The programs provide matching funds to support U.S.  industry efforts to build, maintain, and expand commercial overseas  markets for U.S. agricultural products, with the overarching goal of  increasing agricultural exports. MAP is the largest of the five programs,  with a current annual authorization of $200 million—about 80 percent  of USDA’s total annual market development funding. Participants in MAP and FMD Have Remained Relatively Consistent in Recent Years

Participants in USDA’s market development programs use program funds  to support a variety of activities intended to raise awareness or  acceptance of U.S. agricultural products in overseas markets. MAP and  FMD participants, their share of program expenditures, and the countries  where they spent the majority of program funds remained relatively  consistent from 2007 through 2011. Unlike funds for the other programs,  a portion of MAP funds is used for promotion of branded products. In  2011, MAP participants spent about 85 percent of program funding on  overseas promotion of generic commodities; more than 600 small  companies and seven agricultural cooperatives spent the remaining 15  percent of MAP funding to promote branded products. Common activities undertaken included,  among others, market research, consumer and retail promotion,  participation in international trade shows, and reverse trade missions, in  which foreign buyers visit U.S. agricultural producers. FAS Uses Management Processes to Reduce Duplication Risks, but Some Participants’ Annual Progress Reports Have Not Identified Assessment Methodologies

FAS has established processes to reduce risks of duplication among the  five market development programs, to monitor participant expenditures,  and to assess program results. Selected MAP and FMD Progress Reports Generally Reflected FAS Requirements and Key Attributes of Successful Performance Measurement, but Some Reports Did Not Identify Assessment Methodology as Required

The performance measures in the progress reports that we reviewed  generally met criteria based on FAS guidance for progress reports and  key attributes of successful performance measures that we previously  identified. 1. 5. For the 149 performance measures with no  identified methodology (40 percent), it would be difficult for FAS to  determine the reliability of the reported results. FAS Cost-Benefit Analysis Asserts That MAP and FMD Benefit U.S. Economy, but Methodological Limitations May Affect the Magnitude of Estimated Benefits

A 2007 cost-benefit analysis of MAP and FMD, commissioned by FAS,  found that the programs increased U.S. agricultural exports and  benefitted the U.S. economy. Overall, the study asserted that the  government’s expenditures for the two programs had resulted in greater  increases in U.S. agricultural exports and greater benefit to the U.S.  economy than would have occurred without the expenditures. FAS officials reported that they plan to commission a  new cost-benefit analysis in fiscal year 2014, but they indicated that they  have not yet identified the methodologies that the new study will use. However, the  model has limitations related to its exclusion of important variables and its  lack of a sensitivity analysis of key assumptions. 2. Accurate cost benefit analyses  help decision makers determine how best to allocate program funding  and provide a better picture of the potential effect on U.S. exports and the  economy if funding is increased or decreased. Recommendations for Executive Action

We recommend that the Secretary of Agriculture direct FAS to take the  following three actions:  To improve MAP and FMD participants’ annual reporting of the results of  their market development activities, use appropriate means to emphasize the importance of  participants’ identifying the methodologies used to assess results  for each performance measure in their annual country progress  reports. To improve the accuracy of future cost-benefit analyses of FAS’s market  development programs, ensure that any econometric model used for the cost-benefit  analysis, such as the market share model, includes industry- specific variables that could have a significant role in determining  the U.S. market share—for example, commodity prices,  production volumes, and number of export competitors; and  conduct a sensitivity analysis, in accordance with best practices  for cost estimates, of the key assumptions that are applied in any  economic models used in the cost-benefit analysis, such as the  market share model and spillover effect model. Appendix I: Objectives, Scope, and Methodology

We were asked to review several aspects of the U.S. Department of  Agriculture’s (USDA) five market development programs, which USDA’s  Foreign Agriculture Service (FAS) administers. This report (1) describes  participation and expenditures in these market development programs,  particularly the Market Access Program (MAP) and Foreign Market  Development Program (FMD); (2) examines FAS’s management and  monitoring of its market development programs; and (3) assesses FAS’s  cost-benefit analysis of  MAP’s and FMD’s impact on the U.S. economy. To describe agricultural groups’ participation in FAS’s five market  development programs and the programs’ expenditures from 2002  through 2011—our first objective—we reviewed program participants’  applications, country progress reports, and program evaluations to  identify examples of the activities that participants undertook with market  development funding.
Why GAO Did This Study

USDA administers five programs to assist U.S. agricultural industry efforts to build, maintain, and expand overseas markets. However, members of Congress continue to debate the level of funding for this assistance and its impact on agricultural exports. USDA provides about $250 million annually for the five market development programs. MAP and FMD received about 90 percent of this funding in fiscal year 2012, with allocations of $200 million and $34.5 million, respectively.
GAO was asked to review USDA's market development programs. This report (1) describes participation and expenditures in these market development programs, particularly MAP and FMD; (2) examines FAS's management and monitoring of its market development programs; and (3) assesses FAS's cost-benefit analysis of MAP's and FMD's impact on the U.S. economy. GAO analyzed USDA expenditure data from 2002 through 2011 and reviewed key agency and program participant documents. GAO also assessed a sample of participants' annual progress reports and assessed economic cost-benefit analyses of MAP and FMD commissioned by USDA.

What GAO Found

Market development program participants use program funds to support a variety of activities intended to raise awareness or acceptance of U.S. agricultural products in overseas markets. Common activities include, among others, market research, consumer and retail promotion, and participation in international trade shows. GAO's analysis of expenditure data from 2007 through 2011 shows that participants in the Market Access Program (MAP) and the Foreign Market Development Program (FMD)--the largest of the five market development programs--remained generally consistent during that period. The program participants with the largest shares of funding and the countries where the largest shares of funds were spent also remained relatively consistent. Expenditure data for 2011 show that MAP and FMD participants met or exceeded FAS contribution requirements that they match minimum percentages of the program funding they receive. Unlike funding for the other programs, a portion of MAP funds is used for promotion of branded products. In 2011, MAP participants spent about 85 percent of program funding on overseas promotion of generic commodities. More than 600 small companies and seven agricultural cooperatives spent the remaining 15 percent of MAP funding to promote branded products.
The U.S. Department of Agriculture's (USDA) Foreign Agricultural Service (FAS) uses several management and monitoring processes to reduce the risk of duplication among the five programs. FAS uses an integrated system to process funding applications for multiple programs and to monitor expenditures, which reduces the risk of duplication. According to FAS officials, FAS also monitors participants' expenses for all programs through its compliance review process. In addition, FAS guidance requires program participants to submit annual progress reports on the results of their market development activities. GAO found that performance measures in a sample of progress reports generally reflected selected FAS guidance and key attributes of successful performance measures that GAO had identified. However, the sampled reports did not always outline the methodologies used to assess activity results as required by FAS guidelines. In these cases, it would be difficult for FAS to determine the reliability of the reported results and the impact of market development activities.
A 2007 cost-benefit analysis of MAP and FMD, commissioned by FAS, found that the programs increased U.S. agricultural exports and benefited the U.S. economy, but methodological limitations may affect the magnitude of the estimated benefits. Overall, the analysis asserted that the government's expenditures for the two programs resulted in greater increases in U.S. agricultural exports and greater benefit to the U.S. economy than would have occurred without the expenditures. However, an economic model used to estimate the programs' impact on U.S. market share omitted important variables, such as commodity prices. Also, the study did not include sensitivity analyses of certain key assumptions underlying its estimates of impacts on U.S. exports. For example, analyses of the possible effects of varying levels of program funding would provide a clearer picture of the potential impact of increased or decreased funding on U.S. exports and the economy. FAS officials reported that they plan to commission a new cost-benefit analysis in 2014 but have not yet identified the methodologies that the new analysis will use.

What GAO Recommends

GAO recommends that USDA (1) emphasize that market development program participants' annual progress reports should identify the methodologies used to assess results and (2) ensure that any economic models used in future cost-benefit analyses of the programs include industry-specific variables and sensitivity analyses of key assumptions. USDA concurred with GAO's recommendations.