International Food Assistance:

Agencies Should Ensure Timely Documentation of Required Market Analyses and Assess Local Markets for Program Effects

GAO-17-640: Published: Jul 13, 2017. Publicly Released: Aug 14, 2017.

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USAID and USDA provided approximately $1.9 billion of U.S food aid overseas in fiscal year 2015, including about 1.5 million metric tons of commodities such as rice or wheat. Before signing assistance agreements, these agencies are required to document that distributing commodities will not hurt the recipient country's agricultural production or local markets (Bellmon determinations).

We found that USAID and USDA do not consistently document these determinations before distributing food aid.

We recommended that the agencies document Bellmon determinations in a timely manner and also monitor and evaluate markets for negative effects.

Local markets in Malawi (left) and Guatemala (right)

Two photos of markets with vendors and shoppers.

Two photos of markets with vendors and shoppers.

Additional Materials:

Contact:

Thomas Melito
(202) 512-9601
MelitoT@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

What GAO Found

The U.S. Agency for International Development (USAID) and the U.S. Department of Agriculture (USDA) each have a process for prioritizing countries to receive U.S. commodities. USAID's documents lay out its steps to select countries for Food for Peace (FFP) projects in fiscal years 2013 through 2016. However, USDA's documents do not consistently account for decisions to provide commodities to countries that did not meet its prioritization criteria for McGovern-Dole International Food for Education and School Nutrition (McGovern-Dole) and Food for Progress development projects. For example, analysis of USDA documents showed countries that did not meet these criteria received 40 percent of Food for Progress funding in fiscal year 2015; however, the documents do not provide USDA's reasons for these decisions. Better documentation of such decisions would improve transparency and accountability.

USAID and USDA did not consistently document that U.S. commodities would not negatively affect recipient countries' production or markets and that adequate storage was available before providing the commodities. USAID and USDA guidance requires documentation of such “Bellmon determinations” before food aid agreements are signed. In fiscal years 2014 and 2015, USAID and USDA followed this guidance for the 6 FFP emergency projects and 5 of 6 Food for Progress projects GAO reviewed. However, USAID documented determinations before signing agreements for only 5 of 8 FFP development projects, and USDA did so for only 2 of 18 McGovern-Dole projects. As a result, the agencies did not consistently document compliance with a key control.

GAO found lower-than-expected prices 12 percent of the time for key commodities in countries that received commodity-based U.S. food aid at some point in 2015 and 2016. However, neither agency required implementing partners to monitor or evaluate markets during this period. In December 2016, USAID began requiring partners to monitor and evaluate emergency projects for negative market effects, such as unusual price changes. However, USAID does not require this for development projects, and USDA does not require it for either McGovern-Dole or Food for Progress. Yet both agencies require monitoring of project performance and evaluation of project outcomes to identify challenges, ensure projects achieved intended results, and to improve future projects. Monitoring and evaluation for negative market impacts would help identify any needed midcourse corrections and inform future Bellmon determinations.

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In 2015, USAID and USDA provided about $1.9 billion of U.S food aid overseas, including about 1.5 million metric tons of commodities. The Bellmon amendment to the Food for Peace Act requires determining, before distribution of commodities, that the distribution will not cause a substantial disincentive to a country's domestic production and that adequate storage will be available. Agency guidance requires documenting Bellmon determinations before food aid agreements are signed and promotes monitoring and evaluation to improve accountability and performance.

GAO was asked to review USAID's and USDA's provision of U.S. commodities. This report examines the extent to which the agencies have (1) documented their selection of countries for food aid, (2) documented Bellmon determinations before signing project agreements, and (3) monitored and evaluated markets to identify any negative effects during and after project implementation. GAO analyzed agency data, interviewed officials, and visited sites in Malawi and Guatemala where the agencies had projects. GAO also reviewed documentation for 38 projects initiated and 35 final evaluations or reports completed in fiscal years 2014 and 2015.

What GAO Recommends

GAO is making eight recommendations to strengthen USAID's and USDA's provision of U.S. commodities. For example, GAO recommends that both agencies document all Bellmon determinations before signing agreements with partners and require monitoring and evaluation for negative market effects. Both USAID and USDA agreed with our recommendations.

For more information, contact Thomas Melito at (202) 512-9601 or MelitoT@gao.gov.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: On October 13, 2017 USAID provided a formal response to the Congress on the recommendations included in GAO-17-640. In the response, USAID indicated that it concurred with the recommendations in the report, and USAID reported that it is updating guidance and procedures to address the recommendations. USAID expressed its commitment to ensure that Bellmon determinations are documented for all food assistance projects prior to the provision of U.S. commodities. Additionally, USAID provided documentation that it had completed a Bellmon determination for all applicable food assistance projects in fiscal year 2017.

    Recommendation: To help ensure that, consistent with the Bellmon amendment, the provision of U.S. in-kind food aid does not result in a substantial disincentive to, or interference with, domestic production or marketing in countries receiving in-kind food aid, the USAID Administrator should ensure that Bellmon determinations are documented for all food assistance projects prior to the provision of commodities, consistent with agency guidance.

    Agency Affected: United States Agency for International Development

  2. Status: Closed - Implemented

    Comments: On October 13, 2017 USAID provided a formal response to the Congress on the recommendations included in GAO-17-640. In the response, USAID indicated that it concurred with the recommendations in the report, and USAID reported that it is updating guidance and procedures to address the recommendations. USAID updated and reissued the Food for Peace Information Bulletin, which outlines USAID's guidance on Bellmon determinations. USAID distributed the updated guidance to the Food Aid Consultative Group in April, 2018 and uploaded the document to the USAID Food For Peace public-facing website.

    Recommendation: To help ensure that, consistent with the Bellmon amendment, the provision of U.S. in-kind food aid does not result in a substantial disincentive to, or interference with, domestic production or marketing in countries receiving in-kind food aid, the USAID Administrator should update guidance on Bellmon determinations to reflect current policies and procedures.

    Agency Affected: United States Agency for International Development

  3. Status: Closed - Implemented

    Comments: In response to the GAO recommendation, USAID updated its fiscal year 2018 guidance for Development Awards to require implementing partners to monitor and report on local markets. Specifically, USAID guidance now requires implementing partners to report on price changes in local markets over time, as well as unexpected disincentives or negative effects on markets.

    Recommendation: To help ensure that, consistent with the Bellmon amendment, the provision of U.S. in-kind food aid does not result in a substantial disincentive to, or interference with, domestic production or marketing in countries receiving in-kind food aid, the USAID Administrator should monitor markets during implementation of development projects to identify any potential negative effects, such as unusual changes in prices.

    Agency Affected: United States Agency for International Development

  4. Status: Closed - Implemented

    Comments: GAO reported that USAID did not require implementing partners to evaluate markets in 2015 or 2016. In December 2016, USAID began requiring partners to evaluate emergency projects for negative market effects, such as unusual price changes. However, USAID did not require evaluation of markets for development projects. Because the provision of in-kind food aid can distort local markets and displace commercial trade in recipient countries, GAO recommended that USAID evaluate markets after development projects are completed to identify any potential negative effects, such as unusual changes in prices. In response to the GAO recommendation, USAID updated its fiscal year 2018 guidance for Development Awards to require implementing partners to evaluate and report on local markets. Specifically, USAID guidance now requires implementing partners to provide a final evaluation on unexpected market impacts or disincentives to local production upon project completion. Additionally, in December 2018, USAID conducted its own post-completion market evaluation of a development project using the required reporting provided by the implementing partners. Moving forward, USAID indicated it will use market evaluations provided by implementing partners to assess any potential negative market impacts if there were indications of market disruptions during program implementation. By evaluating markets after projects are completed, USAID will improve their ability to determine if any negative market effects resulted from delivery of in-kind food commodities, and therefore would have information that could be used to ensure future projects do not cause disincentives to, or interfere with, domestic production or marketing.

    Recommendation: To help ensure that, consistent with the Bellmon amendment, the provision of U.S. in-kind food aid does not result in a substantial disincentive to, or interference with, domestic production or marketing in countries receiving in-kind food aid, the USAID Administrator should evaluate markets after development projects are completed to determine whether markets were negatively affected during project implementation or after project completion.

    Agency Affected: United States Agency for International Development

  5. Status: Open

    Comments: The agency agreed with our recommendation. As of December 2018, USDA has not developed guidance to require documentation of the reasons for providing funding to countries that were not on the priority list.

    Recommendation: To ensure the transparency and accountability of USDA's selection of countries to receive in-kind food aid, the Secretary of Agriculture should develop guidance to require documentation of the reasons for providing funding to countries that were not on the priority list.

    Agency Affected: Department of Agriculture

  6. Status: Closed - Implemented

    Priority recommendation

    Comments: GAO reported that USDA did not consistently document that U.S. commodities would not negatively affect recipient countries' production or markets and that adequate storage was available before providing the commodities. USDA guidance requires documentation of such "Bellmon determinations" before food aid agreements are signed . In fiscal years 2014 and 2015, USDA documented determinations before signing agreements for only 2 of 18 McGovern-Dole projects. GAO recommended that USDA take action to ensure that Bellmon determinations are documented for all food assistance projects prior to the provision of commodities, consistent with agency guidance. In response to the GAO recommendation, USDA expressed its commitment to ensure that Bellmon determinations are documented for all food assistance projects prior to the provision of U.S. commodities, and USDA updated its guidance to require Bellmon determinations should be documented and approved by USDA management. Additionally, USDA provided documentation that it had completed a Bellmon determination for all applicable food assistance projects in fiscal year 2017.

    Recommendation: To help ensure that, consistent with the Bellmon amendment, the provision of U.S. in-kind food aid does not result in a substantial disincentive to, or interference with, domestic production or marketing in countries receiving in-kind food aid, the Secretary of Agriculture should ensure that Bellmon determinations are documented for all food assistance projects prior to the provision of commodities, consistent with agency guidance.

    Agency Affected: Department of Agriculture

  7. Status: Open

    Comments: The agency agreed with our recommendation. USDA reported that proposed McGovern-Dole commodities are selected in coordination with the host governments in order to ensure they will not disrupt local production, markets, or food prices. However, as of December 2018, USDA has not taken action to monitor markets during implementation of McGovern-Dole projects to identify whether any potential negative effects have occurred, such as disruptions of local production or unusual changes in food prices.

    Recommendation: To help ensure that, consistent with the Bellmon amendment, the provision of U.S. in-kind food aid does not result in a substantial disincentive to, or interference with, domestic production or marketing in countries receiving in-kind food aid, the Secretary of Agriculture should monitor markets during implementation of McGovern-Dole projects to identify any potential negative effects, such as unusual changes in prices.

    Agency Affected: Department of Agriculture

  8. Status: Open

    Comments: The agency agreed with our recommendation, and has reported actions to address the recommendation. As of December 2018, GAO has requested documentation from USDA to confirm the actions taken.

    Recommendation: To help ensure that, consistent with the Bellmon amendment, the provision of U.S. in-kind food aid does not result in a substantial disincentive to, or interference with, domestic production or marketing in countries receiving in-kind food aid, the Secretary of Agriculture should evaluate markets after the completion of McGovern-Dole and Food for Progress projects to determine whether markets were negatively affected during project implementation or after project completion.

    Agency Affected: Department of Agriculture

 

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