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Inefficiency, Costs Gobble Up U.S. Emergency Food Aid

WASHINGTON, DC, April 19, 2007 (ENS) - 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.

Harkin

Senator Tom Harkin represents Iowa, a state with an economy built on agriculture. (Photo courtesy Office of the Senator)
"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."

wheat

A Pakistani worker unloads U.S. donated wheat flour at the Mehra Camp for displaced earthquake survivors. March 2006. (Photo courtesy USAID)
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.

warehouse

A food warehouse in Wajir, Kenya, receives U.S. food aid for drought victims. March 2006. (Photo courtesy USAID)
In their investigation GAO staff learned of legal requirements that result in awarding of food aid contracts to more expensive 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.

ship

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. (Photo by Richard Lee courtesy World Food Programme)
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

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. (Photo courtesy U.S. State Department)
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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