United States General Accounting Office Report to Congressional Requesters GAO July 1990 FOREIGN ASSISTANCE Non-Emergency Food Aid Provided Through Private Voluntary Organizations .f: ‘. GAO/NSLAD-90479 * United States GAO General Accounting Office Washington, D.C. 20548 National Security and International Affairs Division B-239471 July 24, 1990 The Honorable E (Kika) de la Garza Chairman, Committee on Agriculture House of Representatives The Honorable Dante B. Fascell Chairman, Committee on Foreign Affairs House of Representatives The Honorable Patrick J. Leahy Chairman, Committee on Agriculture, - Nutrition and Forestry United States Senate This report responds to your requests that we review non-emergency food aid programs sponsored by private voluntary organizations (PVOS) and cooperatives,l under title II of Public Law 480. You were concerned about the recent termination of several Pvo-sponsored projects in Sub- Saharan Africa. You asked us to determine whether (1) PVOSare less willing than in the past to sponsor non-emergency projects, particularly in Africa, and (2) PVOSencounter problems implementing non-emergency food aid projects that affect their willingness to continue to sponsor title II projects, and could the problems be addressed by legislative or admin- istrative action. In addition, we reviewed U.S. government audits of food aid projects sponsored by PVOSand cooperatives to determine whether the financial management systems of these organizations are adequate to account for food aid commodities donated by the U.S. government. Appendix I provides a more detailed discussion of the non-emergency food aid program. We found that PVOSand cooperatives remain willing to sponsor non- Results in Brief emergency food aid programs using U.S. commodities, but they do not have plans to expand their participation in the next 5 years. We also found that PVOShave requested less food for their non-emergency pro- grams in Africa and they are choosing to sponsor different types of food aid projects. ‘A cooperative is a privatesectororganization, ownedandcontrolledby its members,whoshareits servicesandprofits.It providesbusiness servicesandoutreachin cooperative development for Its members. Page1 GAO/NSlAD-90479 Non-Emergency FoodAid Et-239471 food aid projects. The principal sponsors have been Catholic Relief Ser- vices (CRS)and Cooperative for American Relief Everywhere (UKE), which together distributed about 86 percent, or about 330,000 metric tons each, of the non-emergency commodities given to PVOSin 1989. Sponsors usually work in a country through local partners, SUG: as local pvos or national ministries, to implement projects. Food donated under title II consists of bulk grains; bagged commodities, such as lentils and beans; and processed foods, such as cornmeal, soy- fortified bulgur, and vegetable oil. These commodities can be distributed to targeted individuals or sold to generate funds for approved purposes. Food aid sponsors have typically distributed title II commodities through the following types of projects. l Maternal and child health projects that provide supplementary food to children and pregnant and lacating women to ensure an adequate diet and improve nutritional status. . Food-for-work projects that provide take-home rations or on-site meals to unemployed or underemployed individuals or communities who par- ticipate in community construction projects, such as building schools, roads, irrigation systems, or improving land through reforestation or terracing. l School feeding programs that generally provide meals to the poorest pri- mary schools to improve the health, learning capability, attendance, and nutritional status of students. Meals are also provided to adults who attend training courses. AID administers title II activities, establishes the regulations governing, the program, and monitors how sponsors implement projects. The Department of Agriculture determines the types and quantities of com- modities available for title II programs and procures the commodities for delivery to program sponsors. We found that PVOScontinue to have a strong commitment to the non- PVOs Not emergency, title II program and are not withdrawing from it. World- Withdrawing, but Title wide, the volume of food aid provided through non-emergency, PVO- II Projects Are sponsored title II project; in 1989 was about the same as provided in 1986. PVOShave requested the Congress to set aside more food for their Changing projects in the next 6 years. However, we found that they do not have specific plans for using more food during this period. Page3 GAO,NSIAWW-179 Non-Emergency FoodAid B-239471 During our review, PVOofficials told us that the United States overregu- AID Works With PVOs lated the title II program, and that regulations, which had not been to Revise Title II revised since 1979, were outdated and made non-emergency food aid Regulations projects unnecessarily difficult to manage. In December 1988, AID pub- lished a proposed revision of its regulations for review and comment and received numerous recommendations from PVOSfor additional changes. AID worked with Pvo representatives and incorporated many of their recommendations into new regulations, which were issued in June 1990. AID officials said that changes were made for clarity and to account for inflation, provide additional operational flexibility, and streamline some reporting requirements. However, they stated that the revised regulations continue to focus on the food aid sponsor’s responsi- bilities for commodity control, as well as program effectiveness, in order to address the accountability problems identified in AID Inspector Gen- eral reports. We did not evaluate the new regulations. Through its audits of food aid projects, AID’s Inspector General has con- Audits Disclose eluded that PVOSgenerally lack adequate management control systems to Control Weaknesses account for commodities and the funds generated from the sale of com- modities, and that these projects are vulnerable to fraud, waste, and abuse. We also found, during our field work in Africa, examples of the difficulties PVOSface in trying to ensure that title II commodities are accounted for and used as intended. The Inspector General attributed these weaknesses, in part, to financial constraints that precluded PVOSfrom spending adequate funds on finan- cial management. The Inspector General suggested that PVDSshould be required to use a portion of the local currencies they generate from sales of title II commodities to improve their financial management systems. AID officials agree that this suggestion would be useful, but had no spe- cific plans for implementing it. To help PVOSresolve common food aid management problems, AID pro- vided a $500,000 grant to a major PVOfood aid sponsor to support a consortium of PVOfood aid sponsors to identify common implementation problems and seek mutually acceptable solutions. The group held its first workshop in January 1990 and decided to focus initially on “accountability issues.” To make food aid projects less vulnerable to fraud, waste, and abuse, we Recommendation recommend that the AID Administrator consider the adequacy of food Page6 GAO/NSIAD.9@179 Non-Emergency FoodAid B-239471 appropriate. However. in accordance with your wishes, we did not obtain written comments on a draft of this report. Copies of this report are being provided to the Secretary of Agriculture; the Administrator of the Agency for International Development; appro- priate congressional committees; the Director of the Office of Manage- ment and Budget, and other interested parties. Copies will be made available to others upon request. This report was prepared under the direction of Harold J. Johnson, Director, Foreign Economic Assistance Issues. He can be reached on (202) 2755790, if you or your staff have any questions. Other major contributors are listed in appendix II. Frank C. Conahan Assistant Comptroller General Page7 GAO/NSIALHC-179 Non-Emergency FoodAid Page9 GAO/NSL4B90-179 Non-Emergency FoodAid AppendixI Non-EmergencyFoodAid Programs Sponsoredby PVOs or a development project that does not include a feeding component); and (3) AID’S willingness to make its food aid more attractive to PVOSby imposing fewer conditions and reporting requirements. AID officials told us that, although its regulations were recently revised for clarity, and to (1) account for inflation, (2) revise some reporting requirements, and (3) provide more flexibility to PVOS,title II regulations continue to focus on commodity control and program effectiveness to ensure that US. assistance is used for intended purposes. Food aid experts predict increasing food aid needs in Africa during the Food Aid Needs in 1990s. However, the volume of US. non-emergency food aid requested Africa Increasing, but b y PVOSand cooperatives for projects in Africa decreased each year, PVOs Distributing between 1986 and 1989. Furthermore, less food was distributed through traditional feeding programs targeted to needy children and pregnant Less Food and lactating women, and more food was sold to generate funds to pay project costs. PVOs Requested Less Food The National Research Council’s panel of food aid experts warned, at Aid for Projects in Africa their October 1988 meeting, that during the 1990s “Africa will continue to be the important focus of concern for food aid-and the region of greatest uncertainty-because of continuing conflict, locust plagues. cycles of drought and flood, and low economic growth combined with high rates of population growth.” Rather than increasing food aid to meet these predicted needs, recent distribution levels suggest a different trend is developing. AID statistics show that, rather than increasing, the volume of food requested by PVOS for non-emergency projects in Africa has decreased each year since fiscal year 1986. Table I.1 shows that PVOSreceived about 10 percent less food aid for these projects in fiscal year 1989 than in fiscal year 1986. Table 1.1: Non-Emergency, Title II Food Aid Received by PVOs and In Metric Tons Cooperatives, by Region, Fiscal Years 1988-89. Region 1988 1987 1988 1989 Africa -~ 126,995 116,603 116,370 114,819 Asia/NearEast 477,285 401,178 513,490 456,588 Latin Amenca 147,290 166,477 163,719 198,945 Total 751,570 884,258 793,579 770,352 Source. AID Page11 GAO/NSlAEMO-179 Non-Emergency FoodAid - AppendixI Non-EmergencyFoodAid Programs Sponsoredby PVOa for feasibility studies. However, new projects of other PVOShave been mostly food-for-work or development projects, rather than maternal and child health or school feeding projects. The shift from maternal and child health projects in Africa reduced the estimated number of individ- uals participating in those projects from about 1.8 million to about 545.000. AID commissioned a study of maternal and child health projects, in response to the declining number of these projects, to review their role and effectiveness and to suggest changes to improve them. Based on an analysis of evaluations of maternal and child health projects and inter- views with PVOand other food aid officials, the study identified the fol- lowing possible reasons why PVOSmay be less willing to sponsor this type of project than in the past. . PVOSand host governments now emphasize community-based develop- ment projects rather than charitable transfers of food that do not address, and may delay, long-term solutions. l The high costs of implementing effective maternal and child health projects are not met by donors or host governments. . Local organizations have limited technical, managerial, and operational abilities to implement effective health and education projects. . Most evaluations of maternal and child health projects have been incon- clusive or negative, giving PVOand host government officials the percep- tion that these projects are ineffective in improving nutritional status, More Food Aid Was Sold PVOSare permitted to sell all or a portion of the title II commodities they receive from the United States to generate local currencies to support approved projects. In fiscal year 1990, about 32 percent of the value.of food aid shipped to PVOSfor their African programs will be sold, whereas in fiscal year 1987, about 14 percent was sold. According to AID and PVOofficials, factors that affect the level of sales in Africa include l weak transportation, health, and education infrastructures that make food distribution projects difficult, expensive, and less attractive to implement than projects without feeding components; . the use of sales proceeds to buy local products can reduce inland trans- portation and storage costs, and encourage local agricultural production; . PVOS’need for funds for the operational costs of feeding projects because government and other local support for health and nutrition programs has been limited; and Page13 GAO/NSlAIWO-179 Non-Emergency FeudAid AppendixI Non-EmergencyFoodAid Programs Sponsoredby PVOs where and how much food was sold, and how PVOSused the local curren- cies generated by these sales. These reports are due by February 16 of each succeeding year. The report for fiscal year 1987 showed that most sales proceeds were used to support feeding programs. Because similar reports had not been prepared for fiscal years 1988 or 1989, we were unable to determine the extent to which local currencies were used to support feeding programs or other authorized purposes in those years. AID officials told us that they were preparing a report on fiscal year 1989 sales that would be issued shortly and would include some infor- mation on 1988 sales. They explained that AID overseas missions had not submitted sufficient information on sales activities to permit the prepa- ration of a full report for 1988. AID Provides Some Grants AID provides dollar grants to PVOSto help support food aid projects. The current program is designed primarily to provide grants to help PVOS to Food Aid Sponsors enhance the development impact of their projects, although funds can also be provided for logistical costs. The total amount of funding avail- able depends on other AID development priorities, but has increased somewhat in recent years, and has ranged from $5 to $7 million annu- ally. However, PVOofficials told us that they will need significantly more dollars from AID or other sources in the future to (1) improve commodity and fund control systems and (‘2) expand food aid programs in Africa. PVOs Seek Legislation to Because the Coalition for Food Aid believed that substantial increases in AID’s budget for grants to food aid sponsors seemed unlikely, it asked Ensure Reliable Grant the Congress to provide an additional source of dollar grants for PVOS.It Funding recommended that the Congress amend Public Law 480 to provide that not less than 2 percent of the title II budget be made available to PVOSto “assist them in meeting the requirements of this title, expanding and establishing new programs under this title, and meeting administrative, management, personnel, and internal transportation and distribution costs” for carrying out title II programs. Currently, none of the title II budget is used for these purposes. The Coalition’s request was developed with limited analysis of the unfunded costs of administering food aid projects. The Coalition told us that it reviewed the grant applications submitted to AID in early 1989 by food aid sponsors. The Coalition found that these multi-year requests averaged about $12 million annually, which it estimated was about 2 percent of the total title II budget for that year. We do not believe that the Coalition adequately supported its request that PVOSbe given grants Page15 GAO/NSL4D90.179 Non-Emergency FoodAid Apwvilx I Non-EmergencyFoodAid Programs Sponsoredby PVOs Regulations Require Full AID’S regulations hold PVOSresponsible for ensuring that title II commod- ities and program funds received from the US. government and distrib- Accountability and Impose uted to their partners in recipient countries are used in accordance with Financial Penalties for regulations established by AID, and an operating plan approved by the Noncompliance U.S. government. In accordance with these regulations, food aid spon- sors are responsible for providing adequate supervisory personnel to (1) make internal reviews, warehouse inspections, inventories, and end- use checks and (2) review records maintained by their local partners to document commodity transactions. A PVOmust refund the value of any commodities, monetary pkoceeds, or program income that were used for unapproved purposes, or if the PVO was responsible for their loss, damage, or misuse. Program sponsors are relieved of liability, if AID determines that the loss, damage, or misuse could not have been prevented by proper exercise of the sponsor’s responsibilities. However, if the loss, damage, or misuse was cause by a third party, the sponsor will be held financially liable unless it pursues reasonable collection action against the liable party for all claims exceeding $500. Audits Show Need for Audits by AID’S Office of the Inspector General have shown that food aid projects are subject to fraud, waste, and abuse, partly because PVOSlack Improved Controls and good financial management and internal control systems. The Inspector Oversight General concluded in a 1986 review of its past audit reports that PVOS generally lacked adequate control systems to account for commodities and funds generated from project activities. Recent Inspector General reports indicate that some PVOSand their local partners still have inade- quate control systems and can neither account for large quantities of commodities nor prove that commodities were delivered to the intended beneficiaries. In addition, the Inspector General continues to find instances, of varying significance, of fraud, waste, and misuse of com- modities in Pvo-sponsored programs. We reviewed 20 Inspector General audit reports of PVOfood aid projects issued after 1986. Of the 20 audits, 17 audits found commodity control deficiencies, 7 found fund control deficiencies, 10 found noncompliance with loss claims procedures, 10 found noncompliance with commodity destruction procedures, 8 found noncompliance with reporting require- ments, and 13 found inadequate targeting of beneficiaries. Internal control weaknesses allowed significant fraud or misuse of com- modities to go undetected. Recent audits of a major program sponsored Page17 GAO/NSL4D9O-179 Non-Emergency FoodAid AppendixI Non-EmergencyFoodAid Programs Sponsoredby PVck Because food aid programs are vulnerable to fraud, waste, and abuse, the Inspector General has suggested that PVOsbe required to allocate a percentage of local currencies generated by selling title II commodities to strengthen their management capabilities. .41Dofficials agreed that this would be useful. Examples of Commodity During our field work in Africa, we found examples of the difficulties facing food aid sponsors in trying to control and account for all commod- Control Problems ities in widespread food aid projects. Among the problems we noted Encountered by Food Aid were inaccurate, unreliable reporting and improper distribution of com- Sponsors modities by local staff at final distribution sites. We interviewed staff of CRS and its local partners in Burkina Faso, Togo, and Kenya and visited numerous distribution sites, including primary schools, training schools, maternal and child health centers, and food- for-work project sites. CRS’ partners in Burkina Faso and Togo were largely host government agencies, but in Kenya, it worked through Catholic Church diocesan and parish organizations. In each country, local officials responsible for distributing food to targeted beneficiaries told us that they had no difficulty in preparing the monthly inventory and distribution status reports submitted to CRS. However, we found that these reports were not necessarily accurate. For example, a school teacher in Burkina Faso told us that he had falsified reports he sent to CRSto show that commodities had been correctly dis- tributed according to the 5-month distribution schedule designed for his school. He had, in fact, stretched the rations over a longer portion of the lo-month school year. Another teacher told us that his reports had not disclosed that he had distributed title II commodities to an unauthorized village youth group at the direction of village elders. When we observed that some students were not receiving food at another school, we were told by the new teacher that he withheld food from students who had not yet paid their school fees, and distributed their share among the stu- dents who had paid. A CRSofficial in Togo said that although reports submitted by maternal and child health project directors in Togo appeared perfectly balanced, he believed that minor thefts occurred and were concealed. In Kenya, we found that a center director calculated the amount of food distributed by using a formula that would eventually cause the reports and the center’s actual on-hand inventory to differ significantly. Page19 GAO/NSIAD-90.179 Non-Emergency FoodAid AppendixI Non-Emergency FoodAid Programs Spcmoredby PVOa l Work with ND to prepare a consolidated statement on food program costs for the Congress. A group spokesman told us that the group hopes that by adopting rea- sonable food management standards and identifying the actual costs of implementing good control systems, donors will (1) provide additional funds and develop greater confidence in the ability of PVOSto control commodities and (2) focus their attention on different issues, such as project effectiveness. Coalition for Food Aid The Coalition for Food Aid has asked the Congress to establish a food aid regulatory review committee composed of representatives from the Proposes Additional Department of Agriculture, AID, and all title II food aid sponsors. This Forum for PVO and AID group would, therefore, include Pvos who are not part of the AID-spon- Coordination sored consortium. The group’s first task would be to review and revise AID'S regulations to ensure that (1) they reflect current law, (2) require- ments and processes are streamlined, and (3) standards for accounta- bility are realistic and appropriate for the conditions found in developing countries, and can accommodate diverse food program objec- tives The Coalition asked the Congress to set a deadline for convening the group and completing the initial review process. In fiscal years 1992 through 1995, the group would meet biannually to review the effective- ness of regulations and procedures governing Pvo-sponsored title II programs. AID believes that adequate avenues for collaboration already exist and that AID and PVOShave demonstrated the ability to work together without the review committee suggested by the Coalition. We did not fully evaluate how the proposed review committee would differ from the food aid consortium currently sponsored by AID, although it would have more members. However, we note that the consortium’s eight mem- bers include the largest PVOfood aid sponsors, which handled more than 90 percent of all non-emergency title II commodities in fiscal year 1989. In view of AID's sponsorship of the consortium and its ability to work with PVOSand cooperatives, as demonstrated by its recent collaboration with these organizations to revise title II regulations, it appears that AID may be correct in its belief that adequate avenues for coordination already exist and that there is no need to establish another group. Page21 GAO/NSIAD99.179 Non-Emergency FoodAid _ ,- - ,..- _- ..- - .- . _ . Requests for copies of GAO reports should be sent to: U.S. General Accounting Office Post Office Box 60 15 Gaithersburg, Maryland 20877 Telephone 202-275-6241 The first five copies of each report are free. Additional XII+- $2.00 each. There is a 25% discount on orders for 100 or more YOU single address. Orders must be prepaid by cash or by check or IINII(+~ out to the Superintendent of Documents. United States General Accounting Office Postage & Fees ‘#7 Washington, D.C. 20648 GAO Permit No. GlOO 0flMa.l Business Penalty for Private Use $300 - . . -. -., - -..-.-, - . Appendix II - Major Contributors to This Report Donald L. Patton, Assistant Director, Foreign Economic Assistance National Security and Issues, (202) 275-5790 International Affairs Dianne L. Rawl, Senior Evaluator (4721913) Page22 GAO/NSIAD-SS-179 Non-Emergency FoodAid AppendixI Non-EmergencyFoodAid Pmgram Sponsoredby PvOs cas headquarter officials told us that reporting discrepancies by their local partners do not necessarily reflect fraud on the part of their partners. They said the discrepancies are generally unintentional or insignificant. In addition, they said that staff of some of their local part- ners adjust their inventory records to hide normal operating losses simply to avoid the program’s loss claims procedures, which they find cumbersome. AID Sponsors PVO A recent AID grant may help PVOSresolve common accountability problems. In an effort to improve the efficiency and effectiveness of Consortium to Seek food aid, AID awarded CAREa $500,000, Z-year grant to sponsor a five- Solutions to Common member consortium of PVOfood aid sponsors. The group later expanded Problems its membership to eight PVOfood aid sponsors. The group is expected to identify supervisory, management, and food aid issues, and seek mutu- ally acceptable solutions. The work will be accomplished, in part, through workshops involving field and headquarters personnel. The group’s first workshop was held in January 1990, and focused ini- tially on “accountability issues,” particularly those pertaining to com- modity control activities, such as port operations, warehouse management, commodity tracking, and end-use monitoring. The group will review the systems used by its members and other food aid spon- sors, and identify features or standards that constitute good food aid management practices. A report from its first workshop stated that “accountability requirements are often unrealistic in the field context, costly to administer, and counterproductive to program goals and objectives. The cost impli- cations of meeting accountability requirements are often not recognized by the [food aid sponsor], or the donor, resulting in inadequate accountability.” The workshop report suggested that, among other effects, poor account- ability strained sponsor and donor relationships and caused unwar- ranted criticism of food aid. It also reported that donors do not provide sufficient funds to food aid sponsors because they are unaware of the actual costs of food programming and tend to overestimate the resources of sponsors. The group decided to address these issues in the following manner. . Establish a common set of accountability standards and encourage their adoption by sponsors and AID. . Convince sponsors to document the actual costs of food programs and the level of funds they can contribute. Page20 GAO/NSIAD90.179 Non-Emergency FoodAid AppendixI Non-EmergencyFoodAid Programs Sponsoredby PvOa by the CRSin India disclosed that CRS’local partners had falsified their inventory records to conceal that (1) rations were generally about 15 to 20 percent smaller than authorized; (2) most commodity losses were not reported to the sponsor but were recorded as distributed to recipients; and (3) most attendance records were inaccurate and, in one example, inflated by as much as 400 percent. The auditors determined that CRS had not adequately monitored the activities of its partners and therefore was unaware of the losses, misuse, and falsified records. The auditors and CRSagreed that inaccurate and missing records did not necessarily mean that commodities had been misused or that fraud had occurred. AID began working with cRSto correct its management weaknesses. In May 1990, at AID’S urging, CRSsubmitted a grant proposal to AID stating that, beginning in July 1990, it would need U.S. dollar grant funding to undertake management and programmatic improvements to correct deficiencies noted during audits of its programs in India. CRSproposed that AID provide a 3.5-year, $4.165 million grant to help it improve its institutional capabilities and those of its local partners. Further, cas stated that commodity sales might be a viable method of obtaining addi- tional funding for the program in the future, but that it could take as long as 3 years to negotiate sales agreements, obtain U.S. government approvals, receive and sell the commodities, and distribute the proceeds. In the interim, the program needed funds. At the end of our review, AID headquarters and field officials were considering whether the proposal adequately addresses the problems identified in the audit reports. As a result of another Inspector General review, AID issued bills of col- lection, totaling more than $1.6 million, to the Adventist Development and Relief Agency for the unauthorized sale and misuse of title II commodities. The Inspector General found that the country director for the Adventist agency had used title II food to pay labor costs for the construction of his residence and a tennis court. Other staff members had also used donated food and funds for their personal gain. AID’s Inspector General believes that, because PVOSare “financially con- strained,” they “only provide the bare minimum to financial management. PVOsare more concerned with providing needed services to needy people. Consequently, audits of the title II program consistently find significant problems in the distribution and delivery of these commodities.” Page18 GAO/NSlADSO-179 Non-Emergency FoodAid AppendixI Non-Eher@ncyFoodAid I%@ama Sponwredby PVOs equal to at least 2 percent of the title II budget. Neither AID nor the pvos have collected data on actual and unfunded costs of food aid projects. Although it seems reasonable that a stable source of dollar funding for PVOSwould help make title II projects more effective, without empirical evidence, we could not independently determine what amount would be appropriate. During our review, PVOofficials told us that the non-emergency title II AID Worked With program had been over-regulated by the U.S. government and that regu- PVOs to Revise Title II lations were outdated and made non-emergency food aid projects unnec- Regulations essarily difficult to manage. Regulations governing the transfer of title II commodities to food aid project sponsors are found in title 22, part 211, of the Code of Federal Regulations, and are commonly called “AID Regulation 11 .I’ At the time of our review, Regulation 11 had not been revised since 1979 and no longer reflected current law or procedures. In December 1988, AID pub- lished a proposed revision of these regulations in the Federal Register for review and comment, and PVOSsubmitted numerous recommenda- tions for additional changes. AID worked with PVOrepresentatives to incorporate many of the recommendations into a final revision, which was issued in early June 1990. We did not evaluate the new regulations,, but AID believes that they address most of the concerns raised by PVOS. Food aid sponsors are responsible for ensuring that title II commodities Additional Funding and program funds are used as intended. As one PVOofficial said during and Collaboration May a congressional hearing, Help PVOs Improve “The American people have a right to accountability when they pay the bills; the Accountability government has a responsibility to demand it and the beneficiaries and users of gov- ernment goods and services should be able to reasonably expect that high standards will be set and met.” The AID Inspector General has found that PVOShave not always been able to fulfill this responsibility, in part, because they lack funds to improve their financial management systems. As a result, title II com- modities have been wasted or misused. To help PVOSresolve food aid management problems, AID has provided grant funding to support a con- sortium of food aid sponsors to identify major issues and seek mutually acceptable solutions. Page16 GAO/NSL4MW179 Non-Emergency FeudAid AppendixI Non-EmergencyFoodAid Programs Sponsoredby PVOs l some more recent title II sponsors are not traditional food aid distribu- tors, and primarily use title II commodities to generate local currencies for development projects. PVOSare responsible for ensuring that all costs of implementing title II PVOs Seek Additional programs are covered. They receive funds to implement these programs and Reliable Funding from private donations, host governments, voluntary contributions from for Project Costs project beneficiaries, and the U.S. government through cash grants and sales of title II commodities. Although PVOSindicate continuing interest in sponsoring non-emergency food aid programs, they told us that it has become increasingly difficult to pay the high costs associated with food distribution projects. We were told that the private donations of some PVOShave declined, some host governments are less able or willing than in the past to support food aid projects, and project costs have increased as PVOSexpand their monitoring activities in response to increasing U.S. emphasis on commodity control and accountability. Commodity Sales Have Not PVOScan obtain local currencies to pay overseas project costs by selling Provided Funds for All title II commodities. Public Law 480 was amended in December 1985 to explicitly permit such sales by PVOSand established a minimum sales Expenses level equal to 5 percent of the aggregate value of the commodities dis- tributed under non-emergency programs each year. In December 1987, the law was expanded to specifically include cooperatives and increase the minimum sales level to 10 percent. The permissible uses of local cur- rencies included support for income-generating projects, agricultural or community development, health, and nutrition projects. AID guidance, however, states that the U.S. government will give precedence to sales proposals that support feeding programs. Although commodity sales have been used successfully to generate local currencies, they have not been practicable in all countries. PVOofficials told us that convertible currency, such as U.S. dollars, is needed to pay local costs in countries where commodity sales have not been practi- cable, for example, when hyper-inflation would quickly erode the value of local currencies generated from commodity sales. PVOSalso say that some expenses, such as U.S. staff salaries, some vehicles, equipment, and supplies, can only be paid with dollars. Beginning in fiscal year 1987, legislation requires the President to submit an annual report to the Congress outlining, among other things, Page14 GAO/NSIAB9&179Non-Emergency FoodAid - AppendixI Non-EmergencyFoodAid Programs Sponsoredby PVOs PVOSindicated that they are not unwilling to sponsor non-emergency food aid projects in Africa. However, they told us that long-standing problems, such as the lack of transportation, health, and education infrastructure; the need to develop new program models for Africa; and the lack of host government and donor funding for project expenses limit their ability to expand. PVOs Distributed Less During fiscal years 1986-89, PVOSchanged the way they used title II commodities in Africa. In fiscal year 1989, PVOSrequested 72 percent Food Through Feeding less food for traditional maternal and child health projects, 11 percent Programs less for school feeding projects, and 19 percent more for food-for-work projects than they did in fiscal year 1986. Significantly more food aid was requested for sale. Table I.2 shows the distribution of food aid requests, by project type, worldwide, and in Africa, in fiscal years 1986 and 1989. Table 1.2: Approved PVO and Cooperative Food Aid Requests, Fiscal In metric tons ____ _-- Years1966and1969 Worldwide Africa Project Type 1966 1969 1966 1969 Maternal and child health -__--~~ ~-- 399,483 347,952 110,128 30,346 School feeding 133,158 100,885 15,798 ___--__ 14,004 Other child feedmg 29,296 37,135 3,104 1,964 Food-for-work 247,920 233,794 29,122 34,605 General relief 17,894 45,331 4,809 6,641 Other 16,722 41,556 745 10,146 __~~~ _ ~~~._ Sales 26,996 124,455 553 26,756 Total 671,471 931 ,106 164,259 126,462 Note These figures are based on planned and not actual dlstributlon levels As a result the annual totals do not match those in table I 1 Source AID The decrease in food distributed through maternal and child health projects in Africa appears to be due, largely, to the termination or reduc- tion of CRSprojects in several Sub-Saharan countries between 1986 and 1989. CRSofficials said that the terminations were caused by a variety of country-specific reasons, including changes in host government develop- ment priorities. According to AID and PVOofficials, AID became concerned over the declining volume of food requested for Africa and actively encouraged other PVOSto begin projects in Africa, and provided grants to some PVOS Page12 GAO/NSIADSQl79Non-Emergency FoodAi Appendix I Non-EknergencyFood Aid Programs Sponsored’ by PVOs Public Law 480 currently requires the U.S. government to provide a minimum of 1.9 million metric tons of food each year through title II programs. The law further requires that a “subminimum” of 1.425 mil- lion metric tons of food will be distributed through PVOS,cooperatives, and the World Food Program for non-emergency programs. The current minimum and subminimum have been in effect since fiscal year 1987. The Coalition for Food Aid, an organization representing U.S. PVOSand PVOs Request More cooperatives sponsoring food aid programs, has asked the Congress to Food, but Plans for Its gradually increase the annual minimum tonnage to 2.65 million metric Use Are Uncertain tons and the subminimum to 1.8 million metric tons by fiscal year 1995. The Coalition based its request on National Research Council projections of increased global needs for food assistance during the 1990~~and the general intentions of the Coalition’s membership to expand their pro- grams to help meet those needs. The Coalition did not contact the World Food Program to ask for its plans when it estimated the new sub- minimum requirements included in its proposal. Based on interviews with Coalition and PVOofficials, we found that PVOS do not have specific plans for using the increased volume of commodi- ties requested by the Coalition. Several PVOofficials did not see the need to increase the subminimum at the present time because it seems unlikely that PVOSwill be able to use more food aid for non-emergency programs in the near future. PVOScited several factors that could limit their food aid requests in the next few years. A CAREofficial, for example, told us that CAREmay reduce the number of beneficiaries in some of its feeding programs, so that it can increase the rations given to the remaining beneficiaries to enhance nutritional impact. They said that this process might initially result in a decrease in the amount of food aid requested. The official also said that future expansion depends on additional U.S. dollar grants for operational costs. Officials of other PVOSalso told us that expansion of their food aid projects depends on (1) receipt of additional funds for project costs; (2) U.S. development priorities and willingness to approve the types of programs that are proposed (e.g., a secondary school feeding program, ‘FoodAid ProJections for theDecade of the 199Os, Reportof anAd HocPanelMeeting.October6 and 7, 1988,BoardonSaenceandTechnology for InternationalDevelopment, Officeof International Affairs,NatIonalResearchCouncil. Page10 GAO/NSIAD90179Non-Emergency FoodAid contents Letter 1 Appendix I 10 Non-Emergency Food PVOs Request More Food, but Plans for Its Use Are Uncertain 10 Aid Programs Food Aid Needs in Africa Increasing, but PVOs 11 Sponsored by PVOs Distributing Less Food PVOs Seek Additional and Reliable Funding for Project 14 costs AID Worked With PVOs to Revise Title II Regulations 16 Additional Funding and Collaboration May Help PVOs 16 Improve Accountability Appendix II 22 Major Contributors to This Report Tables Table 1.1: Non-Emergency, Title II Food Aid Received by PVOs and Cooperatives, by Region, Fiscal Years 1986-89. Table 1.2: Approved PVO and Cooperative Food Aid 12 Requests, Fiscal Years 1986 and 1989 Abbreviations AID Agency for International Development CARE Cooperative for American Relief Everywhere CRS Catholic Relief Services PVO Private Voluntary Organization Page8 GAO/NSlABW179Non-Emergency FoodAid B-239471 aid sponsors’ financial and management systems when reviewing their requests to sell title II commodities to generate local currencies, and if such systems are inadequate, ensure that sufficient sales proceeds are set aside for improving those systems. To determine whether PVOSare leaving the title II program, we reviewed Scopeand AID statistical reports for fiscal years 1986 through 1990 and analyzed Methodology changes in the volume of non-emergency food aid requested by PVOS.We did not verify the accuracy of these statistics. We also asked officials of two organizations representing multiple food aid sponsors about the activities and future plans of their members. To identify the problems encountered by PVOSin implementing title II non-emergency programs, we asked officials of several PVOSsponsoring title II programs about their projects, funding, and control systems. We also interviewed officials of the (1) Coalition for Food Aid to obtain information on the legislative proposal it submitted to the Congress on behalf of food aid sponsors and (2) the food aid management consortium sponsored by AID about its efforts to identify problems encountered by PVOSand its plans to seek solutions for those problems. We also visited three countries in Sub-Saharan Africa, Burkina Faso, Togo, and Kenya, and interviewed AID, PVO,host government, and other local officials and observed food aid programs in operation. While in Africa, we also inter- viewed officials of PVOSnot sponsoring US. food aid programs to deter- mine why they were not participating. We pursued issues raised by PVO country directors in Africa with PVOheadquarters officials in the United States. We interviewed AID and Department of Agriculture officials to obtain their perspective on the problems and issues raised by PVOS. To identify implementation problems and internal control weaknesses, we reviewed evaluations and AID Inspector General reports of food aid projects. While in Togo and Kenya, we identified the control systems used by the primary PVOfood aid sponsor and its counterparts to account for commodities and funds; however, we did not test these sys- tems and cannot express an opinion on the accuracy of reports gener- ated from these systems. Our work was conducted between September 1989 and April 1990, and was performed in accordance with generally accepted government auditing standards. The views of responsible agency officials were sought during the course of our work and are incorporated where Page6 GAO/NSLAD90179 Non-Emergency FoodAid - 5239471 During 1986-89, PVOSchanged the way they used the food aid donated by the United States. Less food was given away through feeding projects targeted at mothers and children and more was given to individuals par- ticipating in community development projects. More food was sold to generate local currencies to support projects, with and without feeding components. The reduction in food distributed through feeding projects was most apparent in Sub-Saharan Africa and was due, in part, to (1) changing opinions among PVOSand host governments about the effectiveness of feeding projects compared to community-based development projects, (2) the difficulties PVOSface in implementing feeding projects, caused by poor transportation, health, and education infrastructure and inade- quate funding, and (3) the termination of several large maternal and child health projects. The increased volume of food being sold reflects the PVOS’need to generate funds to support both feeding programs and projects that do not use food. PVOSsay that food aid projects are expensive to implement and they need a reliable source of dollar grants to pay operating expenses, under- take needed management improvements, and expand their programs, particularly in Africa. They say that it has not been practicable for them to sell title II commodities to generate local currencies in all countries where they have food aid projects and need local currencies. In addition, some program costs must be paid with dollars. Although PVOSreceive dollar grants from AID, the amount available for such grants has depended on AID development priorities. PVOShave asked the Congress to amend food aid legislation to provide that not less than 2 percent of the title II budget be given to them as cash grants to help pay program costs. We found that the PVOS’request was based on a limited analysis of the unmet costs of administering food aid projects. Although a reliable source of dollar grants to help PVOSpay the costs of food aid projects may encourage PVOparticipation in the title II program and facilitate expansion and management improvements, we believe that PVOShave not adequately supported their need for grants equal to at least 2 per- cent of the title II budget. Neither PVOSnor AID have analyzed the actual costs of implementing food aid projects. However, a consortium of PVO food aid sponsors, funded by AID, is proposing to develop such data to help donors evaluate the need for funding to support food aid projects. Page4 GAO/NSlAD99-179 Non-Emergency FoodAid B-239471 PVOSdo experience difficulties implementing food aid projects, which they attribute, in part, to inadequate funding. PVOSsaid their ability to expand their programs and undertake management improvements iden- tified by government auditors is contingent on the receipt of additional funds to pay the high costs of food aid projects. PVOShave asked the Congress to amend Public Law 480 to provide for a portion of the title II budget to be given to them as cash grants to support title II projects. However, neither PVOSnor the Agency for International Development (AID), which administers the title II program, has collected data on the additional amount of funding that may be needed. PVOSalso said that US. regulations governing the transfer of title II commodities made non- emergency projects unnecessarily difficult to manage. AID issued revised regulations in June 1990 and believes that they address most concerns raised by PVOS.We did not evaluate the regulations. U.S. government audits of non-emergency food aid projects indicate that these projects are vulnerable to fraud and misuse. The AID Inspector General has attributed this vulnerability, in part, to financial constraints that have precluded PVOSfrom spending adequate funds on their finan- cial and management systems. To address this problem, the Inspector General suggested that PVOSshould be required to use a portion of the local currencies they derive from selling title II commodities to improve their financial and management systems, if deemed necessary by AID. The United States provides food assistance to (1) combat hunger and Background malnutrition, (2) encourage economic development, (3) expand export markets for U.S. agricultural commodities, and (4) promote U.S. foreign policy goals. Food assistance is provided under several legislative authorities, but primarily under the Agricultural Trade Development and Assistance Act of 1954, as amended, commonly referred to as Public Law 480, which expires in December 1990. Title II of the act authorizes food donations to cooperating sponsors “to meet famine or other urgent or extraordinary relief requirements; to combat malnutrition, especially in children; to promote economic and community develop- ment in friendly developing areas; and for needy persons and nonprofit school lunch and preschool feeding programs outside the United States.” Non-emergency food aid is provided through the United Nations’ World Food Program, foreign governments, PVOS,and cooperatives. In fiscal year 1989, 13 PVOSand cooperatives, operating in 34 countries, received 770,000 metric tons of food valued at $210 million, for non-emergency Page2 GAO/NSlAD99-179 Non-Emergency FoodAic
Foreign Assistance: Non-Emergency Food Aid Provided Through Private Voluntary Organizations
Published by the Government Accountability Office on 1990-07-24.
Below is a raw (and likely hideous) rendition of the original report. (PDF)