Cyttited States General Accotttttittg Office GAO Report to the Honorable Charles E. Sclwner, House of Representatives June IWO AGRICULTURAL TRADE Improvements Needed in Management of Targeted Export Assistance Program GA0 /NSIAD-W-22.5 National Security and International Affairs Division B-226269 June 27,199O The Honorable Charles E. Schumer House of Representatives Dear Mr. Schumer: At your request, we have examined the extent to which the Department of Agriculture has implemented recommendations made in our May 1988 report on the Targeted Export Assistance Program. We have focused on documentation of major program decisions, the adequacy of program guidance, oversight of program participants, and efforts to evaluate the success of individual activities and the program. We have made several recommendations related to these issues. The Department of Agriculture has concurred with our findings and recommendations and is currently taking steps to address many of our concerns. Copies of this report are being sent to the Secretary of Agriculture and other interested parties. This report was prepared under the direction of Allan I. Mendelowitz, Director, Trade, Energy, and Finance Issues. Other major contributors are listed in appendix V. Sincerely yours, Frank C. Conahan Assistant Comptroller General Executive Summary At the request of Representative Charles E. Schumer, GAO conducted a Purpose review of the management of the Department of Agriculture’s Targeted Export Assistance Program. This program, funded at $200 million annu- ally for fiscal years 1989 and 1990, was established to make funds or commodities available to counter or offset the adverse effects on U.S. agricultural exports of subsidies, import quotas, or other unfair trade practices of foreign competitors. GAO examined the management of this program, focusing on (1) docu- mentation of key program decisions such as funding allocations and par- ticipant contributions, (2) oversight of all program participants, (3) the adequacy of the program’s guidelines, and (4) the Foreign Agricultural Service’s efforts to improve its evaluation process. Section 1124 of the Food Security Act of 1985 established the Targeted Background Export Assistance Program. Legislation authorizing the program did not specify how it was to be implemented. The Secretary of Agriculture authorized the Foreign Agricultural Service to administer it as a foreign market development program, modeled after Agriculture’s long-standing Cooperator Program. Both programs provide funding to conduct activi- ties that promote U.S. agricultural commodities and products overseas. Many participants are in both programs, and the guidelines and types of activities conducted are similar. A major difference between the two programs is that participation in the Targeted Export Assistance Pro- gram is only available for those commodities that have been adversely affected by foreign unfair trade practices. Program participants include private, nonprofit agricultural trade organizations, state-related organi- zations, and private, profit-making U.S. firms. The Foreign Agricultural Service is not adequately documenting major Results in Brief program decisions such as how its funding criteria are applied and ranked for each participant. Guidance to program participants has not been clear, nor have guidelines been consistently enforced. Greater over- sight of participants, particularly those private firms that promote their own brands, is needed to improve program management and ensure accountability. The Foreign Agricultural Service needs to continue its efforts to assist participants with evaluation requirements. It has not yet evaluated the success of the overall program, but has relied mainly on sales as proof of success. Page 2 GAO/NSLAD-90-225 AgriculturalTrade Executive Summary Although the two market development programs are similar, the Foreign Agricultural Service does not adequately coordinate funding decisions or its management of activities under both the Targeted Export Assistance and Cooperator Programs. Combining the two programs could improve program administration and program effectiveness. Recent developments, such as the issuance of proposed regulations for the Targeted Export Assistance Program and a limited reorganization to clarify lines of authority, are some of the actions the Foreign Agricul- tural Service is taking to improve program operations. However, further management improvements are still needed to ensure that all funds are being properly accounted for and to enhance program effectiveness. Principal Findings Program Decisions not Although federal standards call for documentation of key activities, the Foreign Agricultural Service has not adequately documented major pro- Clearly Documented gram decisions such as how and why it makes funding allocation deci- sions. GAO reviewed the main source of documentation for such decisions and found that it remains unclear how the Foreign Agricultural Service applies and ranks its criteria. Without adequate documentation, the opportunities or risks for inconsistent, inequitable, and inappropriate funding decisions increases. More Oversight of Program There has been some debate on the branded portion of the Targeted Export Assistance Program concerning the equity of providing govern- Participants ment funds to private firms to promote their own brand. However, it is generally believed that, depending on the commodity, branded promo- tion can be the most effective way of establishing a market presence. Branded promotion accounts for approximately 35 percent of annual program funding and should be more closely managed to ensure accountability and effectiveness. The Foreign Agricultural Service dele- gates responsibility for administering branded funds to the nonprofit agricultural trade organizations, but exercises minimal oversight over these organizations. Without adequate oversight, there are no assur- ances that the guidelines on allowable promotional expenses, required documentation, and financial procedures are being followed, and that activities are being conducted in the most appropriate way to benefit the industry as a whole. Page 3 GAO/NSLAD-90-226 Agricultural Trade Executive Summary Lack of Adequate Program guidelines require that participants conduct evaluations of their promotional activities. Although the Foreign Agricultural Service Evaluation Process has taken steps to improve its ability to evaluate the success of its market development programs, its evaluation guidance to participants remains unclear. The Foreign Agricultural Service needs to continue its efforts to assist participants in understanding and complying with eval- uation requirements. It is not clear how the Foreign Agricultural Service uses participant evaluation results as a factor in making its funding decisions. The Foreign Agricultural Service is also required to conduct evaluations of the overall success of the program in various regions. However, it has not yet evaluated the success of the program overall but, instead, cites increased exports as proof that the program has been a success. After publication of GAO’S May 1988 report, Agricultural Trade: Review of Targeted Export Assistance Program, the Foreign Agricultural Ser- vice established a Program Evaluation Office; however, this office had no substantial coordinating or enforcing role and operated more as an adviser to the Commodity Divisions. As part of the Foreign Agricultural Service’s limited reorganization, a new Planning and Evaluation Office was recently established. Officials expect this new office to be more involved in enforcing evaluation requirements and in conducting some limited program evaluations. Combine Market The Foreign Agricultural Service does not adequately coordinate funding decisions nor approval of marketing activities for both the Development Programs Targeted Export Assistance and Cooperator Programs. It has been reluc- tant to combine the two programs because they are under different funding authorities, and one program requires that participants demon- strate that they have been adversely affected by foreign unfair trade practices. Nevertheless, GAO believes that combining the two programs, with one set of criteria and guidelines, would (1) be a more efficient use of Foreign Agricultural Service resources, (2) streamline program administration, (3) provide more complete and accurate information to management concerning the scope of market development activities worldwide, and (4) result in more effective program decision-making and management. recommends that the Secretary of Agriculture direct the Adminis- Recommendations GAO trator of the Foreign Agricultural Service to take the following actions: Page 4 GAO/NSIAIMW226 Agricultural Trade l Comply with federal standards for internal controls by adequately docu- menting major program decisions, including the funding allocation deci- sion process, to clearly show how funding criteria were applied and ranked and the basis for those decisions. l Conduct more oversight of those participants who are private firms pro- moting their own brand, to ensure accountability for program funds and compliance with program guidelines. l Provide more specific evaluation guidance to the participants and con- duct evaluations of the program overall. l If the Targeted Export Assistance Program is reauthorized, combine the Targeted Export Assistance and Cooperator Programs to facilitate pro- gram administration and to maximize program effectiveness. As requested, GAO did not obtain official agency comments on a draft of Agency Comments this report but discussed its contents with appropriate agency officials. Their comments have been incorporated where appropriate. Page 6 GAO/IUSIADBO-225 Agricultural Trade Contents Executive Summary 2 Chapter 1 8 Background TEA Program Operations Previous GAO Report 9 14 Objectives, Scope, and Methodology 14 Chapter 2 16 TEA Program Funding Decisions not Adequately Documented FAS Staff Do Little Market Analyses 16 19 Administration Lacks Contributions Are Still not Formally Required 20 Sufficient Personnel Practices Affect TEA Program Management 21 Regulations Are Needed to Establish Clearer and More 23 Management Control Consistent Program Guidance and Accountability A Combined TEA and Cooperator Program Could Be More 25 Efficient and Effective Conclusions 27 Recommendations 27 Chapter 3 29 FAS Imposes Minimal Controversy Over Branded Promotion Reimbursement Rates Vary Among Commodities 29 30 Control Over the No Evaluations Required in the Branded Program 30 Branded Portion of the Conclusions 32 Recommendations 32 TEA Program Chapter 4 34 FAS Needs to Enhance FAS Has Historically Had Difficulty Evaluating its Market Development Programs 34 Its Commitment to Evaluation Guidance Is Unclear and Inconsistently 35 Evaluate Market Applied FAS Efforts to Assist Participants in Meeting Guideline 37 Development Requirements Activities Conclusions 40 Recommendations 40 Page 6 GAO/NSLUMW225 Agricultural Trade -. Contents Appendixes Appendix I: TEA Program Participants, Fiscal Years 42 1986-1990 Appendix II: TEA Branded Participants and Amounts 44 Received for Fiscal Year 1989 Appendix III: Countries Where the Majority of TEA 55 Funds Were Budgeted for Fiscal Year 1989 Appendix IV: Top 15 Program Participants by Total 56 Amount of TEA Funds Allocated Appendix V: Major Contributors to This Report 57 Figures Figure 1.1: Fiscal Year 1990 TEA Worldwide Breakdown 10 by Promotion Type Figure 1.2: Fiscal Year 1990 TEA Promotional Strategy 11 Figure 1.3: Fiscal Year 1990 TEA Promotional Activities 11 by Region Abbreviations CCC Commodity Credit Corporation C&MP Commodity and Marketing Programs EIP Export Incentive Program FAS Foreign Agricultural Service MPD Marketing Programs Division OIG Office of Inspector General TEA Targeted Export Assistance USDA U.S. Department of Agriculture UTP Unfair Trade Practice Page 7 GAO/NSIAD9@226 Agricukud Trade Chapter 1 Background Foreign unfair trade practices adversely affect U.S. agricultural exports and place the United States at a competitive disadvantage worldwide. To ease the effects of foreign unfair trade practices and to help stem the decline in agricultural exports, the Food Security Act of 1985 estab- lished several export assistance programs. One of these is the Targeted Export Assistance Program (TEA). TEA’S goal is to help increase U.S. agri- cultural exports. It authorizes the use of funds or commodities of the Commodity Credit Corporation1 (ccc) to counter or offset the adverse effects of foreign unfair trade practices (UTP) such as export subsidies and import quotas. As authorized by Section 1124 of the Food Security Act of 1985, TEA gives priority consideration to U.S. agricultural commodities that have received a favorable decision under section 301 of the Trade Act of 1974, as amended,? or that have been adversely affected by retaliatory action related to such decisions. The legislation authorizing TEA did not specify how the program was to be implemented. The U.S. Department of Agriculture’s (USDA) Foreign Agricultural Service (FM), which was given authority to administer TEA, decided to establish a market development assistance program similar to that of its Cooperator Foreign Market Development Program.:’ The Coop- erator Program, currently funded at an annual level of approximately $33 million, provides long-term market development assistance to U.S. agricultural exporters. FASchose to implement TEA as a foreign market development program because it believed that market development activities were not being adequately funded under the Cooperator Program. It also wanted to ‘The CCC issues generic commodity certificates that bear a dollar denomination to partially reim- burse participants. These certificates may be exchanged for CCC inventory in the form of surplus commodities, but are generally exchanged for cash in the open market. “Section 301 of the Trade Act of 1974, as amended, expanded the President’s discretionary authority to respond to unfair trade practices of foreign governments. The President can respond to any act, policy, or practice of a foreign government that he determines to be unjustifiable, unreasonable, dis- criminatory, or contrary to an existing trade agreement obligation. The statute also allows the private sector to petition the U.S. government to act on its behalf against unfair trade practices. “The Agriculture Trade Development and Assistance Act of 1954 (P.L. 480) as amended. and the Agriculture and Food Act of 1981 (P.L. 9798), as amended, authorized market development activities and the use of federal funds to develop, maintain, or expand foreign markets for I.S agricultural commodities. FAS determined that this should be accomplished through private, nonprofit agricul- tural organizations, known as cooperators, which should be required to share in the financial expense of the market development programs See our March 1987 report, International Trade Kev~rw of Effectiveness of FAS Cooperator Market Development Program (GAO/NSIAD-87-89), for details on the Cooperator Program. Page 8 GAO/NSIAD90-225 Agricultural Trade Chapter 1 Background assist high value products and horticultural crops whose commodity groups had claimed that they were victimized by unfair trade practices that had not been addressed by USDA export programs. (See app. I for a list of TEA participants for fiscal years 1986 to 1990.) TEA market development activities can be implemented for generic and/or branded promotion. Generic activities, conducted by nonprofit or state-related organizations, are designed to increase the total market for that commodity, with no emphasis on a particular brand. Branded activ- ities, conducted by nonprofit organization producer members or private, profit-making firms, are aimed at establishing consumer loyalty to a particular brand. Generic promotion is used for most bulk commodities and may be useful for several nonbulk commodities in newer, largely undeveloped markets, and for complementing branded promotions. For many of the high value or consumer-ready products, branded adver- tising is the principal means of foreign market development. Branded promotion is associated with brand identification and consumer loyalty, but it also can benefit the commodity in general by increasing overall sales. (For a list of branded participants, see app. II.) The TEA program provides funding, primarily for consumer-related pro- TEA Program motions, for a wide array of commodities and products. Market develop- Operations ment activities are conducted throughout the world. This program, although similar to the Cooperator Program in types of activities con- ducted, provides significantly greater funding. In addition, participants in TEA must demonstrate that they have been adversely affected by unfair trade practices. TEA Funding Section 5 of the Food Security Improvements Act of 1986 set annual funding for the TEA Program at a minimum level of $110 million for fiscal years 1986 through 1988 and $325 million for 1989 and 1990. Our May 1988 report on the TEA Program identified a number of manage- ment weaknesses and expressed concern that an increase in the author- ized funding level of TEA from $110 million to $325 million for fiscal years 1989 and 1990 would exacerbate existing management problems. We also believed that the program could not effectively absorb more funding. Because of concerns over the budget deficit and ~~4smanage- ment problems that GAO and USDA'S Office of Inspector General (NC;) identified, the House and Senate Appropriations Committees reduced authorized TEA funding to $200 million annually for fiscal years 1989 and 1990. Page 9 GAO/NSIAIWO-225 Agricultural Trade Chapter 1 Backgruund Approximately 75 percent of TEA funds go toward consumer promotion4 (See fig. 1.1.) The remainder is used for trade servicing,” technical assis- tance activities,” and/or trade shows. For fiscal year 1990,66 percent of budgeted funds were allocated to generic activities, and 34 percent were allocated to branded activities. (See fig. 1.2.) Approximately 50 percent of TEA funds for fiscal year 1989 were spent in Asian markets, with pro- motions in Japan alone accounting for 36 percent of the funds. Euro- pean countries were the next largest targeted markets, with promotions in the United Kingdom accounting for about 12 percent of TEA funds. (See app. III.) For fiscal year 1990, FAS estimates similar breakdowns. (See fig. 1.3.) In each year of the program, the top 15 commodity organi- zations, ranked by amount of TEA funds received, accounted for over 64 percent of TEA funds. (See app. IV.) Figure 1.l: Fiscal Year 1990 TEA Worldwide Breakdown by Promotion Type Trade servicing Technical assistance 75% l - Consumer related \ Source, FAS “Consumer promotion is designed to change consumers’ attitudes toward or make them aware of the advantages of U.S. agricultural products. “Trade servicing influences foreign traders, importers, wholesalers, and foreign government officials involved with importing, distributing, and marketing agricultural commodities and products. “Technical assistance addresses technical problems in selling, moving, processing, marketmg. or using U.S. agricultural products. Page 10 GAO/NSIA.MO-225 Agricultural Trade Chapter 1 Background Figure 1.2: Fiscal Year 1990 TEA Promotional Strategy - Branded oromotional activities - Generic promotional activities Source: FAS Figure 1.3: Fiscal Year 1990 TEA Promotional Activities by Region Western Europe Other Pacific Rim A Japan Source: FAS. TEA Program Modeled The TEA and Cooperator Programs conduct similar types of market After Cooperator Program development activities. However, TEA requires that a participant demon- strate that it has been adversely affected by an unfair foreign trade Page 11 GAO/NSIALMO-225 Agricultural Trade chapter 1 Background practice. It also has substantially larger funding and uses generic com- modity certificates issued by the CCC rather than using appropriated funds. The Cooperator Program focuses more on bulk commodities, such as wheat, corn, and rice, while the TEA Program provides assistance pri- marily to organizations representing high value horticultural crops, such as fruits and nuts and processed products. Although the activities of both the Cooperator and TEA Programs are similar, TEA focuses more on consumer promotion. Many of the TEA par- ticipants formerly were participants in the Cooperator Program, and approximately half remain in both programs. Both programs receive contributions from the participants in the form of cash, goods and ser- vices,’ or contributions generated from foreign third parties.” TEA Program Criteria FAS allocates money to TEA participants based on the following 10 cri- teria, as listed in the Federal Register: (1) the commodity or product to be promoted and the degree to which the organization represents U.S. producer interests on a commodity or nationwide basis, (2) the degree to which exports of the commodity or product may ben- efit from promotional activities, (3) the dollar amount of assistance requested, (4) the unfair foreign trade practice and the extent to which it has adversely affected exports of the commodity, (5) the extent to which the applicant organization is willing to con- tribute resources to the joint project, including the source of projected contributions that may be provided, (6) the organization’s prior export development experience and the ade- quacy of its administrative and personnel resources for the purposes of planning and managing the requested program level, 7Goodsand services contributions are the TEA participants’ estimate of contributions made by a US. industry member for which the TEA participant made no cash reimbursement. “Third-party contributions consist of cash or goods and services from a foreign government or private organization that has entered into a foreign market development agreement with a US participant to assist in promoting the export of U.S. agricultural commodities. Page 12 GAO/NSIAD90-225 Agricultural Trade Chapter1 Background (7) the historical export levels of the commodity or product, (8) the anticipated likelihood of success of the proposed project in terms of increasing US. exports or mitigating the unfair trade practice or its effects, (9) whether or not the commodity or product is in adequate supply, and (10) the extent to which the composition of the commodity or product is of U.S. origin. Products whose origin is less than 50 percent from the United States, computed on a volume or value basis, will not be considered. From TEA'S inception, FAS has encouraged participants to contribute a certain percentage of their resources to the generic portion of the pro- gram. These contributions are not required by legislation or by the TEA guidelines. FM officials state that contributions demonstrate commit- ment on the part of the participants and foster a cooperative relation- ship between FAS and the participants. Nevertheless, FM has not made contributions a formal requirement nor established uniform guidelines for contributions. The branded portion of the program is a matching funds arrangement in which FAS reimburses private firms for a specified percentage of their eligible expenses. Although FAS reimburses all firms representing a par- ticular commodity or product at the same rate, this rate differs across commodities. FAS officials told us this is because commodities that have received a favorable decision under section 301 of the Trade Act of 1974, as amended, or have been adversely affected by retaliatory action related to such decisions, are eligible for preferential reimbursement rates. TEA guidelines state that participants in the generic portion of the program must conduct evaluations of their activities. In addition, the guidelines require that FAS conduct evaluations of the overall success of TEA activities. However, FM has not required private firms in the branded program to conduct evaluations of their activities. TEA Application and The TEA Program for each fiscal year is announced in a Federal Register Funding Approval Process notice that outlines criteria for participation and announces the amount available for allocation. Interested parties then have 45 days to submit their proposals to FAS. This deadline has been extended to 60 days for the fiscal year 1991 cycle. The Commodity Divisions within FAS review the proposals to determine whether the participants are eligible. The Page 13 GAO/NSIAMO-225 Agricultural Trade Chapter 1 Background divisions then compile the funding recommendations into two- to four- page proposal summaries and submit them to the FAS Assistant Adminis- trator for Commodity and Marketing Programs (c&MP). After the Assis- tant Administrator approves or revises the recommended amounts, the summaries are forwarded, through the Administrator of FAS, to the Undersecretary for International Affairs and Commodity Programs for final approval. Once approved for TEA funding, program participants must enter into agreements with the ccc that define their obligations and responsibili- ties under the program. They then submit detailed activity plans and budgets to FAS for approval before beginning activities. These plans con- tain descriptions of the proposed activities, anticipated contributions and their source, and ways to measure the extent to which such activi- ties affect the identified constraints to market expansion. Participant expenditures are partially reimbursed from CCCresources, subject to reviews by the FAS Compliance Review staff and audits by USDA'S Office of Inspector General. In our May 1988 report, Agricultural Trade: Review of Targeted Export Previous GAO Report Assistance Program (GAO/NSIAD-SS-183), we stated that FAS was imple- menting the TEA Program with insufficient accountability and manage- ment controls. We recommended that FAS document its decision-making process for funding allocations as well as the basis for its decisions on the type and amount of participant contributions. While FAS had criteria in place, it was not clear how those criteria were applied or ranked. In addition to other management problems that we identified, FAS had not established clear guidelines on the purpose, scope, and cost of partici- pant evaluations. FM was not adequately using evaluations as an over- sight or management tool. Because of this, evaluations were not influencing subsequent program funding decisions. FAS officials responded to our 1988 report by stating that corrective action would be taken on documentation procedures and in evaluation of the program. Representative Charles E. Schumer asked us to conduct a review of the Objectives, Scope,and management of the Department of Agriculture’s Targeted Export Assis- Methodology tance Program. We focused our review on (1) documentation of key pro- gram decisions such as funding allocations and participant contributions, (2) oversight of all program participants, (3) the ade- quacy of the program’s guidelines, and (4) the Department’s efforts to Page 14 GAO/NSIAD-90-225 Agricultural Trade Chapter 1 Background improve its evaluation process. A later review will examine the effec- tiveness of F&3-funded market development activities in foreign markets. To determine the adequacy of Fti program guidance, documentation, and oversight of program participants, we interviewed FAS officials responsible for management and oversight of TEA and reviewed docu- ments and files from FAS' Commodity Divisions and the Marketing Pro- grams Division to determine the basis for FAS decisions and the adequacy of FAS documentation for program decisions. We interviewed numerous TEA participants-private, nonprofit agricultural organizations, state- related associations, and private exporting companies-to determine how they are administering their activities and how closely they coordi- nate with and report to FAS. We coordinated with USDA'S Office of Inspector General, which was conducting a similar review, concerning FM management deficiencies and third-party contributions to the program. To determine the success of FAS efforts to improve participant evalua- tions of their activities and its own steps to evaluate the program, we attended evaluation workshops sponsored by FAS and conducted by Management Systems International. We attended a food show sponsored by the National Association of State Departments of Agriculture, where we met with several TEA participants to discuss how they manage their activities and how they gauge the success of their programs. We attended the annual U.S. Agricultural Export Development Council Workshop to discuss program management and market development issues with FAS officials and TEA participants. Our work was conducted from March 1989 to June 1990 in accordance with generally accepted government auditing standards. As requested, we did not obtain official agency comments on a draft of this report but discussed its contents with appropriate agency officials. Their comments have been incorporated where appropriate. Page 15 GAO/NSIAMO-225 Agricultural Trade TEA Program Administration Lacks Sufficient Management Control and Accountability We examined the extent to which FAS has implemented recommenda- tions made in our May 1988 report. While some improvement has been made, FAS has not taken sufficient steps to ensure that the program is being managed with adequate internal controls. Funding decisions are still not adequately documented, only limited market analyses are being done by FAS marketing specialists, and contributions from participants, although encouraged, are not yet required. Regulations are needed to establish more consistent program guidance. Personnel practices, such as rotational assignments, lack of technical training, and narrowly targeted recruiting, have adversely affected TEA program management. Administrative efficiency and program effectiveness could be enhanced by combining the TEA and Cooperator Programs into one market devel- opment program. A key finding in our previous report on TEA was that FAS was not ade- Funding Decisions not quately documenting the funding allocation decision process to clearly Adequately show how funding criteria were applied and ranked and the basis for Documented those decisions. After applications are submitted, the Commodity Divisions and the Mar- keting Programs Division review their adherence to criteria and assess the strength of the proposals. Marketing specialists then develop two- to four-page summaries on each proposal. For each proposal, the mar- keting specialists make an initial recommendation on funding levels, based on their knowledge of the organization, the commodity and, if specified, the countries where the activities are planned. The summaries are written after internal division meetings are held, then presented to the Assistant Administrator, C&MP, for review and approval. If the Assistant Administrator changes a recommended funding amount, the TEA summary is amended to incorporate the change and the rationale for it. These summaries are then forwarded, through the Administrator of FAS, to the Undersecretary for International Affairs and Commodity Pro- grams for final approval. Our review of the TEA summaries for fiscal years 1989 and 1990 shows that minimal analysis and documentation exist to support recom- mending such large funding amounts. Without adequate documentation, the opportunities or risks for inconsistent, inequitable, and inappro- priate funding decisions increases. The TEA summaries for fiscal year 1990, although improved from the previous year, remain the only source of documentation for these Page 16 GAO/NSIAD-SO-225 Agricultural Trade Chapter 2 TEA Program Administration Lacks Sufficient Management Control and Accountability funding decisions and, as such, do not adequately document how and why funding decisions are made. For example, there is no mention in TEA summaries of an applicant’s past performance in both the TEA and Cooperator Programs; no explicit rationale is presented as to why the applicant is requesting a certain amount of TEX funds or why FASis approving a particular funding amount; and limited information is presented on the probable success in the proposed countries (in large measure because FAS has not done many in-depth market analyses). In fiscal year 1990, no changes were made to the individual TEA recom- mendations of the Assistant Administrator, C&MP; however, in previous years, when funding level changes were made either by the Adminis- trator or the Undersecretary, the rationale for such changes was not documented. No record exists of discussions between the Commodity Divisions and the Assistant Administrator, CAMP. Therefore, it is diffi- cult to know if factors other than the application criteria are influencing those changes. FAS experienced significant changes in top-level management during 1989. The officials responsible for fiscal year 1990 funding level approvals-the Assistant Administrator, C&MP; the Administrator of FAS; and the Undersecretary for International Affairs and Commodity Programs-assumed their positions in early 1989. The Administrator made no changes to the funding recommendations submitted by the Assistant Administrator, and the Undersecretary recused himself from deciding on all funding allocations for fiscal year 1990 because of his past association with one ‘~XAparticipant. The final funding approval for fiscal year 1990 was made by the Administrator, Agricultural Stabi- lization and Conservation Service, who is a member of the Board of the CCC. The Federal Managers’ Financial Integrity Act of 1982 (31 U.S.C. 3512 (b)) requires executive agencies to establish and maintain systems of internal control that are to be consistent with the Comptroller Gen- eral’s Standards for Internal Controls in the Federal Government. These standards call for internal controls to provide reasonable assurance that the use of resources is consistent with applicable laws, regulations, and policies; resources are safeguarded against waste, loss, or abuse; and reliable data are maintained and fairly reported. The standards recog- nize that the cost of internal control should not exceed the benefits to be derived and that judgment needs to be exercised in determining the extent of control needed. The standard on documentation, which all agencies are required to follow, states that all transactions and other Page 17 GAO/NSIAD90-226 Agricultural Trade Chapter 2 TEA Program Administration Lacks Sufficient Management Control and Accountabiity significant events are to be clearly documented, and the documentation is to be readily available for examination. Such documentation must be purposeful and useful to managers in controlling their operations, and to auditors or others involved in analyzing operations. Overreliance on Several FAS officials have stated that documentation should not be an issue because of the “institutional memory” that exists in FM. However, Institutional Memory our review indicates that this knowledge base is lacking. Several of the marketing specialists who work directly with the participants and make day-to-day decisions concerning their programs are either new to that division or new to the TEA Program and have not had significant experi- ence working with the commodity organizations. This lack of familiarity is exacerbated by FAS' lateral reassignment policy for Foreign Service personnel. Such reassignments have recently been encouraged to diver- sify Civil Service staffs experience. Diversified experience has for sev- eral years been considered essential for Foreign Service personnel or career candidates for the Foreign Service, in preparation for overseas assignments. The rotational policy for both the Civil Service and Foreign Service staff provides diverse experience but also heightens the need for documenting key decisions. Because little documentation exists from previous marketing specialists, the new specialists have to rely on the few staff in FAS who have been involved with marketing programs and particular commodity organiza- tions for several years. The Assistant Administrator, CMP, told us that the staff were not resistant to documentation, but that they just did not have the time because of their many administrative and program responsibilities. A few marketing specialists confirmed these time con- straints. By not ensuring that its staff are documenting program deci- sions adequately, however, FAS is preventing the very establishment of what could be considered “institutional memory.” Problems With Participant One of the major ways that participants conduct promotional activities Documentation is by contracting out for services. TEA guidelines provide general gui- dance on procedures for contracting, but FAS does not closely enforce them. Lack of documentation has also been a problem with some partici- pants. FAS' Compliance Review staff have found many cases, particu- larly where participants contract out for services, where the participants could not provide proper documentation to support claims for such expenses as advertising and other promotional activities. TEA Page 18 GAO/NSIAD&226 Agricultural Trade Chapter 2 TEA Program Administration Lacks SufTicient Management Control and Accountabiity guidelines do not adequately refer to basic elements of Federal Acquisi- tion Regulations, such as bidding procedures, minimum required docu- mentation to justify reasonableness of costs, and principles of contract management. In the past, the Compliance Review staff has found that TEA participants have not exercised sufficient control over contractors. To understand the difficulties that the participants were having con- cerning contracting issues and to avoid further problems, a group of CAMP officials formed a team to outline the problems and propose some possible solutions. In a summary report on their findings in June 1989, the group noted that participants’ problems in this area stem from inad- equate FAS guidelines and the lack of contract management knowledge on the part of FAS and the participants. The group suggested that FAS clarify TEA guidelines but said that the participants should be respon- sible for developing or obtaining additional contracting expertise. FAS officials have told us that they do not want to provide too much detail concerning contracting issues because they are not contract experts. They believe that contract management is the responsibility of the indi- vidual participant. FAS is relying solely on the Compliance Review Office to catch instances of noncompliance after they occur. FM is not exercising adequate over- sight of its participants during the activity plan year to ensure that con- tracts are being properly managed. Without such program oversight, recipients of FAS market development funds are left on their own to handle bidding procedures and other elements of contract management, including how to determine reasonableness of costs, how to assure per- formance, and what documentation is required. FM has not provided specific guidance to participants or made itself readily available to par- ticipants to answer contracting questions. Commodity Division staff are not aggressively analyzing potential FAS Staff Do Little opportunities for their commodities in new markets or new ways of pro- Market Analyses moting those products in established markets. We found no evidence of any formal coordination among FAS divisions on cross-commodity and -country analyses. Information sharing that could potentially lead to new opportunities for some commodities or products or alert others to problems experienced in specific countries is only being done on an ad hoc basis. Marketing specialists in the Commodity Divisions have limited time to devote specifically to market analysis. While the marketing staff in the Page 19 GAO/NSIAD-W226 Agricultural Trade Chapter 2 =pro(pam Admidbatlon Lacks Sumdent Management C4mtrd and Accountability Commodity Divisions has increased, so, too, have the programs and responsibilities. One FAS official noted that much of what is done to administer and evaluate TFA activities could be considered market ana- lysis. For example, when the marketing specialists or the Directors or Deputy Directors of the Commodity Divisions travel to countries where TEA activities are being conducted, they can accumulate information about the market and the success of a commodity in that market. How- ever, in our review, we have not seen sufficient evidence that FAS is accumulating more substantial, documented expertise in market development. During the course of this review, FAS officials told us that there are no Contributions Are Still set criteria for establishing contribution levels because they believe con- not Fornmlly Required tribution amounts should be decided on a case-by-case basis. FM believes that contributions demonstrate commitment and an ability to adminis- tratively handle the program. However, FAS has been reluctant to for- mally require contributions. In describing why FAS does not wish to require contributions, one official explained that participants in TEA represent injured parties (because of the existence of a UTP)and there- fore cannot always contribute much. However, at least half of the par- ticipants in TEA have also been in the Cooperator Program, where they have contributed approximately one-third of the market development funds. Although the Cooperator Program involves much lower funding levels, these participants have been making contributions, so the con- cept of shared funding in a market development program is not new. We see no reason why contributions should not be a requirement for participation. FAS, in its proposed regulations currently out for public comment, is establishing a minimum required contribution level. In practice, FAS has been withholding approval, beginning with fiscal year 1989, of partici- pants’ marketing or activity plans, if participants were offering less than a 5-percent contribution. We believe that this requirement should remain in the regulations to ensure adequate commitment on the part of all participants. Although it appears that most organizations are contributing to the pro- gram, FAS does not have adequate data on whether and how much each participant is contributing. Contribution amounts are not well docu- mented and do not meet the test of transparency, that is, FAS does not show the variations in the type and amount of contribution in relation- ship to the nature and extent of the individual FAS funded activities. Page 20 GAO/NSIAD-90-225 Agricultural Trade Chapter 2 TEA Program Administration Lacks Sufficient Management Control and Accountability FAS' justificationfor not adequately documenting the basis for the type and amount of participants’ contributions is that contributions are not legislatively required, and the ability to contribute varies among pro- ducer groups. Third-Party Contributions Third-party contributions consist of cash or goods and services from a foreign government or private organization that has entered into a for- eign market development agreement with a U.S. participant to assist in promoting the export of U.S. agricultural commodities. In our 1988 report, we recommended that FAS define the importance of third-party contributions in the funding decision process and more closely enforce the guideline that the participants document the method by which third- party contributions are derived. Since then, FM has revised its guide- lines to require participants to document the method for computing non- cash (third-party and goods and services) contributions and to make documentation of such contributions available for audit. USDA’S Office of Inspector General is conducting a follow-up review of its March 1988 audit report on TEA concerning third-party and other contri- butions. OIG officials have told us that their current review focuses on whether third-party contributions are, in fact, being made as reported on the participants’ end-of-year report and whether participants are maintaining adequate documentation to support such contributions. In addition to the verification of third-party contributions, OIG officials advised us that they are assessing the extent to which FAS is monitoring and verifying contributions to the program. Narrowly targeted recruiting and the lack of technical training, coupled Personnel Practices with the staff reassignments previously discussed, have adversely Affect TEA Program affected TEA Program management. Management Recruitment Focus Is Until recently, FAS hired only those with a master’s degree in agricul- Being Broadened tural economics. Consequently, many in FAS have little or no background in export marketing. An FM official told us that the agricultural attaches stationed abroad need an agricultural economics background because they are responsible for preparing economic analyses and statistical Page 21 GAO/NSIAIMO-226 Agricultural Trade Chapter 2 TEA Program Administration Lacks Sufficient Management Control and Accountability reports. We believe that the attaches and FAS headquarters staff man- aging the TEA and Cooperator Programs, however, also need expertise in marketing and business. Until recently, FAShad not seen the need to broaden its outreach and recruit more staff with such expertise. FAS has recently completed a job analysis reviewing the academic backgrounds necessary to fill positions in its headquarters and overseas offices. Based on this review, FAS has decided to expand its recruitment to include people with economics backgrounds other than in agriculture. FASalso plans to do some limited hiring of specialists with marketing backgrounds for the headquarters office. More Formal Training FAS does not provide adequate technical training to its staff. For example, FAScurrently offers no training in marketing or business. It Needed for Marketing offers a variety of seminars and field trips over a 24-month period in its Specialists Professional Career Development Program, but this program is only geared to entry-level GS-5 through GS-9 economists. An FM Executive Summary, prepared by a task force several years ago, stated that a survey of private sector representatives found that many FAS officers were weak in their ability to identify market development opportunities and in their ability to plan and implement market develop ment activities. A 1987 FXs-sponsored evaluation of the TEA Program in Japan observed that it would be useful if TEAprogram managers had more training and experience in business administration. FAS has recently advised us that it is currently setting up contracts with univer- sities and consultants to provide in-house marketing training to its staff. The FM Assistant Administrator for Management acknowledged that there has been no technical training in FAS. E&sting training has focused on managerial and supervisory training because FAS officials believed this to be a priority. However, FAS has recently begun an orientation pro- gram for new employees and has initiated a reentry program for returning attaches. FAS officials told us they are planning to develop technical training for the marketing specialists. Page 22 GAO/NESIAD8&225 Agrkultnral Trade Chapter 2 TEA Program Administration Lacks Sufficient Management Control and Accountability Several TEA participants have complained that the TEA guidelines are Regulations Are always changing, making it difficult to plan and administer their pro- Neededto Establish grams. Some FAS marketing specialists acknowledged this fact but indi- Clearer and More cated that factors beyond their control, including congressional criticism of the guidelines, necessitated such changes. Consistent Program Guidance The current Assistant Administrator, CAMP, acknowledged that the guidelines have had several changes and said that when a change is made, all TEA participants are notified. He pointed out, however, that often it is not the guidelines themselves that have changed but FAS’ interpretation of the guidelines. This highlights a problem that exists in the Commodity Divisions. Within the Divisions, both the managers and the marketing specialists often do not have extensive experience either with the commodity organization or with a marketing program such as TEA. If the guidelines are not sufficiently clear and specific, or if the policy direction coming from the office of the Assistant Administrator is not clear, then it is likely that guideline interpretations will differ. While guideline changes may be necessary because of changing circumstances, FAS needs to ensure that such changes are adequately communicated to the participants. Because the guidelines were unclear and there was no formal mecha- nism for communicating guideline changes to the participants other than occasional memos, GAO recommended in testimony before Congress on November 16, 1989, and February 21, 1990, that FAS establish regula- tions in place of the guidelines. Such a step would improve program administration, and regulations would allow for a 60-day comment period by all participants and other interested parties. This would elimi- nate discretionary changes to the program and would establish standard procedures. USDA’S OIG and the Office of Management and Budget also have con- cluded that establishing regulations is necessary to ensure fairness and consistency in the application of program criteria. Although some FAS officials have in the past opposed regulations because they believed such regulations would impede the flexibility needed to manage a market development program, the Administrator of FAS established a task force in January 1990 to write regulations for the TEA Program. Draft regulations, approved by the Office of Management and Budget, were published in the Federal Register in April 1990 and are awaiting public comment before being made final. Page 23 GAO/hWAD-90-226 Agricultural Trade Chapter 2 TEA Program Administration Lacks Suffident Management Control and Accountability Inadequate Management FAS officials often do not have basic management information about their TEA participants. For example, some officials could not tell us Tracking System whether and for how long their TEA participants had been in the Cooper- ator Program. Funding and other program decisions under the Cooper- ator and TEA Programs are not coordinated for each participant and, thus, the full scope and capability of a participant’s market develop- ment activities may not be known. Duplication of effort may occur. FAS officials tell us that the TEA Program is a success, but they only cite increased sales as proof. They do not have readily available, basic man- agement data, such as total amount of TEA funding and types of activi- ties for all commodities in a particular country; total amount of TEA funds used for branded promotion; and information on the extent of participants’ adherence to their evaluation requirements. It was also dif- ficult to obtain some of the information we received from FAS. For example, when we requested a list of all branded participants and their allocated amounts, FAS did not have this information readily available. Each marketing specialist in each Commodity Division keeps a hard copy of information on branded participants they are responsible for, and there was no central list available. We had to request such informa- tion more than once from FAS and then had to wait weeks to obtain the data. Appendixes I and II of this report contain data on TEA participants that were directly provided by FAS. Appendixes III and IV are a GAO analysis of FAS data, showing the top countries and participants receiving the most TEA funds. Our review also indicated that FAS currently does not have sufficient management information system capability to develop, coordinate, and track large amounts of program data. Without such capability, FAS cannot effectively aggregate and/or analyze the data from its market development programs. This type of information is important if FAS offi- cials are to effectively manage the program and plan its future direction. FAS has recently acknowledged that its management information system needed to be upgraded and is taking steps to expand the capability of its system. Unfair Trade Practice Legislation authorizing the TEA Program established that it should be Requirement Restricts used to counter or offset the adverse impact of foreign unfair trade practices. Priority consideration was to be given to those commodities Participation that have received a favorable decision under section 30 1 of the Trade Act of 1974, as amended, or have been adversely affected by retaliatory Page 24 GAO/NSIAD90-226 Agricultural Trade Chapter 2 TEA Program Administration Lacks Sufficient Management Control and Accountability actions related to such decisions. FAS considers this to be a prerequisite for eligibility under the program. FAS expanded the UTP requirement for fiscal years 1989 and 1990 by requiring multicommodity or product groups to show a UTP on every product involved in export promotion. For example, if a company par- ticipating in the branded program wishes to promote several items in its grocery line, such as tomato sauce, salad dressing, and fruit cocktail, it would have to demonstrate the effects of a UTPon each of those items. The Director of the High Value Products Division has said that this requirement has caused numerous companies to be denied funding under the branded program because they could not demonstrate a LJTPor could not estimate the damage for each product. Several participants have suggested that having been adversely affected by a UTP should not be a requirement for participation in a program designed to promote market development and increase exports. Combining the TEA Program with the Cooperator Program would seem to A Combined TEA and be a more efficient use of FAS resources. Marketing specialists and other Cooperator Program FAS officials presently spend their time dealing with the two programs Could Be More separately because they operate under different deadlines. Little coordi- nation exists between the two programs. When TEA funding levels are Efficient and Effective being discussed, the extent of Cooperator funding received by the appli- cant or the applicant’s performance in the Cooperator Program is not routinely considered. FAS officials said that its staff are so busy with day-to-day operational and administrative issues that they have little time for such considerations. We believe, however, that because FAS has numerous program responsibilities with limited staff, combining the two programs would be a more efficient use of staff time and could poten- tially provide program managers with more time to address strategic planning and policy issues. FM officials have been reluctant to combine the two programs because of the different funding authorities and the UTPrequirement that is a prerequisite for participation in the TEA Program. In addition they noted that the TEA Program focuses mainly on high value commodities and products, while the Cooperator Program has traditionally been ori- ented toward bulk commodities. They expressed concern that a com- bined program would become dominated by either high value or bulk commodities, to the detriment of the other. Page 26 GAO/NSIAD-W226 Agricultural Trade Chapter 2 TEA Program Administration Lacks Sufficient Management Control and Accountability Nevertheless, we believe that a combined program would facilitate deci- sion-making for program specialists because they would then have one set of criteria for funding allocations, participant contributions, program evaluations, and other aspects of program administration. In addition, the program guidelines, operating procedures, and information require- ments could be the same. Finally, a combined program would also make market development activities more effective. Both programs fund the same types of activi- ties, such as consumer promotion, trade servicing, and technical assis- tance. A combined program could continue to tailor the activity to the commodity or product being promoted. Because approximately half of the TEA participants are also in the Cooperator Program, coordination of activities would prevent duplication of effort and would provide more complete and accurate information to management concerning the scope of market development activities worldwide. Combining the two programs can only be done in the event that the TEA Program is reauthorized. One difficulty in combining the two programs would be that TEX requires the demonstration of a UTP.However, in the current version of the proposed House and Senate Agriculture Commit- tees’ 1990 Farm Bill legislation, TEA would be reauthorized, although under a different name. Also, both versions have removed the UTP requirement as a prerequisite for participation, but would provide pri- ority assistance to those who could demonstrate adverse effects from UTFS.Removal of the UTPas a requirement for participation makes the TEA Program, or its replacement, even more similar to the Cooperator Program and would facilitate combining the two programs. Policy Issues to Consider Regardless of whether the two programs are combined or maintained for Determining Market separately, we believe that the following issues should be clarified in order for FAS to more effectively use its market development resources: Development Program Direction l the percent of total funding that should be allocated to generic and/or branded promotion, l the combined emphasis to be placed on exports representing high value products and/or bulk commodities, l the division of funding between new market development and main- taining established markets, l allowing large, well-established private firms to participate or focusing resources on helping small, and/or new-to-market firms obtain a foot- hold in the market, and Page 26 GAO/NSLAKNO-226 Agricultnral Trade Chapter 2 TEA Program Administration Lacke Sufficient Management Control and Accountability l the establishment of criteria for the amount of time that participants could remain in the programs before they would be expected to maintain their market presence on their own. While improvements have been made in program administration over Conclusions the life of the TEA Program, further action is needed. FAS continues to make important program decisions, such as funding allocations and amount and type of contributions from each participant, with minimal documentation. Because the TEA Program involves substantial funding to the private sector, FAS should ensure accountability by providing a rationale for its decisions. FAS also needs to communicate clearly to program participants the responsibilities of receiving government funding. These responsibili- ties include adequate documentation and adherence to program guide- lines. The long-term and often “intuitive” nature of market development does not override the need for documenting program decisions and transactions. Accurate and sufficient documentation is a requirement for proper internal controls. Although FAS is now basing its funding allocation decisions on more information than before, it does not appear to be developing the type of information that could lead to more effective use of TEA funds. Such information should come from in-depth marketing analyses, coordina- tion of activities under the TEA and Cooperator Programs, evaluation results from previous activities, and a sharing of information among all Commodity Divisions. Although FAS has believed for some time that contributions demonstrate commitment and administrative ability, it had been reluctant to for- mally require such contributions. However, FAS recently established, as a matter of policy, that promotional activities will not be approved unless participants contribute at least 5 percent of the TEA resources approved, and it has incorporated such a requirement in the proposed regulations. We recommend that the Secretary of Agriculture direct the Adminis- Recommendations trator of FAS to do the following: l Comply with federal standards for internal controls by adequately docu- menting major program decisions, including the funding allocation deci- sion process, to clearly show how funding criteria were applied and Page 27 GAO,NXAD9O-226 Agricultural Trade Chapter 2 =pro(gam Mmhhtration Lncka Suflldent Management Control and Acumntability ranked and the basis for those decisions,and the rationale for deter- mining the type and amount of contributions from each participant. l Better ensure that TEAfunds are allocated for those commodities and markets with the greatest potential for successfulmarket development by performing in-depth market analyses,improving the coordination between the TEAand Cooperator Programs, and enhancing the informa- tion sharing among FM ccmunodity Divisions. . Require that participants in the generic portion of the program con- tribute a minimum of 6 percent of the TEAresourcesapproved, as pro- posed in FM' draft regulations. . Develop formal technical training programs for program specialists in such areas as marketing and business. . Develop a managementinformation system that will provide easy access for program managersto basic summary data on participants and pro- gram operations for market development programs. l Combine the TEAand Cooperator Programs, if the TEAProgram is reauthorized, to facilitate program administration and to maximize pro- gram effectiveness. Page 28 GAO/NSIADW226 Agricdtnral Trade -~~~ ~ ~ FM Imposes Minimal Control Over the Branded Portion of the TEA Program FM does not adequately monitor the administration of the branded pro- gram’ to ensure proper accountability of the resources made available. Although there are guidelines on how Cooperator and regional groups should administer the branded funds, FAS appears to pay little attention to assuring that these guidelines are followed. For example, F.&S has dele- gated responsibility for administration of the branded program to the Cooperators and regional groups, with the exception of the three Export Incentive Programs (EIP), for which no cooperator groups exist. FAS’ oversight of these organizations does not appear to be adequate to pro- vide sufficient information on branded activities. In addition, FAS does not require those in the branded program to conduct evaluations of their activities, as it does for those in the generic program. FM officials have noted that because the prir7ate firms are contributing matching funds, it is in their best interest to manage their program suc- cessfully. We believe, however, that FM should retain more oversight over this program because of the substantial amounts of government funds involved. For fiscal year 1990, approximately 35 percent of the TEA funds, or $68 million, was spent on branded activities. An official from the Marketing Programs Division questioned why such oversight was needed, stating that FAS cannot exclude anyone from par- ticipating in the program. FAS criteria for the branded program are broad and allow both large and small or new-to-market firms to participate as long as they can demonstrate having suffered from a UTP. Nevertheless, if wide participation in the program is an FM goal, this should not pre- clude FM from exerting sufficient oversight over the participants to ensure that guidelines are met and that activities conducted are the most appropriate for benefiting the industry as a whole. Firms and organizations representing different commodities in the branded program are reimbursed at different rates, and it is not clear, both from internal FAS documents and from conversations with FM offi- cials, why such variations exist. There is debate within FM and Congress on whether branded promotion Controversy Over is more effective than generic promotion in developing new markets and Branded Promotion whether branded promotion should be funded with government market ‘There are two ways that private firms can participate in the branded portion of the TEA Program: (1) through the Export Incentive Program (EIP), where FAS directly enters into agrwmcxnts with private firms; and (2) through branded promotion programs administered by nonprofit .qmrultural organizations or state regional groups. Page 29 GAO/NSIAD-90-225 Agricultural Trade Chapter 3 FAS Imposes Minimal Control Over the Branded Portion of the TEA Program development funds. One official noted that there is concern over the use of taxpayer funds to assist certain companies in promoting their own brands. Several of these profit-making companies that participate in TEA are large, multiproduct corporations. Some FAS officials and program participants have expressed concern that TEA funds are being used to help fund foreign market development activities by certain large, well- established corporations. Generally, marketing specialists and TEX participants believe that, depending on the commodity, branded activities can be the most effec- tive way of establishing a market presence. Some products, such as wine, are known by their brand names. Some believe that by estab- lishing a niche for a particular brand, one company may open up the market for other brands. Others say that branded advertising benefits the whole industry because as exports increase, the domestic supply is decreased, and prices go up. Many government and private sector marketing experts agree that branded advertising is more effective for high value products. Because of congressional interest in increasing exports of high value and value- added commodities and products, FAS should decide how much funding should be dedicated to branded activities, and it should establish a better system for tracking such activities. reimburses private firms participating in the branded program for a Reimbursement Rates FAS specified percentage of eligible promotional expenses. FAS officials have Vary Among told us that reimbursement rates are the same within a commodity but Commodities vary among commodities. For example, some commodities are reim- bursed at a 50-percent rate and others at a 67-percent or 75-percent rate. Several FAS officials have told us they do not know the reason for the varying rates. A July 1988 internal FAS memo acknowledges that inconsistencies exist in the reimbursement rates that could lead others to accuse FAS of being either arbitrary or unfair. FAS has recently pro- posed that all reimbursements be limited to 50 percent. Unlike commodity organizations participating in the generic program, No Evaluations private firms and organizations in the branded program are not required Required in the to conduct evaluations of their activities. FAS officials believe that Branded Program because these firms are contributing up to 50 percent of their own funds, their self-interest will ensure successful promotions, and FAS has no plans to require such evaluations. While we agree that, on the one Page 30 GAO/NSIAD!W225 Agricultural Trade Chapter 3 FAS Imposes Minimal Control Over the Branded Portion of the TEA Program hand, private, profit-making firms spending up to 50 percent of their own funds to perform market development activities would have normal business incentives to conduct effective activities, on the other hand, these firms’ promotional expenses are being reimbursed 50 percent or more with government funds. Nevertheless, these firms have virtually no evaluation requirements other than to submit end-of-year sales data. Even though a firm may be motivated by business incentives, it never- theless is paying only 50 percent or less out of its own pocket, while the government is picking up the rest of the cost of promotion. Therefore, it is possible that a firm would consider conducting a promotional activity even if the value of such activity were only worth the 50 percent that the firm is contributing. Our review also indicated that there have been no evaluations of the branded program to demonstrate that promotional activities taking place with TEA funds are in addition to what would have taken place in the absence of the TEA Program. For example, if a firm were going to spend $1 million for promotional activities in a particular country, with or without TEA, then the TEA grant becomes a subsidy to the firm without any public benefit in the form of additional promotions and increased exports. A senior official in MPD told us that some of the nonprofit cooperator groups administering the branded program hire independent third par- ties to evaluate the impact of the branded program in a given market. In this case, the firm conducting the evaluation would assess the activities of all the private firms operating in a given market and provide a report to the cooperator that would then be forwarded to FAS. However, this official noted that although such evaluations are recommended on occa- sion by the Commodity Divisions, in general, sales data reports are all that are required from the nonprofit cooperator groups administering the branded program. FAS management believes that such data are sufficient to ensure addi- tionality (that is, total sales of a commodity or product go up, instead of the different firms representing that commodity or product taking market shares from each other). FAS also believes that it is not prudent to allow TEA funds to be used by individual private firms to evaluate the relative success of their brand as compared to other U.S. brands in the market. However, in reviewing the list of branded participants and their allo- cated amounts for fiscal year 1989 (see app. II), it is apparent that there Page 31 GAO/NSIAlMO-225 Agricultural Trade Chapter 3 FAS Imposes Minimal Control Over the Branded Portion of the TEA Program is a wide range of funding, from a low of $700 to a high of $9.2 million, that is provided to individual private firms and organizations repre- senting different commodities and products. Unless FAS and the non- profit cooperator organizations evaluate the activities of individual participants and of the branded program overall, there are no assur- ances that funds provided are effective in establishing a market pres- ence for U.S. commodities and products and that activities conducted by individual firms and organizations are the most appropriate to benefit the industry as a whole. We believe that, at a minimum, FAS should require all nonprofit Cooper- Conclusions ator groups that are administering the activities of the private firms in the branded program to conduct evaluations of the overall success of their branded activities. This information, in addition to sales data, is important to ensure that private firms in the branded program are held accountable for TEA funds received and to provide FAS with more infor- mation in order to make future program decisions that affect all com- modities and products. Branded promotions account for approximately 35 percent of the annual TEA Program and should be more closely managed by FAS to ensure accountability and effectiveness. FAS officials’ “hands-off” approach in managing the branded program may facilitate the administration of activities by others, but it represents an abdication of their stewardship and fiduciary responsibilities, which limits FAS’ influence and control over individual participants. FAS officials have not been able to explain the reasons for the variations in the reimbursement rates among commodities. However, in its pro- posed regulations, FAS has recently established a 50-percent reimburse- ment rate for all participants in the branded program. Cooperator groups administering the branded program are only required to submit end-of-year sales data reports to FAS for all private firms that are their responsibility. FM believes that this is all that should be required because the firms are contributing up to 50 percent of their own funds and, thus, will be likely to conduct effective activities in their own best interest. We recommend that the Secretary of Agriculture direct the Adminis- Recommendations trator of FAS to do the following: Page 32 GAO/NSIAD9@225 AgriculturalTrade Chapter 3 FAS Imposes Minimal Control Over the Branded Portion of the TEA Program l Conduct more oversight of participants in the branded program to ensure accountability for TEA funds and compliance with TEA guidelines. l Establish a 50-percent reimbursement rate for all commodities in the branded program, as proposed in FAS’ draft regulations. l Require nonprofit cooperator groups administering the branded pro- gram to evaluate the success of ail branded activities for which they are responsible. Page 33 GAO/NSJAlMO-225 AgriculturaTrade Chapter 4 FAS Needsto Enhance Its Commitment to Evaluate Market Development Activities The need for FAS to effectively evaluate market development activities was strongly emphasized in our prior TEA report. We recommended that FAS develop guidelines on evaluation criteria, scope, purpose, and cost. FAS revised its guidelines effective October 1988. We subsequently found, however, that these guidelines lack specificity, which is causing confusion among participants. In our prior report we recommended that evaluations, whether interim or final, be submitted along with the applications for the next fiscal year’s funding and that FAS develop a tracking system for documenting the progress and results of TEA evaluations. This review has indicated that evaluation results are still not being fully considered in funding allocation decisions, and that evaluations are still not being adequately tracked and monitored. These shortcomings handicap FM officials’ ability to manage the program effectively or to assess overall program results. FAS has attempted for years to develop an effective and workable evalu- FAS Has Historically ation methodology. We have acknowledged the difficulties in estab- Had Difficulty lishing such a methodology but have continued to stress the importance Evaluating its Market of evaluating both individual activities and the overall program. Development In past reports, we noted that FAS did not seem fully committed to using Programs evaluations as a management tool. Instead, it relied on and continues to rely heavily on the professional judgment and expertise of its marketing specialists, and participants, to determine which activities are suc- cessful. In the past, both FAS and TEAparticipants seemed to view evalu- ations more as a means of satisfying outside critics than as a tool for developing more effective market development strategies. In the past year, FM has taken several steps to improve evaluations of participants’ activities. It is attempting to educate both TEA participants and its marketing specialists on the importance of evaluations to the success of TEA activities. To this end, it has conducted several work- shops for the participants and training sessions for the marketing spe- cialists, discussing the purpose of evaluations and how to conduct them. FM has also cosponsored a symposium on methods for evaluating generic market development activities. Although more actions are needed to establish an adequate system for evaluating the overall pro- gram and for ensuring adequate evaluations of participants’ activities, FAS officials have recently been moving toward addressing our concerns. Page 34 GAO/NSIAIMO-225 AgriculturalTrade Chapter 4 FAS Needs to Enhance Its Commitment to Evaluate Market Development Activities The TEA guidelines state that three types of evaluations will be con- Evaluation Guidance ducted: (1) status reviews; (2) activity evaluations; and (3) program Is Unclear and evaluations. The participant is responsible for the first two, and the Inconsistently Applied Commodity Divisions are responsible for the third. FAS describes the evaluation requirements for each participant in its activity plan approval letter. Several TEA participants have complained that the guidelines are still not clear on a number of issues, including evaluation. FM officials have told us that this is because FAS has tried to allow flexibility in how the participants evaluate their programs. The result, however, has been that some participants are confused about what is expected of them. One FAS official noted that in the past year, FAS has been trying to educate par- ticipants to view evaluations as a means to improve future activities and not simply to satisfy FM or outside critics. Status Reviews Status reviews are intended to ensure that there is ongoing communica- tion between the division and the participant on the progress of the activity. The guidelines stipulate that all activities are to be included in at least one of these reviews per year, and that all such reviews are to be documented. Most Commodity Division officials and marketing spe- cialists to whom we spoke said that participants provide several status reviews per year, many of them quarterly. However, in many cases, these updates are not written but are merely oral conversations between the participant and the marketing specialist. While the marketing spe- cialists may in such cases be well informed, verbal contact does not comply with FAS’ guidelines and does not establish a comprehensive track record for that participant. One marketing specialist told us that he does not document conversations with the participants concerning the success of their program because he does not believe such documen- tation is required and, furthermore, he does not have the time to provide it. Those status reviews that are documented are often the only type of evaluation available on current year activities for the next fiscal year’s funding allocation process. Activity Evaluations For the activity evaluations, participants are required to address in their activity plan the manner in which each activity will be evaluated. This statement should include goals and benchmarks against which the success of the activity will be measured. FAS allows participants to pro- pose exemption of certain activities from formal evaluation if they can Page 35 GAO/NSIAD90-225 Agricultural Trade Chapter 4 FAS Needs to Enhance Its Commitment to Evaluate Market Development Activities justify that such evaluation would be impractical or unnecessary. Par- ticipants may also choose whether to evaluate the activity themselves or to hire an outside evaluator. This decision, however, is subject to approval from FAS. Fiscal year 1989 was the first full year in which the new evaluation guidelines applied. Activity evaluations are required within 3 months after completion of an activity. Program Evaluations FAS is responsible for conducting program evaluations that could cover one participant’s entire program within a country or region or several similar programs within a country or region. However, several FAS offi- cials told us that FAS’ ideas about program evaluations were still evolving. To date, only five program evaluations have been completed (one on the Alaska Seafood Marketing Institute; two on the California Cling Peach Advisory Board; one on the almond EIP program; and one conducted jointly on the Meat Export Federation and the USA Poultry and Egg Council). The evaluation office has assisted the Commodity Divisions in defining research methodology for future program evaluations. The responsi- bility, however, for initiating and conducting program evaluations rests with the Commodity Divisions. Unclear How Evaluation In the TEA summaries for fiscal year 1989, evaluation results were rarely discussed. For fiscal year 1990 allocations, most of the TEA sum- Results Affect Funding maries provided information on evaluation results. In some cases, the results discussed were from evaluations conducted on fiscal year 1987 and 1988 activities, since results would not have been available for fiscal year 1989 activities. While such results were, for the most part, addressed in the fiscal year 1990 summaries, no clear link was made between the evaluation results and the amount of funding provided. For example, it was not always clear from the summaries why some organi- zations with poor evaluation results received additional funding, while others with favorable results had their funding levels reduced. In some cases where evaluation results showed significant problems, funding for the next year was significantly increased, with no indication that adequate steps were being taken to prevent such weaknesses from recurring. While poor evaluation results should not necessarily lead to a Page 36 GAO/NSIAIMO-225 AgriculturalTrade Chapter 4 FAS Needs to Enhance Ita Commitment to Evaluate Market Development Activities reduction in program funds, FAS needs to clearly document how and why the evaluation results affect subsequent funding decisions. To assist the participants in understanding and meeting the require- FAS Efforts to Assist ments of the new evaluation guidelines, FAS contracted with a consulting Participants in firm to provide four evaluation seminars across the country. The goal Meeting Guideline was to help participants improve their performance in both planning and conducting evaluations. In preparing for the seminars, the con- Requirements tractor reviewed over 50 activity plans and several evaluations. The consulting firm also met with FXS officials and several participants. Most participants we spoke with at the seminars said that although they believed that the contractor did a good job explaining evaluation objec- tives and techniques, the TEAguidelines were still unclear. The contractor submitted a final report to FAS listing several recommen- dations. One was that FAS should develop a simplified activity and evalu- ation plan review process. The firm also recommended that FAS develop and implement a system for collecting, tracking, and documenting pro- gress and results of TEA evaluations. In addition, it suggested that the TEA guidelines on evaluations be rewritten after better procedures are in place. FAS asked the contractor to provide two additional workshops for par- ticipants in fiscal year 1990, to follow up on progress made since the previous workshops. These workshops focused on ways to effectively use evaluation findings, conclusions, and recommendations in devel- oping future marketing plans. In addition, FAS conducted a l-day training seminar for new Cooperator and TEA organization staff on the administrative aspects of developing a good marketing plan. FAS has also been collaborating with specialists in the private sector and academia to develop more effective methodologies for evaluating the success of market development activities. FAS recently cosponsored a symposium on evaluating the effects of generic market development activities in which papers were presented on how to isolate the effects of market development activities from other influencing variables. Market development specialists and analysts from both the private sector and the federal government also made presentations. The emphasis of this symposium was on using the available, increasing expertise to develop evaluations that would improve the management of the programs. There was a frank exchange of ideas between market Page 37 GAO/NSIAIHO-225 Agricultural Trade Chapter 4 FAS Needs to Enhance Its Commitment to Evaluate Market Development Activities development practitioners and academic analysts concerning a common- sense approach to evaluating. The symposium also provided an opportu- nity for skeptics to become better informed on the benefits of effectively evaluating market development programs. By lending its support to such efforts, F&S is emphasizing to the agricultural industry and academia the importance of evaluation to ensuring effective activities. Activity Plans Must Now Several FAS officials have told us that, as one example of FAS' commit- ment to evaluation of market development activities, approval of fiscal Include Evaluation years 1989 and 1990 activity plans were delayed if the participants did Planning not address in their activity plan how they will measure the effective- ness of their activities. Approval of the 1990 plans were also held up if either the required evaluations for fiscal year 1989 had not been sub- mitted or the evaluation had not been suitably conducted. FAS officials say that they have been telling the participants that planning and evalu- ation go hand in hand, and that evaluation should be seen as a manage- ment tool. FAS officials have told us that they are trying to convince participants that evaluations should not be tied to export sales. They acknowledge that many factors other than market development may cause exports to increase. However, several participants we spoke with said that they believe that FAS continues to rely too heavily on sales data, despite recent FAS efforts to educate participants about the benefits of evalu- ating their activities. These participants did not appear to believe that FAS would fully accept measures of success other than increased sales. Such measures of success could include increased product awareness, improved quality of the commodity or product at point of sale, and an increased willingness of importers and distributors to market the com- modity or product and also contribute to its success. Program Evaluation Office FAS established a Program Evaluation Office within the Marketing Pro- grams Division in August 1988. This Office consisted of only two profes- sionals for over a year, but has subsequently been fully staffed with six professionals. The official in charge described the Office’s role as that of a consultant that gives advice when requested by the Commodity Divisions. The Program Evaluation Office has focused on educating both partici- pants and FAS staff on effective ways to evaluate their activities. This office has not conducted any overall evaluations of the TEA Program nor Page 38 GAO/NSIAD-W-225 Agricultural Trade Chapter 4 FAS Needs to Enhance Its Commitment to Evaluate Market Development Activities has it conducted cross-commodity analyses to identify specific trends or areas for improvement. The official in charge of this office noted that at the time the office was established, the former Assistant Administrator, C&MP, intended for it to serve only in an advisory capacity, while keeping the responsibility for evaluation with the marketing specialists in the Commodity Divisions. From its inception, the Program Evaluation Office did not have a system to adequately track and document the progress of TEA evaluations and ensure that all participants were complying with the evaluation guide- lines. However, because FAS did not formally require evaluations prior to fiscal year 1989, and because such evaluations are submitted 90 days after the end of the activity, FAS had not received a significant number of evaluations prior to January 1990. Since that time, the Evaluation Office has refined its tracking system to account for all evaluations submitted. Although this office has helped marketing specialists interpret the eval- uation guidelines, it has had no substantial coordinating or enforcing role nor has it been involved in making long-range plans for TEA Pro- gram direction. Moreover, this office has not been coordinating and ana- lyzing all participant evaluations, assessing the effectiveness of the overall TEA Program, or making policy recommendations to the Assistant Administrator, C&MP, on how to improve the program. FAS Reorganization Will FXS conducted a limited reorganization effective April 6, 1990. The Administrator of F&S requested this reorganization to establish clearer Establish a New Planning lines of authority and to improve overall management. Under the reor- and Evaluation Off ice ganization, a new Planning and Evaluation Staff for CAMP was estab- lished, replacing the current evaluation office. In addition, the former Marketing Programs Division was replaced by a Marketing Operations Staff which, in addition to its operational responsibilities, will incorpo- rate many of the responsibilities of the former evaluation office, such as educating the marketing specialists concerning evaluation requirements, tracking all evaluations, providing training, and serving as a liaison with the Commodity Divisions. The new Planning and Evaluation Staff is expected to conduct some pro- gram evaluations; make long-range plans based on evaluation results; and do cross-commodity and other types of analyses. As currently organized, this office does not have a clear mandate to evaluate the suc- cess of the overall program. Moreover, the new Planning and Evaluation Page 39 GAO/NSIAIMO-225 Agricultural Trade chapter 4 FAS Needs to Enhan* Ita Commitment to Evaluate Market Development Activities Staff was not given specific responsibility for making policy and programmatic recommendations through the Assistant Administrator, CAMP, to the Administrator, FAS. Establishing such mandates and respon- sibilities can demonstrate to program participants that evaluations are a serious and integral part of FAS management of the TEA Program. FAS has established evaluation guidelines; however, they are not specific Conclusions enough to prevent confusion among some participants. Its tracking, enforcement, and use of evaluations has been inadequate, and it is unclear how evaluation results affect subsequent funding decisions. We recommend that the Secretary of Agriculture direct the Adminis- Recommendations trator of FAS to take the following actions: l Provide more specific guidance to participants concerning evaluation requirements in order to prevent confusion and to facilitate compliance. l Clearly document how evaluation results affect funding allocation decisions. l Conduct cross-commodity analyses and evaluations of the program overall to assist the Assistant Administrator, C&MP, in making policy decisions concerning program direction and administration. Page 40 GAO/NSIAD90-225 Agricultural Trade Page 41 GAO/NSIAMO-225 Agricultural Trade Appendix I TEA Program Participants, Fiscal Years 19864990 Dollars in thousandsa Nonprofit applicant organizations 1988 1987 1988 1989 1990 Alaska Seafood Marketing Institute $b $1.500 $1,950 $6,000 $4,500 American Plywood Association 1,950 1,980 1,200 7,700 6,500 b b b b American Seed Trade Assocration 350 b b b American Sheep Industry Association 100 148 American Soybean Association 8,500 b 9,800 11,450 11,500 California Avocado Commrssion b 420 450 650 b California Cling Peach Advisory Board 2,500 5,600 5,700 4,700 3,500 California Kiwifruit Commissron b 500 500 1,000 900 California Pistachio Commisston 200 200 b 500 750 California Prune Board 4,000 4,500 5,500 5,800 7,500 California Rarsin Advisory Board 6,300 9,800 9,800 10,700 12,500 b b b b California Strawberrv Advisorv Board 500 California Table Grape Commission 350 450 750 1,850 2.300 b b b b California Tree Fruit Agreement 500 California Walnut Commission 9,000 7,000 6,500 7,300 8,000 b b b Catfish Farmers of America 50 150 b b b Cherrv Marketina Institute, Inc. 500 400 Chocolate Manufacturers Association of America 2,500 b 2,500 3,000 900 b b b Concord Grape Association 1,500 700 Cotton Council International 7,000 6,800 1,450 15,000 15,400 Eastern United States Agricultural and Food Export Council, Inc. (EUSAFEC) 1,100 1,000 1,100 2.100 2,950 Export Incentive Program (Almonds) 900 4,180 6,500 11,800 9,000 Export Incentive Program (Crtrus) 8,500 10,500 10,500 11,200 8,800 b b b Export Incentive Proaram (Mink) 1,500 700 Export Incentive Program (Processed Corn) b b 1,500 1,250 1,250 Florida Department of Citrus 4,600 7,000 7,000 5,400 9,900 b b b b Hop Growers of Amenca 50 b b b b Kentuckv Distillers’ Association 2.000 Leather Industries of America b 1,500 1,500 1,800 b Mid-America International Agricultural Trade Council (MIATCO) 800 1,200 1,100 1,900 2,700 b b b National Association of Animal Breeders 400 402 National Association of State Departments of Agriculture (NASDA) 500 b b 100 750 b b b National Council of Farmer Cooperatives 350 300 b b National Dry Bean Council b 800 1,000 b b b National Forest Products Association 6,150 7,400 b b b National Hay Association 300 b National Honey Board b b b 500 1.000 (continued) Page 42 GAO/NSIAW@225 Agricukural Trade Appendix I TEA Program Participants, Fiscal Years 1986-1990 Nonprofit applicant organizations 1986 1987 1988 1989 1990 b b b b National Pasta Association 2,100 National Peanut Council 4,500 4,500 1,500 7,400 4,500 National Potato Promotron Board 2,000 2,550 2,400 4,700 -__4.800 National Sunflower Assocratron t. 3,000 b 2,400 4,000 Northwest Horticultural Councrl-Northwest Cherry Growers b 120 450 800 1,000 Northwest Hortrcultural Council-Oregon-Washington-California Pear Bureau 300 400 500 800 900 Northwest Hortrcultural Council-Washington State Apple Commission 1,400 1,500 2,000 2,850 3,800 Rice Councrl for Market Development 3,500 3,500 4,500 5,700 8,500 ~__ Southern United States Trade Association (SUSTA) 800 800 1,100 1.900 2,700 b b b b Texas Produce Export Association 150 Tobacco Associates, Inc. b 900 400 2,750 5,000 USA Dry Pea and Lentil Council 2,500 2,500 3,000 1,000 b USA Poultry and Egg Export Council 6,000 6,500 4,250 8,000 6,000 U.S. Feed Grams Council 11,100 2,800 2,400 4,200 ~__6,000 US. Meat Extort Federation 7.000 7,000 4.500 17,000 9.000 US. Mink Export Development Council b D b 2,500 1.500 ~-~--- __ U.S. Wheat Associates, Inc. 3,100 3,100 1,200 4,900 5,200 Western United States Agricultural Trade Association (WUSATA) 2,200 1,950 1,600 4,300 5,250 Wine Institute 4,800 2,600 3,000 7,000 9,000 Total $110,000 $110,000 $110,000 $200,000 $200,000 aAllocatrons include fundrng for generrc and branded promotronal activrtres. bNo allocations that year Source: FAS. Page 43 GAO/NSIAD9f%22S Agricultural Trade Appendix II TEA Branded Participants and Amounts Receivedfor F’iscalYear 1989 California Prune Board Sunsweet Growers $3.272.000 Mayfair Packtng 480,000 Marrani Packing - 400,000 Dole Dried Fruit 300.000 Valley View Packing 156,000 Tagus Ranch Packing 115,000 Del Monte Corp. 14,000 Subtotal $4,737,000 California Raisin Advisorv Board Sun Maid $2X80:750 Dole 1,620,375 Champion 782,750 West Coast 400,000 Caruthers 56.250 Manani 40,000 Del Ray 25,000 Tagus Ranch Packrng 7,500 Subtotal $5.612.625 California Walnut Commission Diamond Walnut $435,000 Subtotal $435,000 Chocolate Manufacturers Association M & M Mars $783,100 Hershey 289,294 Nestle -- 287,148 Brown and Valley 112,000 - - .____ Whrtmans 52,500 Myerson 48,208 Goelitz 32,750 Minkowitz - 14,000 AR Marketing 12,500 Goldenberg ~~~ -__10,000 Louretta’s 10,000 ..____ Harbour Sweets 5,000 Subtotal $1,656,500 (conttnued) Page 44 GAO/NSIAD9@225 Agricultural Trade Appendix II TEA Branded Participants and Amounta Received for Fiscal Year 1989 Concord Grape Association - Welch’s $468.145 Smuckers -___118,800 Subtotal $586,945 EUSAFEC International Amencan Supermarkets $100,000 J.P Sullivan 100,000 WBANA 75,000 Coombs Maple Products 50,000 Liu & Shea Co. International -soooo Motts 50,000 Export Trade of America 50,000 Newman’s Own 50,000 F. J. Prost Marketing 30,000 Interfrost 30,000 Boston Beer 25.000 Maple Grove 25,000 Wine Markets America 25,000 Jos. Cernigi Winery 20,000 Main Coast Seafood 20.000 Chitnam International 20 000 Syracuse Export/Import Co. 15,000 United Apple Sales, Inc. 15.000 LP Farms 15,000 Rhode Island Fruit Growers 12.000 Wagner Vineyard 10,000 Miquels of Stowe Away 8.000 Vermont Apple Marketing Board 5 000 Vermont County Seasoning 5 000 Subtotal $805.000 EXDOI-~Incentive Proaram Sunkist Growers $9.234.667 Blue Diamond Growers 7,587,ooo Dole Fresh Fruit Company 2,187 496 The Pillsbury Company 1.139500 Seauora Enteronses 335 000 Hansa-Pacific Associates - .-~~300~-- 000 Dole Nut Company 188,940 Sun World 123,280 Riverbend lnternatronal 99.830 (continued) Page 45 GAO/NSIAD-90-225 Agricultural Trade Appendix II TEA Branded Participants and Amounts Received for Fiscal Year 1989 Pandol Brothers 95,000 Golden West Nuts 58,000 Norpac Food Sales 58,000 Cal Almond 50.000 Dimare Companv 43,550 Hughson Nut Marketing 33,969 Monarch International 30,000 Tri Citrus Company 20,100 Del Monte Foods 12.500 Friday Cannino 10,000 Nicolaysen Farms 9,000 Subtotal $21,615,832 Florida Department of Citrus DNE Sales International $137,103 Seald-Sweet Growers, Inc. 93.128 IMG Enterprise, Inc. 48,807 Dole Citrus 26,232 Baron Trading Corporation 23,625 James N. Rubinstein 15.078 Pan American Trade Development 13,102 Citrus Company Sales, Inc. 11,550 Ocean Spray Cranberries, Inc. 10,205 Plenty, Inc. -___ 7,225 The Ziealer Corp., Justin Intern Corp. 3,919 Rushton & Company, Inc. 1,838 Subtotal $391,812 MIATCO Ralston Purina $200,000 Weaver Popcorn - 100,000 Conaara 100.000 Pillsbury 90,000 Pet, Inc. 80,000 Kraft Co. 80 000 Delicious Foods 80,000 Borden 80,000 Golden Valley -~ ~___ 74,000 Tone Bros. 73,000 Beatreme 50,000 Wyandot ~~ ~__- 50,000 Purity Foods 48,000 ~-___ (conttnued) Page 46 GAO/NSIAtMW225 Agricultural Trade Appendix II TEA Branded Participants and Amounts Received for Fiscal Year 1989 Honee Bear 45,000 General Mills 45,000 Amencan Acy-Tee 40.000 Morrison Farms 40,000 Strum & Sons 30,000 ADM Foods 26,000 Mercantile Foods 25.250 American Meat Protein 25.000 Sonne Labs 23,000 Hsu’s Ginseng 20,000 Beatrice 18,000 Troy Hrqro 15.000 Oliver Wane 15,000 Petrofskv 1451-u-l Stokely, USA 11,500 Parco I~- - 11.250 Cherry Central 5.000 Subtotal $1.514.500 National Association of Animal Breeders World Wide Sires, Inc. $41,000 American Breeders Service 26,000 Federated Genetics 11.000 Sire Power 8,000 Select Sires 7,000 21 st Century Genetics 4,000 Tri State Breeders 3,000 Cow Creek Ranch 1.000 Subtotal $101,000 National Peanut Council CP/C Best $302,000 Nabisco 116,250 Eagle 82,500 Algood 50.000 CPC 35,000 Hunt-Wesson 25,000 Subtotal $610,750 (continued) Page 47 GAO/NSIAMtO-226 Agricultural Trade Appendix II TEA Branded Participants and Amounts Received for Fiscal Year 1989 - National Potato Promotion Board Monarch Food -____- $50 000 Lamb-Weston 37,500 Ore Ida 37,500 Slmplat 37,500 Carnation __--__ 30,000 Sun-Glo ____ 7,500 Subtotal $200.000 Rice Council for Market Develooment Comet American Marketinq $470,000 Riceland 230,000 American Rice, Inc. 217,450 RGA 200,000 Amsnack 50.000 California Garden Products 50,000 Uncle Ben 25,000 Subtotal $1,242,450 SUSTA Bruce Foods $270,000 Crvstal Vallev Catfish 206,000 Capital Petfoods 200,000 Mcilhenny 200,000 Viking Line Promotion 175,000 Crvstal International 125.000 Richland Beveraqe 100,000 Chickasha Cotton Oil 100,000 Autrns Cajun Cookery 60,000 K-Pauls 60,000 So Good South 50,000 Kleins Seafood 50,000 Manchester Farms 40.500 Edwards Baking 40,000 Tropical Blossom 35,000 Panola Pepper 30,000 Florida Euro 25,000 Southern Gold Honey 18,000 BASCO 15,000 The Old City Brewing 10,000 Soft Crawfish 5,000 (continued) Page 48 GAO/NSIAJMO-225 Agricultural Trade Appendix II TEA Branded Participants and Amounts Received for Fiscal Year 1989 Natural Fruit Flavor 5.000 Helens Trop Exotics 3,000 FAIRCO 2.125 Subtotal $1,824.625 USA Poultry and EQQ Export Council Tyson’s Foods $4,390.667 Rockingham Poultry Marketing Corp. 1,210000 National Food Corporatron 430,000 McDonald’s Corporation 210,000 Rocco Turkeys 200,000 Concord Farms 160.000 Norbest, Inc. 160,000 Decoster Eaa Farms 150.000 Nissho lwai American Coop. 140,000 Servac International, Ltd. 100,000 B. Terfloth & Cie, Inc. 80,000 Bil-Mar Foods 60,000 Gold-Kist, Inc. 30,000 Empire Kosher Poultry, Inc. 20 000 American Poultry International 10,000 Ergill, Inc. (Office Center) 10,000 Subtotal $7,360,667 U.S. Meat Export Federation Manning Beef $200,450 Bellinger Associatron 183,750 Consolidated Beef 124 105 Colontal 114875 Brinco ~ 96150 Goodmark 95 000 Monfort 90 000 Beatrice 87 327 Vienna Beef 84.100 John Morrell 58.250 Washington Beef 55.775 Hormel 52.160 Excel :37.500 Shenson ‘32 250 Mountain Meadows 24 500 Gerber 24 400 Oscar Meyer 22 325 (con?lnued) Page 49 GAO/NSLALMO-225 Agricultural Trade Appendix II TEA Branded Participants and Amounts Received for Fiscal Year 1999 Taurus 21,275 Carl Buddig 14,500 DPM 13,450 Superior Foods 12,500 Wilson Foods 11,950 Gurrentz 11,550 Packerland 9,075 VMI 6,400 Southfield 6,075 C. Angus Beef 2,700 Skylark 1,250 Hyplains 700 Subtotal $1,494,342 U.S. Mink Export Development Council American Legend Cooperatives, Inc. $1,37O,OOO Hudson’s Bay Fur Sales, Inc. 880,OGil Subtotal $2,250,000 Wine Institute Gallo $2,15O,KKl Heublein 510,ooo Vininers 480.000 Seagrams 310,000 Glen Ellen 185,000 Giumarra 140,000 Mondavi 120,000 Bronco 115,250 Wente 75,000 Guild 60,000 Wine World 50,000 Mirasscu 35,000 Buena Vista 26,000 Grand Cru 26,000 Clos Du Bois 25,000 Wine Group 25,000 Jekel 25,000 Concannon 20,000 Geyser Park 20,000 Guglielmo 20,000 Seghesro 20,000 (continued) Page 50 GAO/NSI,AIHO-225 Agrkmltural Trade Appendix II TEA Branded Participants and Amounts Received for Fiscal Year 1989 Sutter Home Delicato Domaine Chadon Sebastiani Foppiano Franciscan Korbel 15,000 Martin! 15.000 Monticello Morris, J.W. Pine Ridge 15,000 Cakebread Cellars 14000 Trefethen Belvedere Chalone 10,000 Clos Du Val 10.000 Gibson Stratford St. Francis 10,000 Schramsberg 9,700 Simi 8.700 Iron Horse Quady DeLoach 8,000 Dry Creek 8,000 Clos Peaase 7 500 Hill, William Lohr, J. Adler Fels 6 000 Havwood 6000 Newton 6 000 Sonoma-Cutrer 5500 Caporale 5000 Caymus 5000 Chat. St. Jean 5.000 Freemark Abbey 5,000 Gunlach-Bundschu 5,000 Hacienda 5,000 Hidden Cellars - .5 000 (continued) Page 51 GAO/NSIAD-90-225 Agricultural Trade Appendix II TEA Branded Participants and Amounts Received for Fiscal Year 1989 Jordon 5,000 Kendal-Jackson 5,000 Kenwood 5,000 Klein 5,000 Laurel Glen 5,000 Lyeth 5,000 McDowell Valley 5,000 Viansa 5,000 Ravmond 5,000 Renaissance Rutherford Hill 5,000 Sequoia Grove 5,000 Shafer 5,000 Staa’s Lear, St. Supery Swanson 5,000 Valley of the Moon 5,000 Wheeler, William 5,000 Woltner Estates Firestone Leeward 4,000 Bargetto 4,000 Chalk Hill 4,000 Pedroncelli Buehler Lambert Bridge 3,000 Merryvale 3,000 Parsons Creek 3,000 San Antonio Tribaut Devavry 3,000 Stemmler, Robert 3,000 Sanford 2,500 Subtotal $5,006,900 (continued) Page 52 GAO/NSL4IMO-226 Agricultural Trade Appendix II TEA Branded Participants and Amounts Received for Fiscal Year 1989 WUSATA Campbell Soup $180,000 Kal Kan Foods 180,000 Welch’s 180.000 Ralston Purina 180,000 EJ Gallo 180,000 Tree Top, Inc. 180,000 JR. Simplot 142,500 Continental Mil 125.000 Genuardi Farm 125,000 Intec, Inc. 116,500 Norpac 100.000 Mavfair Corp. 100,000 Stahmann Farms 100,000 J&B Assoc. 100,000 Ruce Food 100,000 Montana Natural 8o.ooo Almond Roco Idaho Pacific Hoody Corp. 50,ooo NM Wineries No00 Roman Meal 5o.ooo American Pecan Or Trading Post Staton Hills 5woo Lindsay Intl. 40,000 Amer. Fine Food 4o.oQo Hoaue Cellars Hansa-Pacific Celes Season 30,000 Nal Fine Food woo0 Aaripac 30.000 Cascadian Farm Dir Mkt Group 30,000 WA Fish Grower 3o.ooo AM World Trade 25,000 Bluewater Farm 25.000 Traditional Med Boyd’s Coffee 25,000 Fleming Food 23,000 L&A Juice 22500 (conttnued) Page 53 GAWNSuI16)0-225 Agrkuhd Trade Appendix II TEA Branded Participants and Amounts Received for Fiscal Year 1989 WE Family Food ~-~ 20,000 Inter-Trade SUD 20,000 Granny Goose 20,000 Amer Wine Trad 20,000 Stein Produce Sangen, Inc. 20,000 Pac-Rim Meat 20.000 Burlev Fresh PA 20,000 Stimson Lane 20,000 Zontontan/Sons 19,500 Poopers Supplv 15,000 West Coast Groc. 14,000 Or Freeze Dry 10,000 CA Wine 10,000 Food Prod Intl. 10,000 Sunalo Rose Creek Vine 10,000 Glorybee Nat. 10,000 CA Cherry 10,000 Perseus Gourmet 10,000 Arbor Crest 10,000 SOURCES UNLTD. 10,000 Ward’s Cheese 10,000 WA Asparagus 7,500 Palisade Pride 7,000 Or Cherrv Grow 4,000 Umpaua Unltd. 3,000 Hoodsport Winer 1,000 Subtotal $3,460,500 Total $60,906,448 Note: The subtotals for each Cooperator represent only fundlng for branded promotlon They do not include funding recewed for generic promotion. Source: GAO analysis of FAS data Page 64 GAO/NSIALM%225 Agricultural Trade L?pe *&~tries Where the Majority of TEA Funds Were Budgeted for F’iscalYear 1989 Percent of fiscal year Total fiscal year 1989 TEA funds Country 1989 budget budgeted Japan $46,054,336 36.26 United Kingdom 15,323,894 12.07 West Germany 10,752,555 8.47 Australia 9,353,132 7.37 Taiwan 6,792,813 5.35 South Korea 5,475,166 4.31 Hong Kong 3,951,733 3.11 France 3,892,645 3.07 Algeria 3,238,350 2.55 Italy 2,428,791 1.91 Spain 2,312,265 1.82 Egypt 2,246,840 1 77 Morocco 1,540,024 1 21 Netherlands 1,406,655 1.11 Portugal 1,191,350 0.93 Singapore 1,026,917 0.81 TOW $118,014,385 92.07 aThis represents approximately 65 percent of the total fiscal year 1989 budgeted TEA funds. (37 other countries also received TEA funds of less than $1 mullion each.) Source: GAO analysis of FAS data. Page 55 GAO/NSIALMO-225 Agricultural Trade Appendix IV L Top 15 Program Participants by Total Amount of TEA Funds Allocated Dollars In thousandsa - Total fiscal Fiscal year Percent of Fiscal 1ys’s”o’ Percent of year 1986 - Percent of Nonprofit applicant organizations 1989 fundsb fundsb 1990 fundsc Export lncentwe Program (Citrus) $11,200 5.60 $8,800 4.40 $49,500 6 78 California Raisin Adwsorv Board 10,700 5.35 12,500 6.25 49,100 6 73 Cotton Council International 15,000 7 50 15,400 7.70 45,650 6 25 U S. Meat Export Federation 17,000 8.!50 9.000 4.50 44,500 6 10 American Soybean Assocration 11,450 5 73 11,500 5.75 41,250 5.65 Callfornla Walnut Commissron 7,300 3.65 8,000 4.00 37,800 5.18 Florida Department of Citrus 5,400 2 70 9,900 4.95 33,900 4.64 Export Incentive Program (Almonds) 11,800 5.90 9,000 4.50 32,380 4 44 USA Poultry and Egg Export Councrl 8,000 4 00 6,000 3.00 30,750 4.21 ___. California Prune Board 5,800 2.90 7,500 3.75 27,300 3.74 U.S Feed Grains Council 4,200 2.10 6,000 3.00 26,500 3 63 Wine lnstltute 7,000 3.50 9,000 4.50 26,400 3.62 Race Council for Market Development 5,700 2.85 8,500 4.25 25,700 3.52 National Peanut Council 7,400 3.70 4,500 2.25 22,400 3.07 California Clina Peach Advlsorv Board 4,700 2.35 3,500 1.75 22,000 3.01 66.33 64.55 70.57 aAllocatrons rnclude funding for both genenc and branded activities bPercentage of TEA funds allocated are based on an annual allocation level of $200 mtlllon for fiscal years 1989 and 1990 CPercentage of TEA funds allocated are based on a total allocated amount for fiscal years 1986 through 1990 of $730 millron Source. GAO analysrs of FAS data Page 56 GAO/NSIAD90-225 A@icuitural Tradt Appendix V Major Contributors to This Report Phillip J. Thomas - Assistant Director Nationa1 Security and J&n J &&&o&y - Adviser International Affairs ‘* Janet Pletrovito - Project Manager Division, Washington, Zina Greene - Evaluator DC. (493509) Page 57 GAO/NSIAD9O-226 Agricultural Trade . Requests for copies of C;AOreports shotild be sent to: U.S. General Accounting Office Post Office Box 6015 Gaithersburg, Maryland 2087i Telephone 202-275-624 I The first five copies of each report are free. .4dditional copies are $2.00 each. There is a 25”0 discount on orders for 100 or more copies mailed to a single address. Orders must be prepaid by cash or by check or money o&er made out to the Superintendent of Documents.
Agricultural Trade: Improvements Needed in Management of Targeted Export Assistance Program
Published by the Government Accountability Office on 1990-06-27.
Below is a raw (and likely hideous) rendition of the original report. (PDF)