I.2, for top country markets). MAP Brand-name Promotions Target Small Businesses

Since fiscal year 1994, FAS has significantly increased the number of small businesses participating in MAP’s brand-name program as well as their share of MAP funds. In fiscal year 1996, as required by statute, FAS discontinued providing direct assistance to large businesses other than cooperatives and certain associations, which by law are eligible to receive this assistance for brand-name promotions regardless of size. FAS requires businesses that are applying for brand-name assistance to certify that they are a small-sized entity based on their own assessment using the Small Business Administration’s (SBA) criteria.Since fiscal year 1994, FAS has increased the number of small businesses participating in MAP’s brand-name program and raised the total amount allocated to small businesses while decreasing the total amount allocated to large companies. 1). Our projection, based on FAS data, suggests that the graduation requirement could affect half of the cooperatives and about a quarter of the small businesses that used MAP funds in fiscal year 1997 to promote their brand-name products. However, FAS used its statutory authority in December 1998 and waived the graduation requirement for all cooperatives. The effect of this decision reduced the impact of the graduation requirement on program participation to $4.3 million, affecting only brand-name promotions conducted by small businesses. FAS’ Compliance Review Staff (CRS) regularly audits the participants that receive direct MAP funding and verifies that these participants and the recipients they fund have completed their certification statements. The Director reported that it is difficult to verify whether MAP funds supplement a participant’s own funds for foreign market development activities because it is hard to determine what a participant would have spent in the absence of MAP funds. As we previously reported, this approach is inconsistent with OMB cost-benefit guidelines, which instruct agencies to assume that resources would be fully employed, and leads to an overstatement of benefits of the program. Thus, it is difficult to generalize about the impact of MAP based on the results of these market-level studies. To determine the impact of the legislative requirement that MAP participants certify that MAP funds supplement, not supplant, their expenditures for promotions in foreign markets on MAP participation, we interviewed FAS officials responsible for the management and oversight of MAP, including representatives from FAS’ Commodity and Marketing Programs Division and Compliance Review Staff.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Department of Agriculture's implementation of legislative reforms to the Market Access Program (MAP) and their impact on program participation.

What GAO Found

GAO noted that: (1) as directed by Congress, the Foreign Agricultural Service (FAS) implemented operational changes to MAP; these changes have affected program participation and distribution of funds; (2) since fiscal year (FY) 1994, FAS has increased the number of small businesses participating in MAP to promote brand-name products as well as small businesses' share of program funds; (3) as required by statute, FAS prohibited direct assistance for brand-name promotions to large companies beginning in FY 1996; (4) this prohibition does not apply to cooperatives and certain associations; (5) also, beginning in FY 1998, FAS prohibited indirect assistance to large companies; (6) FAS implemented a graduation requirement that will affect about a quarter of the small businesses with brand-name promotions totalling $4.3 million in FY 1999, as well as the number of MAP brand-name promotions conducted in individual country markets; (7) this graduation requirement also could have affected about half of the cooperatives; however, in December 1998, FAS chose to use its statutory authority and waive the graduation requirement for all cooperatives, citing special considerations; (8) since FY 1995, FAS has required all participants to self-certify that MAP funds supplement, not supplant, their activities to develop new foreign markets for their products; (9) while FAS regularly verifies that the participants and the companies they fund have completed their certification statements, FAS' Director of Compliance Review Staff reports that it is difficult to ensure that these funds are additional because it is hard to determine what would have been spent in the absence of MAP funds; (10) also, this requirement has had no apparent impact on program participation; (11) questions remain about the overall economic benefits derived from MAP funding; (12) FAS estimates of MAP's macroeconomic impact are overstated because they rely on a methodology that assumes that the resources used were not employed prior to the funding; (13) GAO noted that this is inconsistent with Office of Management and Budget cost/benefit guidelines; and (14) in addition, the evidence from market-level studies is inconclusive regarding MAP's impact on specific commodities in specific markets.