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 Agenciesï¿½ and Stakeholdersï¿½
			  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 [email protected]
           . 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.

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