Inefficiency Costs Gobble Up USA Food Aid

Inefficiency Costs Gobble Up USA Food Aid



   
April 2007 -  Despite the growing 
global demand for food aid, rising business and transportation 
costs over the past five years have cut the average tonnage of 
U.S. food aid delivered in half, finds a new report by 
Congressional investigators. 
The Government Accountability Office, GAO, found that the cost 
of transportation - not food - now represents 65 percent of 
the total expenditure for the largest U.S. emergency food aid 
program. 
The investigation was conducted at the request of Senator Tom 
Harkin, an Iowa Democrat who chairs the Committee on 
Agriculture, Nutrition, and Forestry, and Senator Saxby 
Chambliss of Georgia, the Ranking Republican on that 
committee. 
The key GAO recommendations were presented to the committee as 
testimony on March 21 as part of the committee's Farm Bill 
reauthorization hearings. 
The GAO report recommends that the administrator of USAID and 
the secretaries of agriculture and transportation enhance the 
efficiency and effectiveness of U.S. food aid by improving 
logistical planning, transportation contracting, and 
monitoring, among other actions. 
Senator Tom Harkin represents Iowa, a state with an economy 
built on agriculture. 
"There are longstanding discussions and disagreements over the 
ramifications of U.S. food aid in developing countries and 
international markets," said Senator Harkin. 
Some, including the Bush administration, have proposed 
eliminating some in-kind shipments of food aid and converting 
this form of assistance to grants of money, he said. 
U.S. food aid programs are all in-kind, and no cash donations 
are allowed under current legislation. 
Harkin said the committee is considering this option as well 
as examining existing food aid programs to see how their 
efficiency and effectiveness can be improved. 
"We should continue to provide a strong level of support amid 
growing demands worldwide," said Senator Chambliss. "I believe 
we can integrate high levels of flexibility while retaining 
the existing structure of food aid programs." 
"We should think creatively in order to respond to changing 
circumstances and to attack the fundamental roots of poverty 
around the world, while at the same time maintaining political 
support for these programs at home," he said. "Through the 
contribution of agricultural commodities, American farmers and 
ranchers participate and have a profound effect on the foreign 
policy of the United States." 
A Pakistani worker unloads U.S. donated wheat flour at the 
Mehra Camp for displaced earthquake survivors. March 2006.
 The United States is the largest global food aid donor, 
contributing over half of all food aid supplies. Food aid is 
utilized as a humanitarian response to address acute hunger in 
emergencies and as a development response to address chronic 
hunger. 
Natural disasters, weather calamities, conflicts, poverty, and 
severe public health problems are among the underlying causes 
of both acute and chronic hunger. 
Since 2002, Congress has appropriated an average of $2 billion 
per year for U.S. food aid programs, which delivered an 
average of four million metric tons of food commodities per 
year. 
But based on analysis of agency documents, interviews with 
experts, government officials and nongovernmental 
organizations, and fieldwork in three recipient countries - 
Ethiopia, Kenya, and Zambia - between May 2006 and March 2007, 
the GAO investigators found many inefficiencies and 
unnecessary costs in the delivery of U.S. food aid. 
They documented funding and planning processes that increase 
delivery costs and lengthen time frames. 
A food warehouse in Wajir, Kenya, receives U.S. food aid for 
drought victims. March 2006. 
In their investigation GAO staff learned of legal requirements 
that result in awarding of food aid contracts to more 
expenvironment newsive service providers, as well as inadequate 
coordination between U.S. agencies and food aid stakeholders 
to track and respond to food and delivery problems. 
U.S. food aid programs are often "vulnerable to not getting 
the right food to the right people at the right time," the GAO 
report says. 
These mistakes occur because aid staffers face "challenging 
operating environments in recipient countries," the GAO says. 
The investigators found insufficient coordination among key 
stakeholders, resulting in disparate estimates of food needs. 
U.S. aid officials "had difficulty in identifying vulnerable 
groups and the causes of their food insecurity," the report 
states. 
In addition, officials had to deal with resource constraints 
on conducting reliable assessments and providing food and 
other assistance. 
The GAO documented ocean transportation and contracting 
practices that create high levels of risk for ocean carriers, 
resulting in increased rates for the shipment of food aid. 
For example, cargo preference laws require 75 percent of food 
aid to be shipped on U.S. flag carriers, which are generally 
more costly than foreign-flag carriers. 
The U.S. Department of Transportation's Maritime 
Administration, MARAD, does reimburse the food agencies to 
cover the differential costs for shipping food aid on U.S. 
flag carriers under cargo preference, and in 2004 upgraded its 
reimbursement system. 
The Xanadu, a U.S. ship loaded with donated maize, maize meal 
and corn soya blend, docks at Beira, Mozambique, the main 
point of entry for food aid headed for Malawi, Mozambique, 
Zambia and Zimbabwe. 2002. 
In her letter of comment on the GAO report, Linda Washington, 
MARAD acting assistant secretary for administration, wrote 
that, "MARAD agrees with GAO's findings that the transport 
contracts written by the food agencies must utilize modern 
transportation contracting practices and updated reimbursement 
methodologies." 
She wrote, "Reducing costs associated with these contracts 
will be possible if they begin using commercial principles of 
shared risks, supply chain partnerships, streamlined 
administration methods, and expedited payment and claims 
resolution," as the GAO recommends. 
The GAO responded that even with the improved reimbursement 
process, payments covered total cargo preference costs in 
fiscal year 2005 only. 
Reducing transportation costs would feed hundreds of thousands 
more people, the GAO report states. "At current U.S. food aid 
budget levels, every $10 per metric ton reduction in freight 
rates could feed almost 850,000 more people during an average 
hungry season." 
In its comment on the GAO draft report, USAID was critical of 
this assessment. 
Mosina Jordan, counselor to the agency, wrote, "USAID would 
like to underscore that no hungry season is 'average' and that 
actual saving would represent less than two percent of the 
FY2006 program." 
The GAO was particularly critical of the current practice of 
using food aid as a means to generate cash for development 
projects - monetization, call it "an inherently inefficient 
use of resources." 
Monetization entails not only the costs of procuring, 
transporting, and handling food, but also the costs of 
marketing and selling it to generate cash for funding 
development projects. 
The nongovernmental organizations must maintain the expertise 
necessary to sell and market food aid abroad, which diverts 
resources from their core missions, the GAO pointed out. 
Women distribute U.S. vegetable oil in Zalengie, West Darfur. 
Due to insecurity, this was the first food distribution in 
almost two months. December 2004. 
U.S. agencies do not collect or maintain data electronically 
on the revenues generated from monetization, the GAO said, 
pointing out that the absence of such electronic data impedes 
the agencies' ability to adequately monitor the degree to 
which monetization revenues can cover the costs. 
On USAID's behalf, Jordan responded, "USAID evaluates every 
proposed monetization activity and approves only those which 
use monetization proceeds to address the underlying causes of 
food insecurity, without disrupting local production or 
markets." 
Finally, the GAO was critical of the way USAID and the U.S. 
Department of Agriculture, USDA, handle food spoilage that 
reduces the benefits of food aid to recipients. 
The GAO recommends the establishment of a coordinated system 
for tracking and resolving food quality complaints, saying 
that "agency officials are unable to track the quality of food 
aid for approximately 60 percent of food aid shipments, and 
commodity losses may exceed those reported in the data." 
In its report, the GAO uses the term food quality to refer to 
the degree of food spoilage, infestation, contamination and/or 
damage that can result from factors such as inadequate 
fumigation, poor warehouse conditions, and transportation 
delays. 
Jordan responded that the USDA and USAID are taking a 
three-pronged approach to improving food quality that involves 
the agencies, the food industry and nutritionists, and the 
organizations that deliver the food aid in country. 
"First, USDA is taking steps to improve its contracting for 
food aid by increasing the enforcement of standards in the 
contracts that would be included in future procurements," she 
wrote. 
"Second, USDA will work with experts to identify and reinforce 
laboratory testing standards and manufacturing processes." 
"Third, a longer-term study will be undertaken to help 
identify new products or improved products that could be 
provided through food aid," Jordan wrote. "USDA and USAID will 
work closely with Congress and the private sector during this 
process." 

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