Foreign Assistance:

U.S. Food Aid Program to Russia Had Weak Internal Controls

NSIAD/AIMD-00-329: Published: Sep 29, 2000. Publicly Released: Oct 30, 2000.

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Pursuant to a congressional request, GAO provided information on the internal controls used by the Foreign Agricultural Service in its management of the fiscal year 1999 government-to-government food aid programs to Russia, focusing on: (1) the adequacy of internal controls used to monitor the distribution of food aid commodities; (2) the adequacy of procedures for monitoring collections and deposits of funds derived from the sale of food aid commodities; and (3) the extent to which procedures for determining the price to sell U.S. food aid commodities in Russia were followed.

GAO noted that: (1) the Foreign Agricultural Service did not adequately implement internal controls designed to direct, track, and verify how food aid was delivered at the regional level in Russia; (2) as a result, the Foreign Agricultural Service cannot provide reasonable assurance that the food aid was delivered in agreed upon amounts to the intended regions as was designated in commodity distribution plans approved by both governments; (3) GAO found that for most of the commodity distribution plans, less than one-quarter of the targeted regions received a tonnage amount that was equivalent to or near their planned allotment; (4) the lack of timely reporting on commodity distribution by the Russian government combined with weaknesses in the Foreign Agricultural Service's tracking systems for monitoring commodity deliveries to regional recipients limited the agency's ability to effectively manage the distribution process, identify discrepancies, and minimize the potential for fraud and abuse; (5) officials from the Foreign Agricultural Service told GAO that their ability to effectively implement internal controls was constrained by limited staff resources and the need to implement a large and complex program in a short time period; (6) the Foreign Agricultural Service did not establish adequate procedures to monitor the collection and deposit of funds derived from the sale of fiscal year 1999 U.S. food aid commodities in the Russian regions; (7) the procedures were also inadequate for minimizing the risk of unintended commodity diversions and shortfalls in deposits to the Russian Pension Fund; (8) officials from the Foreign Agricultural Service established and followed a formal procedure for setting commodity prices for food aid sold in Russia, but they did not adequately document their analysis or the basis for how the final price decisions were reached; (9) the prices set were used to calculate the amount to be deposited into the Russian Pension Fund for a given commodity shipment; (10) the U.S. and Russian governments attempted to set commodity prices at a "golden middle" that would facilitate the quick sale of food aid commodities and help to counteract inflationary pressures but would not disrupt local markets; and (11) without documentation of market conditions when making price-related decisions, the Foreign Agricultural Service was unable to demonstrate the reasonableness of final food aid commodity prices, which in turn determines the amount of funds deposited into the Russian Pension Fund.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To provide transparency behind actions taken and key decisions made regarding the management of the U.S. food aid program in Russia, the Secretary of Agriculture should direct the Foreign Agricultural Service to fully document the information and analysis used by both the U.S. and Russian governments in determining the prices for U.S. food and commodities sold in Russia and any subsequent price adjustments.

    Agency Affected: Department of Agriculture

    Status: Closed - Implemented

    Comments: In its statement of action on this recommendation, USDA stated that it will endeavor to fully document the information and analysis used by the both the U.S. and Russian governements in determing the prices for U.S. food aid commodities sold in Russia and any subsequent price adjustments.

    Recommendation: To help ensure that remaining shipments of U.S. food aid commodities are delivered as intended under existing programs, as well as shipments under any future government-to-government program in Russia, the Secretary of Agriculture should undertake efforts to improve the internal controls used to monitor the distribution of food aid as well as the collection of sale proceeds. The Secretary of Agriculture should direct the Foreign Agricultural Service to collect on a regular basis information on funds due by region, amounts paid, and status of delinquencies by requesting the Russian government to provide the United States with its reports on the status of regional payments for U.S. food aid commodities.

    Agency Affected: Department of Agriculture

    Status: Closed - Implemented

    Comments: In its statement of action on this report recommendation, USDA stated that its Foreign Agricultural Service is working to improve food assistance reporting and monitoring through development of an evaluation database which will ultimately be available on line to all program participants.The Foreign Agricultural Service plans to conduct random monitoring of at least 20 percent of food aid shipments annually. It also noted that significant responsibility for monitoring and reporting on foreign assistance programs falls to Cooperating Sponsors, including foreign governments and private voluntary organizations (PVO's). It added that these responsibilities are outlined in individual food aid agreements. GAO will continue to work closely with Cooperating Sponsors to ensure that they understand and full carry out these responsibilities.

    Recommendation: To help ensure that remaining shipments of U.S. food aid commodities are delivered as intended under existing programs, as well as shipments under any future government-to-government program in Russia, the Secretary of Agriculture should undertake efforts to improve the internal controls used to monitor the distribution of food aid as well as the collection of sale proceeds. The Secretary of Agriculture should direct the Foreign Agricultural Service to conduct fewer, but higher quality monitoring visits by: (1) undertaking more physical inspections at regional sites and at times of discharge, transfers, or deliveries; (2) performing some unannounced visits in addition to prearranged visits; (3) recording the type and amount of commodities expected to be found and the actual amount monitored as well as the date the commodities were received; and (4) distinguishing between U.S. food aid commodities that will be sold versus donated to social institutions when assessing the types and quantities of commodities delivered.

    Agency Affected: Department of Agriculture

    Status: Closed - Implemented

    Comments: In its statement of action on this recommednation, USDA stated that its food aid agreements clearly outline the Cooperating Sponsors' responsibility to maintain the integrity of our programs through regular reporting on commodity deliveries and program implementation. USDA's Foreign Agricultural Service plans to conduct random monitoring of at least 20 percent of food aid agreements annually. USDA added that a thorough review of at least five PVO's will also be conducted each year. USDA stated that it will continue to require Cooperating Sponsors to distinguish between commodities sold versus those donated.

    Recommendation: To help ensure that remaining shipments of U.S. food aid commodities are delivered as intended under existing programs, as well as shipments under any future government-to-government program in Russia, the Secretary of Agriculture should undertake efforts to improve the internal controls used to monitor the distribution of food aid as well as the collection of sale proceeds. The Secretary of Agriculture should direct the Foreign Agricultural Service to improve the effectiveness of its management information system by: (1) incorporating information from commodity distribution plans on quantities expected to be delivered to regions, updating the plans as changes are made, and preparing progress reports on a regular basis that compare updated plans with records of actual distribution for each region and commodity as well as quantities found by U.S. monitors; (2) keeping separate track of estimated and actual shipment/delivery data as commodities move through the distribution cycle to recipients providing an audit trail and a better basis for verification by monitors; and (3) tracking separately in key logistical reports those commodities that will be sold versus commodities that will be given free to social institutions.

    Agency Affected: Department of Agriculture

    Status: Closed - Implemented

    Comments: In its statement of action taken on this report recommendation, USDA stated that if it implements a similar assistance program in the future, it will endeavor to track internal commodity distribution, document any changes, and compare updated plans with quantities found by monitors. It states that it is currently asking Coopewrating Sponsors to maintain actual delivery/receipt data throughout the distribution process and to track commodities to be sold versus commodities to be donated. The semi-annual reporting requirements, including commodity delivery, distribution and/or monetization, are clearly outlined in the agreements.

    Recommendation: To provide transparency behind actions taken and key decisions made regarding the management of the U.S. food aid program in Russia, the Secretary of Agriculture should direct the Foreign Agricultural Service to record in the minutes of the Bilateral Working Group, the results and rationale behind key decisions involving changes to distribution plans and price setting of U.S. food aid commodities sold in Russia as well as how issues raised by the monitoring visits are resolved.

    Agency Affected: Department of Agriculture

    Status: Closed - Implemented

    Comments: In its statement of action on this recommendation, USDA stated that the creation of a Bilateral Working Group was a unique feature of the Russian food aid program. It added that if USDA implements a similar assistance program in the future, it will endeavor to document any decisions related to changes in distribution plans and prices as well as resolution of issues raised by monitoring visits.

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