Financial and Management Improvements Needed in the Food for Development Program

NSIAD-85-105: Published: Aug 7, 1985. Publicly Released: Aug 7, 1985.

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Pursuant to a congressional request, GAO reviewed the Food for Development Program, which the Agricultural Trade Development and Assistance Act of 1954 authorized. Under the program, the United States provides food aid to developing countries. If recipients sell the provided commodities and use the local currency proceeds to pay for agreed agricultural or rural development or health or family planning activities, the repayment obligations of the host country are forgiven. GAO evaluated title III programs in Bangladesh, Bolivia, and Senegal, focusing on procedures to forgive repayments, implementation of development projects, and adoption of policy reforms by the recipient countries.

GAO found that program funds: (1) are not always deposited in special accounts or are commingled with other sources of recipient country revenue; (2) were disbursed in excess of amounts budgeted, used to cover shortages in projects sponsored by other donors, or used for other questionable purposes; and (3) were sometimes insufficient for timely project implementation. GAO also found that the Agency for International Development (AID) is hampered in project monitoring because: (1) program agreements do not specify discrete elements of projects which are eligible for support; (2) many recipient countries have difficulty with project implementation because of a lack of experienced administrative personnel; and (3) in countries which also receive other forms of U.S. and other donor assistance, project implementation and monitoring problems can be more severe because of the additional administrative burden imposed on AID missions and recipient governments. In addition, GAO found that: (1) project implementation can be hampered by recipient country policies that inhibit or influence local economies; (2) in Bolivia, planned agricultural and social changes were precluded by political and economic changes; (3) in Senegal, while some improvements were made to regional development organizations and farmer cooperatives, little progress was achieved in resource conservation or commodity marketing and pricing reforms; and (4) in Bangladesh, the program has helped to implement agricultural reforms.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: USDA agreed in principle. It will look to the annual reviews and signing of incremental amendments as the key toward achieving improvements, rather than delivery of commodities.

    Recommendation: The Secretary of Agriculture should direct that, before approval of annual commodity deliveries: (1) progress is being achieved in implementing development projects; or (2) evidence shows that problems hampering implementation are being addressed.

    Agency Affected: Department of Agriculture

  2. Status: Closed - Implemented

    Comments: AID will require the program proposal and the agreement to describe other donor activities to be supported under title III, and require the agreement outline the accounting and monitoring system to be used.

    Recommendation: The Administrator, AID, should direct that requests for title III funds to support other donors' projects identify discrete activities which will receive title III support, and how local currency expenditures and project implementation will be monitored. Expenditures should be traceable to specific project activities.

    Agency Affected: United States Agency for International Development

  3. Status: Closed - Implemented

    Comments: Title III program guidance requires all title III project proposals to fully address mission and recipient country project implementation and monitoring capabilities. The agreement with Haiti fully describes the system and procedures to be used by the mission and recipient goverment in implementing and monitoring title III activities. AID will ensure that these are addressed in future agreements.

    Recommendation: The Administrator, AID, should direct that title III proposals describe the extent to which: (1) recipient countries can adequately implement, manage, and staff additional development activities and, if recipients lack effective institutions and adequate and trained personnel, proposals should describe how title III will specifically overcome these impediments; and (2) AID missions can adequately monitor additional project implementation activities.

    Agency Affected: United States Agency for International Development

  4. Status: Closed - Implemented

    Comments: USDA will not agree to authorize the signature of any future title III agreement until the Food Aid Subcommittee receives certification from AID that the program development process leading to proposal of each title III agreement has ensured that adequate accounting systems are in place.

    Recommendation: The Secretary of Agriculture should direct that deliberations on approving title III agreements and annual commodity deliveries ensure that adequate accounting systems are in place or are being developed before approval is granted.

    Agency Affected: Department of Agriculture

  5. Status: Closed - Implemented

    Comments: AID revised the pertinent section of Handbook 19 - Financial Management, chapter 5 - AID Foreign Currency Programs, to require proper accounting procedures, including the use of special accounts.

    Recommendation: The Administrator, AID, should direct the missions to work with host countries to establish systems which properly account for receipts and disbursements of title III local currencies. Special accounts should be a central mechanism of such systems.

    Agency Affected: United States Agency for International Development

  6. Status: Closed - Implemented

    Comments: USDA will work with the Food Aid Subcommittee to ensure that the two recommended points are addressed before annual amendments providing for new commodity deliveries are approved.

    Recommendation: The Secretary of Agriculture should direct that before approving annual commodity deliveries, either: (1) progress is being achieved in adopting agreed policy reform; or (2) evidence shows that problems hampering progress are being addressed.

    Agency Affected: Department of Agriculture

 

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