Specifically, the 2014 Farm Bill  increased the total amount of 202(e) funding USAID can provide from 13  percent to 20 percent of funds made available to implement Title II of the  Food for Peace Act. Title II also authorizes  USAID to use ITSH funding to cover costs that partners incur while  moving and storing U.S. in-kind food aid after it reaches a destination  country. USAID  data for fiscal years 2012 through 2015 show that the agency provided  about 4.5 million metric tons of food commodities. USAID Used Most of the Increase in 202(e) Funding to Provide Cash Transfers, Food Vouchers, and Locally and Regionally Procured Commodities in Title II Projects

USAID used most of the 2014 Farm Bill’s increase in authorized 202(e)  funding (from 13 percent to 20 percent of total Title II appropriations) to  provide cash transfers, food vouchers, and locally or regionally procured  food for beneficiaries—modalities the agency did not previously support  through Title II. As table 1  shows, in fiscal year 2014, USAID’s obligations for these modalities  comprised 75 percent of the additional 202(e) amount it obligated under  the 2014 Farm Bill; in fiscal year 2015, USAID’s obligations for these  modalities comprised 96 percent of the additional obligated amount. USAID Has Used Funding Authorized by the Foreign Assistance Act Along with Title II Development and Emergency Projects

Our review of USAID funding data shows that USAID has used funds  from two accounts authorized by the Foreign Assistance Act along with  Title II food assistance projects. With regard to funding for emergency food assistance, USAID’s  implementation of the new 202(e) authorities to enhance existing Food for  Peace programs provided by the 2014 Farm Bill has resulted in USAID’s  use of both 202(e) funding and IDA account funds to provide either cash  transfers, food vouchers, or local or regional procurement in the same  emergency food assistance projects. USAID Has Various Controls for Financial Oversight of Title II Implementation and Support Costs, but Its Oversight Has Certain Deficiencies

USAID and its partners have various internal controls for financial  oversight of implementation and support costs funded by 202(e) and  ITSH in selected Title II development and emergency projects, although  we found certain deficiencies in control activities, information and  communication, and risk assessment. USAID’s and implementing  partners’ internal controls for Title II project implementation and support  costs include reviews of planned budgets and high-level spending,  reviews of audit reports, and periodic monitoring data, according to  USAID and partner officials. Our limited,  nongeneralizable financial transactions testing identified instances where  partners had not correctly recorded 202(e) and ITSH spending. Second,  regarding information and communication, USAID lacks key monitoring  data related to these costs that could identify areas needing additional  financial oversight and inform future decisions. USAID Generally Does Not Conduct Systematic, Targeted Financial Reviews

Although USAID reviews partners’ quarterly SF-425 reports of high-level  expenditures for 202(e) and ITSH, USAID generally does not conduct  systematic, targeted reviews of partners’ spending on these costs. For example, for one project, we found a  202(e) charge of $6,543 for fuel that should have been charged to  another project. As a result, USAID  cannot have reasonable assurance that partners are spending, and  accounting for, ITSH funds in compliance with its policy and the Food for  Peace Act. USAID Does Not Require Risk Assessments for Cash Transfers and Food Vouchers in Development Projects despite Requiring Them in Emergency Projects

USAID does not require implementing partners for Title II development  projects to conduct and document comprehensive risk assessments and  mitigation plans for cash transfer and food vouchers funded by 202(e)  despite requiring risk assessments for these modalities in emergency  projects implemented by NGOs. We found that award  documentation submitted by partners for the three projects generally  included some broad discussion of risks, such as security or weather  risks. In its official comments, USAID concurred with our recommendations. Appendix I: Objectives, Scope, and Methodology

We examined (1) any changes in the U.S. Agency for International  Development’s (USAID) use of Title II funding to implement and support  projects since the enactment of the 2014 Farm Bill and (2) USAID’s  financial oversight of Title II funding used to implement and support  selected projects.
Why GAO Did This Study

In recent years, USAID has awarded about $1.4 billion annually for international food assistance projects under Title II of the Food for Peace Act (Title II). This funding has traditionally been used to provide U.S.-purchased commodities to food-insecure beneficiaries overseas. Section 202(e) of the Food for Peace Act authorizes USAID to also provide funding to cover project implementation costs, which have typically included administrative expenses such as implementing partner staff salaries. The Agricultural Act of 2014 (2014 Farm Bill) increased the amount of 202(e) funding USAID can use for implementation costs from 13 to 20 percent of the annual Title II appropriation and also expanded the eligible uses of these funds. USAID's utilization of these new authorities presents potential oversight challenges.
GAO was asked to review Title II implementation costs. This report examines (1) any changes in USAID's use of Title II funding to implement and support projects since the 2014 Farm Bill and (2) USAID's financial oversight of this funding for selected projects. GAO analyzed USAID funding data for fiscal years 2012 through 2015 (the most recent available), reviewed USAID and partner documents, and interviewed officials. GAO conducted financial reviews of a nongeneralizable sample of seven Title II projects, selected on the basis of project funding and implemented modalities.

What GAO Found

The U.S. Agency for International Development (USAID) has used most of the 2014 Farm Bill's increase in authorized funding for section 202(e) of the Food for Peace Act to provide cash transfers, food vouchers, and locally or regionally procured food—modalities not previously supported through Title II. Of the additional authorized funding that the agency utilized, USAID obligated 75 percent in fiscal year 2014 and 96 percent in fiscal year 2015 for these modalities. In addition, to better meet beneficiaries' needs, USAID has increasingly used funds from accounts authorized by the Foreign Assistance Act, along with 202(e) funding, to implement and support projects—costs that 202(e) funding has typically covered. Also, in some cases, USAID has used funds from those accounts along with 202(e) funding to provide cash transfers, food vouchers, or local or regional procurement in a single project.
USAID and its partners have various controls for financial oversight of Title II funding used for implementation and support costs; however, GAO found certain deficiencies in USAID's oversight. USAID reviews partners' detailed planned budgets for these costs and high-level quarterly financial reports, according to USAID officials, but it generally has not conducted systematic, targeted financial reviews of partners' actual spending on these costs. While GAO found that partners' internal controls generally included policies and procedures to help ensure proper use of funds, GAO's limited, nongeneralizable financial transactions testing identified instances of misspending, such as charging a 202(e) cost to one project that should have been charged to another. Also, USAID has not obtained key monitoring data from partners related to these costs that could identify areas needing additional financial oversight. Moreover, USAID does not require partners to conduct comprehensive assessments of financial and fraud risks for cash transfers and food vouchers in development projects, although it requires risk assessments for emergency projects. GAO found that partners for selected development projects provided broad discussions of risk to USAID but did not provide comprehensive risk assessments. As a result, USAID is limited in its ability to ensure that partners are spending funds as planned.

What GAO Recommends

GAO is making five recommendations to USAID—for example, to conduct financial reviews, collect monitoring data, and assess risks. USAID concurred with the recommendations.