International Cash-Based Food Assistance: USAID Has Developed Processes for Initial Project Approval but Should Strengthen Financial Oversight
Highlights
What GAO Found
The U.S. Agency for International Development (USAID) awards new cash-based food assistance grants under its Emergency Food Security Program (EFSP) through a competitive proposal review or an expedited noncompetitive process; however, USAID lacks formal internal guidance for modifying awards. In its review of 22 grant awards, GAO found that USAID made 13 through its competitive process, 7 through an abbreviated noncompetitive review, and 2 under authorities allowing an expedited emergency response. According to USAID, the agency follows a similar process for cost modification requests. Partners may propose cost or no-cost modifications for a variety of reasons, such as an increase in the number of beneficiaries or changing market conditions affecting food prices. In a review of 13 grant awards that had been modified, GAO found that 8 had cost modifications resulting in funding for all 13 awards increasing from about $91 million to $626 million. According to USAID, draft procedures for modifying awards are under review and will be incorporated into its guidance, but it could not provide a time frame. Until USAID institutes formal guidance, it cannot hold its staff and implementing partners accountable for taking all necessary steps to justify and document the modification of awards. GAO also found that though USAID requires partners to monitor market conditions—a key factor that may trigger an award modification—it does not provide guidance on when and how to respond to changing market conditions.
Emergency Food Security Program (EFSP) Cash and Voucher Awards, Fiscal Years 2010-2014
USAID relies on implementing partners for financial oversight of EFSP projects but does not require them to conduct comprehensive risk assessments to plan financial oversight activities, and it provides little related procedural guidance to partners and its own staff. For projects in four case study countries, GAO found that neither USAID nor its implementing partners conducted comprehensive risk assessments to identify and mitigate financial vulnerabilities. Additionally, although USAID's partners had generally implemented financial controls over cash and voucher distributions that GAO reviewed, some partners' guidance for financial oversight had weaknesses, such as a lack of information on how to estimate and report losses. In addition, GAO found that USAID had limited guidance on financial control activities and provided no information to aid partners in estimating and reporting losses. As a result, partners may neglect to implement appropriate financial controls in areas that are most vulnerable to fraud, diversion, and misuse of EFSP funding.
Why GAO Did This Study
For over 60 years, the United States has provided assistance to food-insecure countries primarily in the form of food commodities procured in the United States and transported overseas. In recent years, the United States has joined other major donors in increasingly providing food assistance in the form of cash or vouchers. In fiscal year 2014, U.S.-funded cash and voucher projects in 28 countries totaled about $410 million, the majority of which was for the Syria crisis, making the United States the largest single donor of cash-based food assistance. GAO was asked to review USAID's use of cash-based food assistance. In this report, GAO (1) reviews USAID's processes for awarding and modifying cash-based food assistance projects and (2) assesses the extent to which USAID and its implementing partners have implemented financial controls to help ensure appropriate oversight of such projects. GAO analyzed program data and documents for selected projects in Jordan, Kenya, Niger, and Somalia; interviewed relevant officials; and conducted fieldwork in Jordan, Kenya, and Niger.
Recommendations
GAO is making recommendations to strengthen USAID's guidance for staff on approving award modifications and its guidance for partners on responding to changing market conditions. GAO is also making recommendations to strengthen financial oversight of cash-based food assistance projects by addressing gaps in USAID's guidance on risk assessments and mitigation plans and on financial control activities. USAID concurred with the recommendations.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| U.S. Agency for International Development |
Priority Rec.
To strengthen its management of cash-based food assistance projects and help ensure improved oversight of these projects, the USAID Administrator should expedite USAID's efforts to establish formal guidance for staff reviewing modifications of cash-based food assistance grant awards. |
In March 2015, GAO reported that the U.S. Agency for International Development (USAID) lacked formal internal guidance for approval of modifications to cash-based food assistance grant awards under its Emergency Food Security Program (EFSP). According to USAID, implementing partners may propose cost or no-cost modifications for a variety of reasons, such as an increase in the number of beneficiaries or changing market conditions affecting food prices. In a review of 13 EFSP cash-based assistance grant awards that had been modified, GAO found that 8 had cost modifications resulting in funding for all 13 awards increasing from about $91 million to $626 million. At the time of our report, USAID said draft procedures for modifying awards were under review and would be incorporated into its guidance, but did not provide a time frame. Lacking formal guidance, USAID could not hold its staff accountable for taking all necessary steps to justify and document the modification of awards. GAO recommended that the USAID Administrator take action to expedite USAID's efforts to establish formal guidance for staff reviewing modifications of EFSP cash-based food assistance grant awards. USAID concurred with the recommendation. In response to our recommendation, in December 2016, USAID released the FY17 Annual Program Statement for International Emergency Food Assistance (APS), the solicitation vehicle for emergency food assistance awards, including cash-based food assistance grant awards. The application review requirements outlined in the APS apply to both new proposed interventions and funded extensions or modifications of existing FFP-funded EFSP awards (including cash-based food assistance grant awards). Further, USAID issued the FFP Emergency Award Process Guidance, in March 2017. The guidance includes, among other things, process steps for staff approving competitive and non-competitive funded award modifications, as well as un-funded modifications to FFP emergency awards, including cash-based food assistance.
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| U.S. Agency for International Development |
Priority Rec.
To strengthen its management of cash-based food assistance projects and help ensure improved oversight of these projects, the USAID Administrator should develop formal guidance to implementing partners for modifying cash-based food assistance projects in response to changes in market conditions. |
In March 2015, GAO reported that the U.S. Agency for International Development (USAID) lacked guidance to its implementing partners on responding to changing market conditions in the Annual Program Statement for International Emergency Food Assistance (APS) for International Emergency Food Assistance. We found that this lack of guidance has resulted in inconsistent responses to changing market conditions among different cash and voucher projects funded by USAID. Without clear guidance about when and how implementing partners should modify cash-based food assistance projects in response to changing market conditions, USAID runs the risk of beneficiaries? benefits being eroded by price increases or inefficient use of scarce project funding when prices decrease. GAO recommended that the USAID Administrator take action to develop formal guidance to implementing partners for modifying cash-based food assistance projects in response to changes in market conditions. USAID concurred with the recommendation. In response to our recommendation, in December 2016, USAID released the FY17 Annual Program Statement for International Emergency Food Assistance (APS), the solicitation vehicle for all emergency food assistance awards, including cash-based food assistance grant awards. The FY17 APS, which applies to both new proposed interventions and funded extensions or modifications of existing FFP-funded EFSP awards, specifically references the MARKit Price Monitoring, Analysis, and Response Kit (MARKit) as a tool to help implementing partners interpret and react to market information collected during a project. The MARKit, developed through collaboration among USAID's implementing partners, provides guidance on how to conduct an initial analysis of price data and to determine the factors behind the drivers of price changes and their relative importance. The MARKit also includes guidance on how to determine whether an adjustment to the program is necessary, provides scenarios and corresponding adjustments, and how to plan and implement the adjustment.
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| U.S. Agency for International Development |
Priority Rec.
To strengthen its management of cash-based food assistance projects and help ensure improved oversight of these projects, the USAID Administrator should require implementing partners of cash-based food assistance projects to conduct comprehensive risk assessments and submit the results to USAID along with mitigation plans that address financial vulnerabilities such as counterfeiting, diversion, and losses. |
USAID concurred with the recommendation and in May 2015 began requiring Emergency Food Security Program (EFSP) implementing partners, in its 2015 Annual Program Statement (APS), to "provide an assessment of risk of fraud or diversion and controls in place to prevent any diversion of cash, counterfeiting of food vouchers, and diversion of food voucher reimbursement funds." Further, USAID has updated language in the next version of the APS that requests all grant applicants to complete an analysis of risks as it relates to the proposed modalities and relevant mitigation measures. Specifically, the assessment should examine potential risk related to fraud, corruption and mismanagement. Applicants are also to demonstrate that due consideration has been given to ensuring the security and protection of all participants, especially with respect to: timing and location of distributions; amount of food or cash transfers or value of food vouchers of which participants will take possession; person(s) responsible for pickup; distance to distribution sites, etc. According to USAID officials, the next version of the APS will be finalized in autumn 2016.
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| U.S. Agency for International Development |
Priority Rec.
To strengthen its management of cash-based food assistance projects and help ensure improved oversight of these projects, the USAID Administrator should develop policy and comprehensive guidance for USAID staff and implementing partners for financial oversight of cash-based food assistance projects. |
USAID concurred with this recommendation in its comments to the March 2015 GAO report. In June 2016, USAID reported that it would work with the Cash Learning Partnership (CaLP) on the development and dissemination of policy and guidance related to financial oversight of cash-based food assistance projects. In April 2017, USAID stated that it is continuing to work with CaLP and provide training for FFP staff and implementing partners for the oversight and management of cash-based food assistance programs, including courses related to the financial oversight. USAID has continued to develop and provide guidance, tools, and training opportunities for its staff and implementing partners for the oversight and management of these programs. For example, in June 2017, USAID, in collaboration with CaLP, developed "Monitoring Guidance for Cash Transfer Projects in Emergencies," a document with guidance to support field practitioners as they conduct monitoring and financial oversight of their projects. The guidance includes chapters on risk and context monitoring, use of technology in cash transfer program monitoring, and process monitoring, all relevant to financial oversight. In addition, USAID has updated a monitoring tool that includes questions for vendors and implementing partner staff to encourage more robust review and oversight of food assistance activities. For example, the tool suggests that during field visits, USAID's Food for Peace Officers ask vendors about records of sales, question distribution staff about entitlements, and check site distribution records to ensure that some of the figures (sums and averages) are correctly calculated.
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| U.S. Agency for International Development |
Priority Rec.
To strengthen its management of cash-based food assistance projects and help ensure improved oversight of these projects, the USAID Administrator should require USAID staff to conduct systematic financial oversight of USAID's cash-based food assistance projects in the field. |
USAID concurred with this recommendation in its comments to the March 2015 GAO report. In response to this recommendation, USAID stated it would improve financial oversight by developing guidance training materials for USAID staff. In February 2017, USAID changed its Food for Peace "Guide to Processes" to reflect changing guidance and procedures in response to GAO recommendations. The guide now requires all Agreement Officer Representatives to take training in accruals to understand how to estimate and record expenditures and cost share contributions for the current quarter using information from prior quarters. By August 2017, USAID also updated its Agreement Officer Representatives contract that specifies grant administration authorities. The contract requires the officer to confirm completion of the Web-based accruals course, among other requirements. In September 2017, USAID also updated its training materials for conducting monitoring visits in the field by adding a list of steps to take and questions to ask when meeting with vendors and beneficiaries, among other groups. Steps include a review of transaction-level records at partner and vendor offices and random records sampling. The information gained through these field-based monitoring activities contributes to USAID's systematic financial oversight of the cash-based food assistance program, according to USAID. Together, with new training requirements in accruals, USAID's financial oversight of its cash-based food assistance projects in the field will be more systematic.
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