frames; (2) transportation contracting
    practices that create high levels of risk for ocean carriers, resulting in
    increased rates; (3) legal requirements that can result in the awarding of
    food aid contracts to more expensive service providers; and (4) inadequate
    coordination between U.S. agencies and food aid stakeholders in
    systematically addressing food delivery problems, such as spoilage. U.S.
    agencies have taken some steps to address timeliness concerns. USAID has
    been stocking or prepositioning food commodities domestically and abroad
    and USDA has implemented a new transportation bid process, but the
    long-term cost effectiveness of these initiatives has not yet been
    measured.

    Selected Trends in U.S. Food Aid, Fiscal Years 2002 to 2006

    Given limited food aid resources and increasing emergencies, ensuring that
    food reaches the most vulnerable populations--such as poor women who are
    pregnant or children who are malnourished--is critical to enhancing its
    effectiveness. However, USAID and USDA do not sufficiently monitor the
    effectiveness of food aid programs, particularly in recipient countries,
    due to limited staff, competing priorities, and restrictions in the use of
    food aid resources. For example, although USAID has some non-Title
    II-funded staff assigned to monitoring, it had only 23 Title II-funded
    staff assigned to missions and regional offices in just 10 countries to
    monitor programs costing about $1.7 billion in 55 countries in fiscal year
    2006. As a result of such limitations, U.S. agencies may not be
    sufficiently accomplishing their goals of getting the right food to the
    right people at the right time.

    References

    Visible links
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      33. http://www.gao.gov/cgi-bin/getrpt?GAO-04-1065
      34. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-86-56
      36. http://www.gao.gov/cgi-bin/getrpt?GAO-04-1065
      37. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD/AIMD-00-329
      38. http://www.gao.gov/cgi-bin/getrpt?GAO-07-9
      39. http://www.gao.gov/cgi-bin/getrpt?GAO-07-24
      40. http://www.gao.gov/cgi-bin/getrpt?GAO-04-1065
      41. http://www.gao.gov/cgi-bin/getrpt?GAO-03-607
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      43. http://www.gao.gov/cgi-bin/getrpt?GAO-02-801T
      44. http://www.gao.gov/cgi-bin/getrpt?GAO-02-328
      45. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD/AIMD-00-329
      46. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-00-175
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      53. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-95-74
      54. http://www.gao.gov/cgi-bin/getrpt?GAO/RCED-95-34
      55. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-95-35
      56. http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-94-215
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      58. http://www.gao.gov/cgi-bin/getrpt?GAO/ T-NSIAD-94-174
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      60. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-94-32
      61. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-93-168
      62. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-90-174
      63. http://www.gao.gov/cgi-bin/getrpt?GAO/T-NSIAD-90-23
      71. http://www.gao.gov/cgi-bin/getrpt?GAO-07-616T
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