[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


                 ADDRESSING WASTE, FRAUD, AND ABUSE IN
                    FEDERAL CHILD NUTRITION PROGRAMS

=======================================================================

                                 HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON EARLY CHILDHOOD,
                  ELEMENTARY, AND SECONDARY EDUCATION

                         COMMITTEE ON EDUCATION
                           AND THE WORKFORCE

                     U.S. House of Representatives

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

              HEARING HELD IN WASHINGTON, DC, MAY 19, 2015

                               __________

                           Serial No. 114-15

                               __________

  Printed for the use of the Committee on Education and the Workforce
  
  
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                COMMITTEE ON EDUCATION AND THE WORKFORCE

                    JOHN KLINE, Minnesota, Chairman

Joe Wilson, South Carolina           Robert C. ``Bobby'' Scott, 
Virginia Foxx, North Carolina            Virginia
Duncan Hunter, California              Ranking Member
David P. Roe, Tennessee              Ruben Hinojosa, Texas
Glenn Thompson, Pennsylvania         Susan A. Davis, California
Tim Walberg, Michigan                Raul M. Grijalva, Arizona
Matt Salmon, Arizona                 Joe Courtney, Connecticut
Brett Guthrie, Kentucky              Marcia L. Fudge, Ohio
Todd Rokita, Indiana                 Jared Polis, Colorado
Lou Barletta, Pennsylvania           Gregorio Kilili Camacho Sablan,
Joseph J. Heck, Nevada                 Northern Mariana Islands
Luke Messer, Indiana                 Frederica S. Wilson, Florida
Bradley Byrne, Alabama               Suzanne Bonamici, Oregon
David Brat, Virginia                 Mark Pocan, Wisconsin
Buddy Carter, Georgia                Mark Takano, California
Michael D. Bishop, Michigan          Hakeem S. Jeffries, New York
Glenn Grothman, Wisconsin            Katherine M. Clark, Massachusetts
Steve Russell, Oklahoma              Alma S. Adams, North Carolina
Carlos Curbelo, Florida              Mark DeSaulnier, California
Elise Stefanik, New York
Rick Allen, Georgia

                    Juliane Sullivan, Staff Director
                 Denise Forte, Minority Staff Director
                                 
                                 ------                                

  SUBCOMMITTEE ON EARLY CHILDHOOD, ELEMENTARY, AND SECONDARY EDUCATION

                     TODD ROKITA, Indiana, Chairman

Duncan Hunter, California            Marcia L. Fudge, Ohio,
Glenn Thompson, Pennsylvania           Ranking Minority Member
Dave Brat, Virginia                  Susan A. Davis, California
Buddy Carter, Georgia                Raul M. Grijalva, Arizona
Michael D. Bishop, Michigan          Gregorio Kilili Camacho Sablan,
Glenn Grothman, Wisconsin              Northern Mariana Islands
Steve Russell, Oklahoma              Suzanne Bonamici, Oregon
Carlos Curbelo, Florida              Mark Takano, California
                                     Katherine M. Clark, Massachusetts
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on May 19, 2015.....................................     1

Statement of Members:
    Rokita, Hon. Todd, Chairman, Subcommittee On Early Childhood, 
      Elementary, and Secondary Education........................     1
        Prepared statement of....................................     3
    Fudge, Hon. Marcia, L., Ranking Member, Subcommittee On Early 
      Childhood, Elementary, and Secondary Education.............     3
        Prepared statement of....................................     4

Statement of Witnesses:
    Brown, Ms. Kay, E., Director, Education, Workforce, and 
      Income Security, Government Accountability 
      OfficeWashington, D.C......................................    46
        Prepared statement of....................................    48
    Harden, Mr. Gil, Assistant Director, Inspector General, 
      Office of Inspector, General, U.S. Department of 
      Agriculture, Washington, DC................................     7
        Prepared statement of....................................     8
    Lucas-Judy, Ms. Jessica, Acting Director, Forensic Audits and 
      Investigative Service, Government Accountability Office, 
      Washington, DC.............................................    67
        Prepared statement of....................................    69
    Neuberger, Ms. Zoe, Senior Policy Analyst, Center on Budget 
      and Policy Priorities, Washington, DC......................    19
        Prepared statement of....................................    21

Additional Submissions:
    Questions submitted for the record by:
        Curbelo, Hon. Carlos, a Representative in Congress from 
          the state of Florida...................................    99
        Kline, Hon. John, Chairman, Committee on Education and 
          the Workforce..........................................   105
        Chairman Rokita..........................................   105
    Response to questions submitted for the record:
        Ms. Brown................................................   111
        Mr. Harden...............................................   115

 
                 ADDRESSING WASTE, FRAUD, AND ABUSE IN
                    FEDERAL CHILD NUTRITION PROGRAMS

                              ----------                              


                         Tuesday, May 19, 2015

                       House of Representatives,

              Subcommittee on Early Childhood, Elementary,

                        and Secondary Education,

               Committee on Education and the Workforce,

                            Washington, D.C.

                              ----------                             

    The subcommittee met, pursuant to call, at 10:02 a.m., in 
Room 2175, Rayburn House Office Building, Hon. Todd Rokita 
[chairman of the subcommittee] presiding.
    Present: Representatives Rokita, Thompson, Brat, Carter, 
Curbelo, Fudge, Davis, Bonamici, Takano, and Clark.
    Also present: Representatives Kline and Scott.
    Staff present: Lauren Aronson, Press Secretary; Janelle 
Belland, Coalitions and Members Services Coordinator; Kathlyn 
Ehl, Professional Staff Member; Matthew Frame, Legislative 
Assistant; Tyler Hernandez, Press Secretary; Amy Raaf Jones, 
Director of Education and Human Resources Policy; Nancy Locke, 
Chief Clerk; Daniel Murner, Deputy Press Secretary; Krisann 
Pearce, General Counsel; Mandy Schaumburg, Education Deputy 
Director and Senior Counsel; Alissa Strawcutter, Deputy Clerk; 
Tylease Alli, Minority Clerk/Intern and Fellow Coordinator; 
Austin Barbera, Minority Staff Assistant; Kelly Broughan, 
Minority Education Policy Advisor; Denise Forte, Minority Staff 
Director; and Tina Hone, Minority Education Policy Director and 
Associate General Counsel.
    Chairman Rokita. Good morning. A quorum being present, the 
Subcommittee on Early Childhood, Elementary, and Secondary 
Education will come to order.
    Welcome to today's subcommittee hearing. I would like to 
thank our witnesses for joining us to discuss ways to prevent 
waste, fraud, and abuse in federal child nutrition programs.
    Last month the Committee on Education and the Workforce 
held a hearing to discuss the importance of federal child 
nutrition programs, many of which need to be reauthorized by 
Congress later this year. Members engaged in a robust 
discussion about these programs, and we understand the role 
healthy food plays in a child's physical, mental, and emotional 
development.
    However, tackling waste, fraud, and abuse must be a 
priority as we work to ensure eligible students who are most in 
need have access to nutrition programs.
    The federal government has long invested taxpayer dollars 
in programs that provide healthy meals and snacks to low-income 
students and families. Through the Richard B. Russell National 
School Lunch Act and the Child Nutrition Act, it is estimated 
Congress will spend over $21 billion this fiscal year on a 
number of programs that include the Supplemental Nutritional 
Program for Women, Infants, and Children, otherwise known to us 
as WIC; the National School Lunch Program; and the School 
Breakfast Program.
    Congress has a responsibility to ensure taxpayer dollars 
are well spent. That is why we are here today.
    Recent reports from independent government watchdogs raise 
concerns about waste, fraud, and abuse in the administration of 
these programs. These concerns should be shared by every member 
of the committee for two important reasons.
    First, taxpayer dollars are being misdirected toward 
individuals who do not need, or are eligible for, federal 
assistance. The Government Accountability Office has uncovered 
several troubling examples of fraud and abuse in the WIC 
program. Reports have also found WIC recipients and vendors 
reselling supplemental foods to non-WIC-eligible individuals, 
defrauding the federally funded program for millions of 
dollars.
    Unfortunately, the misuse of taxpayer dollars does not stop 
there. In the first review of payment errors since 2007, the 
Department of Agriculture found that in just one school year it 
made $2.7 billion of improper payments under the school lunch 
and breakfast programs. According to the Wall Street Journal, 
the majority of improper payments stemmed from individuals who 
received the benefits for which they did not qualify.
    American taxpayers deserve better management and oversight, 
especially at a time when the national debt continues to reach 
new heights.
    This brings me to the second reason why we are here today, 
and it is just as important. Each and every dollar spent on a 
federal program should have a direct, meaningful, and lasting 
impact on those it is intended to serve, not those looking to 
cheat the system.
    We must ensure federal nutrition programs effectively and 
efficiently serve the low-income children and families who 
desperately need this assistance. As a witness from last 
month's child nutrition hearing so aptly put it, quote: ``When 
we aren't able to give our children the nutrition they need, we 
fail them,'' unquote.
    Again, it is Congress' responsibility to ensure this 
multibillion dollar investment in child nutrition is in fact 
reaching the students who need it the most. This committee is 
committed to that goal as it works to reauthorize these 
important programs.
    We look forward to learning from our witnesses about how to 
improve the fiscal integrity of federal child nutrition 
programs in order to serve our nation's mothers, infants, 
children, and students who are most in need.
    And with that, I will now recognize the ranking member, 
Congresswoman Fudge, for her opening remarks.
    [The statement of Chairman Rokita follows:]

Prepared Statement of Hon. Todd Rokita, Chairman, Subcommittee on Early 
             Childhood, Elementary, and Secondary Education

    Good morning, and welcome to today's subcommittee hearing. I'd like 
to thank our witnesses for joining us to discuss ways to prevent waste, 
fraud, and abuse in federal child nutrition programs.
    Last month, the Committee on Education and the Workforce held a 
hearing to discuss the importance of federal child nutrition programs, 
many of which need to be reauthorized by Congress later this year. 
Members engaged in a robust discussion about these programs, and we 
understand the role healthy food plays in a child's physical, mental, 
and emotional development. However, tackling waste, fraud, and abuse 
must be a priority as we work to ensure eligible students who are most 
in need have access to nutrition programs.
    The federal government has long invested taxpayer dollars in 
programs that provide healthy meals and snacks to low-income students 
and families. Through the Richard B. Russell National School Lunch Act 
and the Child Nutrition Act, it is estimated Congress will spend over 
$21 billion this fiscal year on a number of programs that include the 
Supplemental Nutritional Program for Women, Infants, and Children or 
WIC, the National School Lunch Program, and the School Breakfast 
Program.
    Congress has a responsibility to ensure taxpayer dollars are well-
spent. That's why we are here today. Recent reports from independent 
government watchdogs raise concerns about waste, fraud, and abuse in 
the administration of these programs. These concerns should be shared 
by every member of the committee for two important reasons.
    First, taxpayer dollars are being misdirected toward individuals 
who do not need, or are eligible for, federal assistance. The 
Government Accountability Office has uncovered several troubling 
examples of fraud and abuse in the WIC program. Reports have also found 
WIC recipients and vendors reselling supplemental foods to non-WIC 
eligible individuals, defrauding the federally funded program for 
millions of dollars.
    Unfortunately, the misuse of taxpayer dollars does not stop there. 
In the first review of payment errors since 2007, the Department of 
Agriculture found that in just one school year it made $2.7 billion of 
improper payments under the school lunch and breakfast programs. 
According to the Wall Street Journal, the majority of improper payments 
stemmed from individuals who received benefits for which they did not 
qualify. American taxpayers deserve better management and oversight, 
especially at a time when the national debt continues to reach new 
heights.
    This brings me to the second reason why we are here today, and it 
is just as important. Each and every dollar spent on a federal program 
should have a direct, meaningful, and lasting impact on those it is 
intended to serve - not those looking to cheat the system. We must 
ensure federal nutrition programs effectively and efficiently serve the 
low-income children and families who desperately need this assistance. 
As a witness from last month's child nutrition hearing so aptly put it, 
``When we aren't able to give our children the nutrition they need, we 
fail them.''
    Again, it is Congress' responsibility to ensure this multi-billion 
dollar investment in child nutrition is in fact reaching the students 
who need it most. This committee is committed to that goal as it works 
to reauthorize these important programs. We look forward to learning 
from our witnesses about how to improve the fiscal integrity of federal 
child nutrition programs in order to serve our nation's mothers, 
infants, children, and students that are most in need.
    With that, I will now recognize the ranking member, Congresswoman 
Fudge, for her opening remarks.
                                 ______
                                 
    Ms. Fudge. Thank you very much, Mr. Chairman.
    And thank you, to the witnesses, for being here today.
    Certainly I welcome the opportunity to discuss ways that we 
can improve the programs feeding the nation's children. 
However, I continue to be disheartened by the way that we word 
things.
    The title of this hearing is ``Addressing Waste, Fraud, and 
Abuse in Federal Child Nutrition Programs.'' These words are 
inflammatory and do not accurately describe what is going on in 
this country.
    The first reports we will discuss today and the written 
testimony of our witnesses will focus on error rates in the 
school meals program and the improper sales of infant formula 
as it pertains to the WIC program. Every federal dollar should 
be spent appropriately, and we should be concerned about 
correcting any and all errors.
    I applaud the Food and Nutrition Service of the USDA for 
creating an Office of Program Integrity for child nutrition 
programs to tackle the issues of error rates. This office has 
developed solutions to reduce errors and continually assesses 
programs--program policies, operations, and procedures to 
ensure a better performance record.
    Further, the USDA has acknowledged that it needs to 
strengthen its policy and provide clarity to states for 
identifying attempted sales of WIC benefits. That work is not 
complete, but I am encouraged that the USDA is taking the issue 
seriously and moving forward to address it.
    As we listen to the witnesses this morning, let's not 
forget the big picture. There are hungry children in this 
country.
    Approximately 15.8 million children, or about 21 percent of 
all children living in the United States of America, are food-
insecure. According to USDA, about 22 percent of the children 
who are eligible to participate in school lunch programs are 
not enrolled. We should focus on how we reduce these numbers.
    The desire to improve the efficiency of our child nutrition 
programs is a good one, but must not lead to more hungry and 
food-insecure children. We can improve efficiency while 
ensuring children get the nutritious foods they need.
    I urge my colleagues to focus on how we do both.
    I yield back.
    [The statement of Ms. Fudge follows:]

      Prepared Statement of Hon. Marcia L. Fudge, Ranking Member, 
  Subcommittee on Early Childhood, Elementary, and Secondary Education

    While I welcome the opportunity to discuss how we can improve the 
programs feeding our nation's children, I must say I am disheartened 
with the title of this hearing, ``Addressing Waste, Fraud, and Abuse in 
Federal Child Nutrition Programs.'' These words are inflammatory and do 
not accurately describe what is taking place.
    The five reports we will discuss today and the written testimony of 
our witnesses will focus on error rates in the school meals program and 
the improper sales of infant formula as it pertains to the WIC program.
    Every federal dollar should be spent appropriately and we should be 
concerned about correcting any and all errors. I applaud the Food and 
Nutrition Service of the USDA for creating an Office of Program 
Integrity for Child Nutrition Programs to tackle the issue of error 
rates. This office has developed solutions to reduce errors and 
continually assesses program policies, operations, and procedures to 
ensure a better performance record.
    Further, the USDA has acknowledged that it needs to strengthen its 
policy and provide clarity to states for identifying attempted sales of 
WIC benefits. That work is not complete, but I am encouraged that the 
USDA is taking the issue seriously, and moving forward to address it.
    As we listen to the witnesses this morning, let's not forget the 
big picture...there are hungry children in America. Approximately 15.8 
million children, or about 21.6% of all children living in the U.S., 
are food insecure. According to USDA, about 22% of the children who are 
eligible to participate in the school lunch program are not enrolled. 
We should focus on how we reduce these numbers.
    The desire to improve the efficiency in our child nutrition 
programs is a good one, but must not lead to more hungry or food 
insecure children. We can improve efficiency while ensuring children 
get the nutritious foods they need. I urge my colleagues to focus on 
how we do both.
                                 ______
                                 
    Chairman Rokita. Thank the ranking member.
    Pursuant to committee rule 7(c), all members will be 
permitted to submit written statements to be included in the 
permanent hearing record. And without objection, the hearing 
record will remain open for 14 days to allow such statements 
and other extraneous material referenced during the hearing to 
be submitted for the official hearing record.
    I will now turn to the introduction of our distinguished 
witnesses.
    First, Mr. Gil H. Harden is the assistant inspector general 
for audit at the Office of the Inspector General for the U.S. 
Department of Agriculture here in Washington, D.C. Mr. Harden 
is responsible for all audits of the Department of Agriculture 
and its worldwide operations and programs. He has audited in 
the areas of food safety, nutrition assistance, animal and 
plant health, marketing, business, housing, and utility loans 
and grants.
    Welcome.
    Next, Ms. Zoe Neuberger is a senior policy analyst with the 
Center on Budget and Policy Priorities here in Washington, D.C. 
Since joining the center in 2001, Ms. Neuberger has provided 
analytic and technical assistance on child nutrition programs, 
such as WIC and school meals, to policymakers and state-level 
nonprofit groups. Previously, she was the budget analyst for 
these programs at the White House Office of Management and 
Budget.
    Welcome.
    Next, Ms. Kay Brown is the director for education, 
workforce, and income security within the U.S. Government 
Accountability Office here in Washington, D.C. Ms. Brown is 
responsible for leading GAO's work related to child welfare, 
child care, domestic nutrition assistance, Temporary Assistance 
for Needy Families--TANF, and services for older adults. Before 
joining GAO, Ms. Brown worked as a caseworker and manager in 
the human services department for county government in 
Pennsylvania.
    Welcome.
    Ms. Jessica Lucas-Judy is the acting director of forensic 
audits and investigative service for the U.S. Government 
Accountability Office here in Washington. GAO's forensic audits 
and investigative service team performs forensic audits, 
internal control reviews, and special investigations targeted 
at vulnerable federal programs and funding, including a recent 
review of federal school meals programs. Since 2000, Ms. Lucas-
Judy has led a range of projects spanning national security, 
social services, and transportation accessibility.
    Welcome to you, as well.
    I will now ask our witnesses to stand and raise your right 
hand.
    [Witnesses sworn.]
    Let the record reflect the witnesses answered in the 
affirmative.
    And you may be seated. Thank you very much.
    Now, before I recognize you to provide your testimony, let 
me briefly explain our lighting system.
    You will have 5 minutes to present your testimony. When you 
begin, the light, of course, will be green; when there is 1 
minute left it will turn yellow; and when it turns red you are 
out of time.
    And that is a reminder for us up here as much as it is for 
you, so thank you for considering that.
    And I will recognize the witnesses for 5 minutes of 
questioning starting with Mr. Harden. Thank you.
    You are recognized for 5 minutes.

   STATEMENT OF MR. GIL HARDEN, ASSISTANT INSPECTOR GENERAL, 
   OFFICE OF INSPECTOR GENERAL, UNITED STATES DEPARTMENT OF 
                 AGRICULTURE, WASHINGTON, D.C.

    Mr. Harden. Good morning, Chairman Rokita, Ranking Member 
Fudge, and members of the subcommittee. Thank you for inviting 
me to testify about OIG's oversight of USDA's programs 
providing nutrition assistance to children.
    The School Lunch; School Breakfast; and Special 
Supplemental Nutrition Program for Women, Infants, and Children 
have each been subjects of a recent OIG audit and investigative 
work. Our audits have highlighted a number of areas for 
improving program operations and effectiveness.
    As you know, OIG's mission is to promote the efficiency and 
effectiveness of USDA programs by performing audits to reduce 
fraud, waste, and abuse. We perform audits designed to 
ascertain a program--if a program is functioning as intended, 
if program payments are reaching those they are intended to 
reach, and if funds are achieving the purpose for which they 
are intended to accomplish. When we find problems, we make 
recommendations we believe will help the agency better 
accomplish its mission.
    As the official responsible for these audits, I will 
outline the results of our work on improper payments, 
participant eligibility in the School Lunch and School 
Breakfast Program, and WIC controls. I will also highlight the 
work conducted by our Office of Investigations.
    In 2014 the School Lunch and School Breakfast Programs 
provided nutritionally balanced low-cost or free meals to 
approximately 31 million children each school day. The program 
serves a vital interest of ensuring that schoolchildren, often 
from the most vulnerable homes, attend their classes hunger-
free and ready to learn.
    However, these programs have experienced high rates of 
improper payments, particularly regarding participant 
eligibility. Together, the two programs cost $16.3 billion in 
fiscal year 2014.
    In fiscal year 2009, the School Lunch Program improper 
payments cost taxpayers an estimated $1.4 billion. In response 
to improper payments legislation in 2010, USDA identified 
School Lunch and School Breakfast as high-risk programs. The 
department was then required to measure and report improper 
payment estimates for these two programs each year.
    In fiscal year 2013, these programs continued to experience 
high rates of improper payments: approximately 25 percent for 
School Breakfast and approximately 16 percent for School Lunch. 
We noted similar results in our recent report on USDA's 
compliance reporting for fiscal year 2014, as well.
    In our recent work we have evaluated methods that FNS used 
to lower its error rates for both programs and to ensure 
children approved for free and reduced-price meals met 
eligibility requirements. However, these programs are self-
reporting programs. Unlike other FNS program, proof of income 
is not required.
    School food authorities annually verify children's 
eligibility, sampling 3 percent of household applications 
approved for the school year. Those verifications indicate that 
the rate of misreported income may be high.
    During school year 2012 and 2013, as a result of the annual 
verification process, school food authorities reduced or 
eliminated benefits for almost 108,000 of the more than 199,000 
sampled households nationwide because the income claimed on 
applications was unsupported or excessive. OIG maintains that 
the shortest path to correcting these problems surrounding the 
programs could be by requiring families to submit income 
documentation with their applications.
    In addition, school food authorities are required to verify 
any questionable application. This verification is an important 
control for reducing improper payments.
    However, our recent work found that 44 of the 56 school 
food authorities we reviewed did not question any applications. 
We later identified 42 applications that were potentially 
questionable based on FNS' criteria.
    In recent work pertaining to WIC, OIG found that FNS has 
worked with states to reduce food costs. However, FNS could 
achieve additional cost savings.
    For example, we found that FNS' management evaluations did 
not always identify significant issues that may impact a state 
agency's food cost. And when FNS did identify the deficiencies 
at state agencies, it did not always ensure that those agencies 
took appropriate and timely corrective action.
    Another audit of FNS' controls over vendor management in 
WIC also found that management evaluations did not identify and 
correct significant issues in the vendor management process.
    Overall, our audit work has shown that FNS has many 
opportunities to improve program oversight. In some cases it 
needs to strengthen its own controls; in other cases it need to 
improve how it communicates requirements to local authorities.
    Like our audits, OIG criminal investigations indicate the 
need to improve oversight. In fiscal year 2014 and 2015, 
investigations involving WIC, School Lunch, and the Child and 
Adult Care Food Program resulted in 93 convictions and $79.2 
million in monetary results.
    The majority of these results stem from a significant WIC 
case investigation in Georgia. To defraud WIC, this ring 
canvassed neighborhoods for WIC recipients and then bought 
their benefits for pennies on the dollar.
    This concludes my statement. I want to again thank you for 
the opportunity to testify, and I welcome any questions.
    [The statement of Mr. Harden follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Chairman Rokita. Thank you, Mr. Harden.
    Ms. Neuberger, you are recognized for 5 minutes.

 STATEMENT OF MS. ZOE NEUBERGER, SENIOR POLICY ANALYST, CENTER 
       ON BUDGET AND POLICY PRIORITIES, WASHINGTON, D.C.

    Ms. Neuberger. Thank you very much for the invitation to 
testify on improving accuracy in the school meal programs and 
WIC. I am a senior policy analyst at the Center on Budget and 
Policy Priorities, a nonprofit policy institute that conducts 
research and analysis on budget and tax policy as well as 
poverty and social programs.
    WIC and the school meal programs have a proven track record 
of promoting healthy growth and learning by providing 
nutritional support to our nation's children. WIC is both 
extremely effective and efficient, ensuring that our youngest 
children get proper nutrition during a critical period of 
development.
    Likewise, school meals bolster nutrition throughout 
childhood. The roughly 30 million children who eat school lunch 
on a typical school day include more than 21 million low-income 
children for whom school meals may be the healthiest and most 
reliable meals they get.
    Nearly 100,000 schools operate the meal programs--
processing applications, providing healthy meals, and tracking 
individual students' eligibility to claim the appropriate 
federal reimbursement. Their work means that we have fewer 
hungry children and our students are better prepared to learn.
    But it is essential for them to administer the programs 
accurately. The Department of Agriculture estimated that the 
Federal Government spent $444 million a couple of years ago on 
reimbursements for lunches that didn't meet nutrition 
standards. That is not acceptable.
    The school meal programs must make sure that federal funds 
are used for meals that meet federal criteria. Fortunately, we 
have got some powerful tools to address the issue.
    The verification process, which checks a sample of meal 
applications; a rigorous new review process; and a recent USDA 
study that gives a great deal of information about the causes 
of errors, which can facilitate effective policy solutions.
    But there are also challenges to improving accuracy in a 
vast and complex system whose main focus is to educate 
children, not administer the meal programs. Schools aren't set 
up to do the kind of eligibility determinations that other 
public benefit programs do.
    SNAP and Medicaid, for example, have teams of professional 
eligibility workers who spend all day every day sorting out the 
details of applications' income of household circumstances. A 
school might only have a cafeteria-worker or secretary who 
handles meal applications for a few weeks at the start of each 
year.
    So given the tools at the program's disposal, how can 
Congress improve accuracy in the meal programs? An example can 
help show the way.
    Beginning with the 2004 reauthorization and building on 
that in 2010, Congress set a clear expectation for school 
districts and states to make better use of the rigorous 
eligibility determinations made by other programs, primarily 
SNAP, to approve children for free meals automatically. This 
saves time and reduces errors.
    In the past decade we have seen striking improvement. Now, 
nearly half of children approved for free or reduced-price 
meals don't have to complete an application. Congress played an 
important role here by setting an expectation and then 
providing the tools and support to meet it.
    My written testimony describes many other tailored steps 
Congress and USDA have taken to strengthen the school meal 
programs and WIC, but there is certainly room to do more. It is 
important to strengthen management and oversight across the 
board, provide more help to school districts that persistently 
struggle with errors, and pursue innovations that could open up 
new ways to improve accuracy.
    For example, GAO recommends exploring the use of data-
matching to identify school meal applications that might have 
incorrect information. That is worth trying.
    USDA plans to develop a model electronic school meal 
application. That is another promising innovation.
    WIC is moving toward offering benefits electronically, 
rather than relying on paper vouchers, which helps prevent 
errors and allows states to strengthen their vendor oversight 
while also reducing stigma for program participants.
    As you develop ways to improve accuracy in these programs, 
I urge you to consider four questions.
    First, does the proposal have a proven record of reducing 
error? Some ideas that sound promising, like requiring a 
household to submit pay stubs with their school meal 
application, have not been effective when tested.
    Second, will it maintain program access for the most 
vulnerable children? Nearly 16 million children live in food-
insecure households. We certainly don't want to worsen that 
problem.
    Third, is it administratively feasible? Adopting a more 
time-consuming documentation or verification system might 
prevent some errors, but it could cause others by adding a step 
to the process, and it would force school staff to spend much 
more time determining school meal eligibility at the expense of 
other educational priorities.
    Fourth, is it cost-effective? High-quality information 
management systems can be very effective but might cost too 
much for a small school district.
    As I noted, it is critical that error reduction strategies 
not reduce access to school meals or WIC benefits for children 
who need them. The best way to improve integrity in these 
programs is not through punitive policy, but instead to 
continue sending a clear message to program officials that 
accuracy is important, that it will be measured, and that 
federal officials will support them in implementing needed 
improvements.
    Thank you.
    [The statement of Ms. Neuberger follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Chairman Rokita. Thank you, Ms. Neuberger.
    Ms. Brown, you are recognized for 5 minutes.

STATEMENT OF MS. KAY E. BROWN, DIRECTOR, EDUCATION, WORKFORCE, 
    AND INCOME SECURITY, GOVERNMENT ACCOUNTABILITY OFFICE, 
                        WASHINGTON, D.C.

    Ms. Brown. Chairman Rokita, Ranking Member Fudge, and 
members of the subcommittee, thank you for inviting me here 
today to discuss our work of online sale of WIC infant formula. 
I will also touch on one aspect of USDA monitoring of the 
school meal program.
    The $6.5 billion WIC program is designed to improve the 
health of low-income pregnant and postpartum women, infants, 
and young children, and infant formula is a key component of 
the food package made available to WIC participants. According 
to the rules, these participants are not permitted to sell 
foods they receive from the program. However, news reports have 
suggested some participants have attempted to do so.
    So what is the extent of these online formula sales? The 
bottom line is we really don't know.
    Neither USDA nor officials we talked to from 12 states 
systematically collect data on this issue. However, officials 
from five of the states told us they had found WIC formula for 
sale online, but most said the numbers were very small.
    So to gather more information on this issue, we monitored a 
popular e-commerce Web site in four large metro areas for 30 
days looking for posts offering infant formula for sale. We 
found more than 2,500 posts that included the term ``formula,'' 
but only two of them that were explicitly identified as WIC 
formula.
    However, we identified more than 400 other posts that could 
have been advertising WIC-provided formula because it was of 
the same brand, type, quantity, or container volume that is 
offered through the state WIC program.
    To be clear, though, we don't know whether these posts were 
made by WIC participants or not. This formula is available at 
retail stores and purchased by others not participating in WIC. 
However, we believe these posts do raise questions that we 
think warrant attention by USDA, particularly in light of the 
growth of e-commerce in recent years and the high value of 
infant formula.
    Even before our study, USDA had taken some constructive 
steps. The department issued guidance and then proposed 
regulations to make clear that offering to sell WIC benefits, 
including online, is a program violation. Violations can result 
in sanctions ranking from a written warning to benefit 
termination.
    The department also sent letters to four e-commerce Web 
sites requesting that they notify their customers that the sale 
of WIC benefits is prohibited, and two of these sites agreed to 
post this notification.
    Beyond these efforts, we made some recommendations for 
additional action. First, we focused on making sure the program 
participants know that selling formula is not permitted. We 
recommended that USDA tell state agencies to include this 
information in the rights and responsibilities statements that 
all WIC participants must sign.
    Also, because we found wide variation in how and how often 
the 12 states we spoke with monitor for online sales, we 
recommended that USDA require states to spell out their 
procedures for this monitoring in their annual planning 
documents.
    USDA included both actions as best practices in April 
guidance to the states and also plans to include them as 
requirements in new regulations.
    Finally, because state officials noted their scarce 
resources and the difficulty in distinguishing between WIC and 
non-WIC online formula sales, we recommended that USDA identify 
cost-effective techniques to monitor for these sales, and USDA 
plans to explore ways to identify and share best practices and 
new approaches.
    Before I conclude, I would like to mention one component of 
our work on school meals monitoring. States are required to 
monitor school food authorities to make sure they are in 
compliance with federal requirements.
    Beginning in school year 2012-2013, as school food 
authorities were implementing the new school lunch nutritional 
requirements USDA encouraged states to focus their oversight on 
technical assistance and support rather than on documenting 
problems and noncompliance. While this may have helped school 
food authorities, evidence suggests that this approach may also 
have resulted in some SFAs being certified as ``in compliance'' 
even though they may not have fully met the new requirements.
    As a result, and as this approach continues, SFAs lack 
information on needed corrective actions and USDA lacks 
complete information on problem areas that require attention.
    This concludes my statement. I would be happy to answer any 
questions you might have.
    [The statement of Ms. Brown follows:]
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    Chairman Rokita. Thank you, Ms. Brown.
    Ms. Lucas-Judy, you are recognized for 5 minutes.

 STATEMENT OF MS. JESSICA LUCASJUDY, ACTING DIRECTOR, FORENSIC 
  AUDITS AND INVESTIGATIVE SERVICE, GOVERNMENT ACCOUNTABILITY 
                    OFFICE, WASHINGTON, D.C.

    Ms. Lucas-Judy. Chairman Rokita, Ranking Member Fudge, and 
members of the subcommittee, thank you very much for inviting 
me here today to discuss GAO's May 2014 report on school meals 
programs and three key opportunities that we identified to 
further strengthen program integrity while ensuring legitimate 
access: first, providing additional guidance for verifying 
eligibility; second, using data-matching to verify household 
income; and third, expanding the types of applications that are 
subject to verification.
    As you know, access to healthy meals is essential for 
students' well-being and academic achievement. USDA administers 
school meals programs to provide such access and spent more 
than $15 billion on them in fiscal year 2014.
    Most students participating in these programs received the 
meals for free or at a reduced price. While many are 
legitimately eligible for this benefit, the school meals 
programs have a high rate of improper payments.
    As we reported in 2014, USDA has taken a number of steps to 
enhance controls to identify and prevent ineligible households 
from receiving school meals benefits. For example, USDA has 
increased the frequency of administrative reviews to determine 
whether eligibility decisions were made correctly.
    However, we identified opportunities for further 
improvement. The first opportunity involves a process known as 
for-cause verification, where school districts review the 
applications that they have deemed questionable and determine 
whether any corrections are needed.
    We interviewed officials from 25 school districts in the 
Dallas and the D.C. metropolitan areas. Officials from nine of 
those school districts said that they do not conduct any for-
cause verification, and five others said that they do so only 
if someone informs them of a need.
    Thus, we recommended that USDA collect additional data on 
this issue and consider developing guidance with criteria to 
help school districts identify questionable applications, which 
the agency has agreed to do.
    The second opportunity involved data-matching to verify 
income information. Households can apply for school meals 
benefits on the basis of income and don't have to provide any 
supporting documentation with their applications.
    We obtained actual income data for federal employees and 
matched it against a sample of approved applications from 25 
school districts in the Dallas and D.C. areas for the 2010-2011 
school year to determine whether the earnings matched up with 
the income that was stated in the application. We found that 
nine out of the 19 households in our review appeared to have 
income too high to qualify for the school meals benefits that 
they received.
    School districts are required to select a sample of 
applications that fall within $1,200 of the income eligibility 
threshold for a review process that is known as standard 
verification. Seven out of the nine applications that we 
identified would not have been subject to that standard 
verification process because the income that was listed on 
their application was outside of that $1,200 range.
    For instance, one household with two children stated an 
income of $26,000 per year in the application and was approved 
for reduced-price meals. By matching payroll records, we found 
that the income was actually $52,000. We interviewed the 
applicant who admitted underestimating her income.
    While our results were from a small sample and can't be 
projected to the whole population, we recommended that USDA 
study the feasibility of using income data, as we did, to 
conduct computer matching to find questionable applications for 
review, and USDA agreed.
    The third opportunity involves verifying a sample of 
applications that indicate so-called categorical eligibility--
that is, eligibility through participation in other public 
assistance programs, such as SNAP, or meeting an approved 
designation, such as foster children. Households can check a 
box on the application indicating that they meet one of those 
requirements and qualify for free meals.
    Categorical applications are not subject to standard 
verification. We found that two out of six households in our 
sample were not actually eligible for free meals, and another 
one could have been eligible for reduced-price meals based on 
income instead.
    To illustrate, one household was approved for free meals 
after providing a public assistance benefit number. When we 
contacted the state agency that administered that program, 
however, officials told us the household had not been receiving 
benefits at that time.
    We recommended that USDA consider verifying a sample of 
applications that indicate categorical eligibility, which the 
agency says it will do.
    So in summary, the three actions that we identified to help 
strengthen the verification process--providing guidance to 
identify questionable applications, using data-matching to 
verify household income, and including categorically eligible 
households in the verification process--can all help USDA 
better ensure that the funds are used to serve students who are 
truly in need.
    Chairman Rokita, Ranking Member Fudge, members of the 
subcommittee, this concludes my prepared statement and I will 
be happy to answer any questions that you have. Thank you.
    [The statement of Ms. Lucas-Judy follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Chairman Rokita. Thank you, Ms. Lucas-Judy.
    We will now turn to member questioning. I am going to 
reserve my question time and defer to the full committee 
chairman, Mr. John Kline of Minnesota.
    Mr. Kline. Thank you, Mr. Chairman. Thanks for the hearing 
and thanks for allowing me to question.
    Thanks, to the witnesses, for being here. It is a great 
panel.
    I look out there and I see two witnesses from the GAO and 
it reminds me of how much we rely on the very fine work that 
you do, so it is good to see you here. And in that line, I am 
going to start with Ms. Brown.
    We have seen you here on a number of occasions. We are 
always glad to have your testimony.
    You sort of wrapped up your testimony talking about the 
work that your team had done on the new meal standards and what 
USDA was doing in emphasizing technical assistance rather than 
documenting instances of noncompliance, and I think technical 
assistance is probably a very good idea, but it does raise a 
question because USDA has been touting, I would say, a 95 
percent compliance rate. How do we have confidence in that 
number if a significant number of schools is doing technical 
assistance rather than checking on compliance?
    Ms. Brown. Based on the work that we did, including surveys 
of state administrators and our on-site visits in schools as 
well as multiple discussions with state officials, I think we 
would conclude that number is probably optimistic and I do want 
to clarify from our perspective that while we fully support the 
need for technical assistance and support from USDA, because 
this is a difficult process and the schools are going through a 
big transition, we think it is particularly important that they 
document the places where schools are out of compliance, 
because otherwise they won't know what needs to be fixed in the 
future.
    And what we know from the most recent report on improper 
payments is that one of the key areas in error rates is menus 
that are not meeting the nutritional requirements. So we think 
the documentation of noncompliance is very important.
    Mr. Kline. Yes. Thank you for that.
    I, too, support providing technical assistance. Seems like 
a smart thing to do when you have got new rules and new 
challenges.
    But it does seem a little bit incongruous to then talk 
about--and proudly talk about--95 percent compliance when the 
process would suggest otherwise. And I appreciate your 
testimony on that.
    Jumping to the inspector general, Mr. Harden, your report 
covers several examples of millions of dollars being lost 
through improper payments. Can you distinguish how much of that 
is fraud, how much of it is waste, how much of--is abuse? And 
in the end, as we look at reforms, do those distinctions matter 
in how we put forward new policy?
    Mr. Harden. I guess I would start off from the fraud 
category. In preparing for this hearing I talked to my 
counterpart for investigations to find out in child nutrition 
programs is this really a significant thing.
    And for child nutrition, it is not a significant fraud 
risk. The number of cases we have are minimal compared to the 
overall investigative caseload that our investigative office 
carries.
    The one exception is WIC, and that is where we see fraud 
schemes that are very similar with regard to trafficking that 
we also see in the SNAP program.
    So from a fraud perspective it is not big. I would put it 
more in the abuse or, you know, better management of programs 
category, where, you know, you have to have the right program 
delivering the right oversight to make sure that the benefits 
get where they are supposed to go and they accomplish what they 
are intended to accomplish.
    Mr. Kline. Okay. Thank you.
    I am going to try to set the standard here, Mr. Chairman, 
and yield back the balance of my time.
    But again, my thanks to the witnesses.
    Chairman Rokita. I thank the chairman.
    Mr. Scott, you are recognized for 5 minutes.
    Mr. Scott. Thank you, Mr. Chairman.
    Mr. Harden, Ms. Neuberger mentioned one of the problems, 
just the logistics of doing this. I understand the families 
have to apply for school lunches at the beginning of the year 
and they are eligible for the rest of the year.
    Exactly who should be doing the oversight? Should you hire 
compliance officers for 2 weeks, or what?
    Mr. Harden. We didn't exactly address that type of 
question, but, you know, what we did find was that, as other 
witnesses have also talked about, the school food authorities 
and the people that are doing this do have many other 
responsibilities, and so this is not always their first, you 
know, point of reference in terms of their job 
responsibilities. So it might be a good idea to pursue looking 
at could you have some specialized skill brought in to look at 
this at the very beginning of the year, because they only look 
at a 3 percent sample, which is a very structured sample based 
on the--
    Mr. Scott. Yes. Yes, but the initial verification is self-
reporting and the results come in. Should you have people with 
accounting backgrounds hired for the--I mean, how long a period 
are we talking? We are only talking about a week or 2 when all 
this information comes in, aren't we?
    Mr. Harden. It is my understanding that does happen in the 
first, you know, 6 months through 6 weeks of the school year, 
yes.
    Mr. Scott. Okay. So, I mean, it would be--you are talking 
about hiring somebody for those 6 weeks?
    Mr. Harden. Again, we didn't specifically look at that, but 
as an idea to look at, I would agree that it is something to be 
looked at.
    Mr. Scott. As you indicated, the school personnel aren't 
people that have these particular skill sets.
    Mr. Harden. Right. When we looked to see how they followed 
through in verifying income we found, you know, examples, where 
they didn't follow up, they didn't ask the questions even 
though there might be information available on the application 
that would indicate the household has more income than they do.
    Mr. Scott. That is if they have the knowledge background of 
knowing what is suspicious and what isn't.
    One of the things that Ms. Neuberger mentioned is the cost-
effectiveness of the cure. In a school, how much money are we 
potentially saving if we hired accountants and CPAs to do this 
information--to get this information?
    Mr. Harden. I think the overall improper payment rates for 
School Lunch is in the $1.4 billion category, so, I mean, it 
would be a significant amount of money if they were meeting 
their reduction targets, if they were meeting what they were 
required to for improper payment reporting.
    Mr. Scott. Right. But how many people would you have to 
hire all over the country to accomplish that?
    Mr. Harden. That I would have to give some thought to and 
get back to you on that.
    Mr. Scott. Now, there are also underpayments, as I 
understand it, so if they did all the work they would be 
identifying money that we actually should not have collected.
    Mr. Harden. Yes. When they do the sample, the 3 percent 
sample, they do identify students that should be getting free 
meals that are having to pay for meals, so it works both ways.
    Mr. Scott. And would a lot of--how many people would--
because the information needs to provided, how many people 
would not receive the free lunch because they just don't 
complete the process?
    Mr. Harden. In the school year that we looked at there were 
55 percent of the ones that were asked to provide information 
that did not respond. So when they did not respond they were 
kicked out of the program.
    Mr. Scott. So you are talking about losing half the 
students in free lunch because of the logistics of applying?
    Mr. Harden. Because they did not provide the income 
documentation that they--
    Mr. Scott. Right. And when you got--we are all politicians 
up here trying to get people to register to vote. It is a 
hassle because they just don't go--want to go through the 
process.
    When you have all of these extra steps to take, some people 
will not comply. So are you talking about a potential 50 
percent loss in students who would qualify if they provided the 
information, just never get around to providing the information 
and lose their access to free lunch?
    Mr. Harden. It is my understanding that yes, some of them 
would be able to qualify. In other instances, others would not.
    Mr. Scott. And 50 percent would lose that eligibility?
    Mr. Harden. In the school year that we looked at that is 
the number that didn't respond, so yes, they didn't--they 
lost--
    Mr. Scott. So we have kind of policy questions. We can get 
better accuracy, but a lot of students wouldn't participate. Is 
that the question we have before us?
    Mr. Harden. I am sorry, I didn't hear the question.
    Mr. Scott. If we got the information perfectly straight, we 
could lose 50 percent of the participation?
    Mr. Harden. Or, if I am understanding your question, you 
could have that many more that were participating, too, if they 
qualified for the program--
    Mr. Scott. Right. But the fact is they--a lot of people 
will not supply the information and will lose eligibility, and 
that number could be as much as 50 percent of those 
participating.
    Mr. Harden. Yes.
    Chairman Rokita. Gentleman's time is expired.
    Mr. Thompson is recognized for 5 minutes.
    Mr. Thompson. Thank you, Chairman. Chairman, thanks for 
this incredibly important hearing.
    And thank you, to the panel of witnesses, for bringing your 
expertise.
    I am heartened. I appreciate your testimony, your written 
and your verbal testimony. I am kind of heartened that many of 
our nutrition programs we are looking at sounds like while 
there may be some issues, it is kind of minimal. Others, in 
terms of significant, is, if I heard correctly, specifically 
trafficking of food commodities obtained by the WIC and SNAP 
program.
    You know, and I think that is important that we look at 
that. I don't have a problem with the title of this hearing 
because I--every dollar that we--that is abused or fraudulently 
obtained is a dollar of food out of the mouth of someone--some 
child, some person, some citizen that needs it.
    I know when my wife and I were just starting out in life, 
we were early 20s, we didn't have much. And we were blessed 
with our first son. Today he is a 30-year-old pastor, but we 
were WIC-eligible, and those--it served a very important--it 
plugged a very important hole financially, in terms of assuring 
that Parker and Penny had the nutrition.
    And so, but I take very seriously any type of fraud and 
abuse with these programs because it is taking mouth out of the 
food of those who are truly deserving and eligible.
    Mr. Harden, in your testimony you discuss the issue of 
improper payments in the National School Lunch Program and the 
costs of error rates to taxpayers. And I agree that increased 
accountability will strengthen this program and others like it, 
but we would remiss if we didn't acknowledge the amount of work 
the schools have to do to verify income, especially in 
districts that have a high number of kids who qualify for free 
or reduced meals.
    And aside from direct certification, is there anything the 
USDA is looking at or doing to share best practices on income 
verification between both states and also with local districts?
    Mr. Harden. Yes, sir. In response to our most recent report 
they provided some of those other opportunities or other 
initiatives that they were trying. It is also why we were 
agreeable to look at other alternatives other than providing 
income documentations we recommended.
    Some of those things that are--the reforms or initiatives 
that they are trying but we haven't looked at yet but do appear 
to be good alternatives are their improved oversight and data 
collection, where they are doing a risk-based analysis on a 
more frequent basis, where they are going to do more reviews or 
a second review if they know a school system has a high error 
rate.
    A third initiative that I thought was a good one is that 
they have proposed rules on training cafeteria workers or 
people at the local level so that they know more about how to 
look for errors and inconsistencies.
    Mr. Thompson. Very good. I appreciate that, what the agency 
is doing.
    Ms. Brown, you--thank you for your work you have done to 
improve government performance and services to children, 
families, and individuals. Under the WIC program, can you point 
to specific areas and the way the program is implemented that 
allow for or invite waste, fraud, and abuse?
    Ms. Brown. Well, as you know, what we looked specifically 
at this time was the possibility of online formula sale, and 
the reason we looked at that was because of the vast increase 
in e-commerce, and that creates new opportunities. And that is 
the trick with situations like this with fraud is to make sure 
that the entities that are managing the program are staying one 
step ahead of the others who may be more creative in thinking 
of ways to abuse the program.
    The other situation in the WIC program that I think Mr. 
Harden talked about was fraud on the part of the vendors or the 
providers of the WIC food products. We haven't done any work in 
that area in a number of years, but I know that has been a 
concern on the part of the I.G.
    Mr. Harden. Yes. In a recent report where we looked at 
vendor management in the WIC program we saw that they weren't--
that FNS wasn't using its management evaluations and that tool 
to oversee things in the way they should.
    By not doing so, they were not timely disqualifying vendors 
that should be disqualified. They weren't investigating high-
risk vendors that should be looked at. And they weren't using 
the reciprocal disqualification that would also go with SNAP 
retailers.
    Mr. Thompson. My final question really has to do with the 
abuse of the categorical eligibility and that--and I know that 
is something we have relied upon and has some benefits, in 
terms of efficiency. And I just wondered, are there any 
conclusions or findings of why those inaccuracies exist? 
Obviously we had this robust debate as part of the farm bill, 
as well, with the SNAP program.
    And, Ms. Lucas-Judy?
    Ms. Lucas-Judy. So if I understand your question, you are 
asking why there are errors with categorical eligibility?
    Mr. Thompson. Well, actually, I am about ready to be cut 
off by the chairman so--
    Chairman Rokita. Yes. I am sorry. The gentleman's time is--
    Mr. Thompson. Look forward to talking with you more about 
that issue.
    Ms. Lucas-Judy. Okay.
    Chairman Rokita. Gentleman's time is expired.
    The Gentlelady from Oregon is recognized for 5 minutes.
    Ms. Bonamici. Thank you very much, Mr. Chairman.
    And I want to thank you, Chairman Rokita and Ranking Member 
Fudge, for holding this hearing. It has been an interesting 
discussion, and certainly we can all agree that if there are 
improper payments being made we need to address that issue.
    I just want to address the title of the hearing for a 
moment, because that is a topic that has come up. ``Fraud'' is 
a very harsh term and it incorporates an intent. And I don't 
want the public to think that there is fraud in the School 
Lunch Program if we haven't shown that.
    And, Mr. Harden, you sort of clarified that there may be 
some risk of fraud in the WIC program, but we are not really 
talking about this perception that, unfortunately, the title of 
the hearing may convey. So I just wanted to clarify that when 
we are talking about this fraud, Mr. Harden, you said that the 
significant risk is in the WIC program.
    And it is problematic, and I noticed, Ms. Brown, in your--
if it is in your testimony--you have a couple of examples of 
posts advertising WIC-provided infant formula for sale, and one 
family needed $35 because their infant was picky, and the other 
one wanted $65 for their formula that their kids aren't 
consuming. I would question whether there was really intent to 
defraud in those advertisements. So let's clarify that we--if 
there is abuse and if it is against the law, that is very 
different from someone intentionally committing fraud.
    So, given that about one in five eligible children are 
currently not receiving free or reduced-price lunch, I want to 
make sure that our efforts to address improper payments, which 
include underpayments as well as overpayments, coincide with 
efforts to reach more eligible families. Because it is clear 
that the positive benefits of good nutrition in school, after 
school, in the summer, and in child care settings are 
undeniable.
    So, Ms. Neuberger, you talk about the schools' use of 
direct certification that is more common, and you cite the 
share of paper applications that has fallen from 76 percent to 
55 percent from 2007-2008 to 2012-2013, suggesting there is 
wider use of direct certification. And I know the GAO found 
that 89 percent of children who received SNAP benefits are 
directly certified.
    Now, in my state of Oregon less than 80 percent of eligible 
children are directly certified, so can you discuss the 
challenges that remain to enrolling more children through 
direct certification? Can we learn lessons from high-performing 
states?
    And I want to save time for another question as well.
    Ms. Neuberger. Sure. That is a really important point.
    States and school districts have come a long way in terms 
of making better use of the highly reliable data from other 
programs. Using direct certification reduces errors and makes 
the program simpler to run for schools and simpler for families 
to get connected with.
    At the same time, there is a lot of room for improvement. 
You talked about Oregon's situation. Only 12 states, in fact, 
currently meet the national performance standards that Congress 
put in place. That means that there are lots of children who 
could be automatically enrolled, and there is a lot of room for 
simplification there.
    There are also students who are putting case numbers down 
on applications. All of those children could be automatically 
enrolled. That would be another important simplification.
    Fortunately, there are resources available. USDA has grants 
available. They provide a lot of technical assistance. They do 
and promote peer-to-peer sharing.
    Ms. Bonamici. Thank you so much.
    And, Ms. Neuberger and Mr. Harden, I wanted to ask you 
about the new design of the traditional paper application. Can 
you explain the development process for that application?
    And certainly preventing errors is the way to go, rather 
than, you know, coming in afterward and saying, ``Wait, there 
are overpayments or underpayments.'' So can you talk about what 
are some of the common errors that the new application is 
designed to prevent, please?
    Ms. Neuberger. Sure. So the way applications work is they 
have to meet certain requirements, but states and districts 
don't have to use a particular form.
    And we have periodically done very thorough reviews of 
applications in use, and they have been a mixed bag. Some of 
them don't follow the program rules. They are certainly not all 
user-friendly.
    USDA went through a thorough process, working with the 
Office of Personnel Management's Innovation Lab, to test out 
changes. So they were hoping to accomplish two things: to make 
it easier for families to understand what is being asked of 
them--there is very clear evidence from the reports that USDA 
has done that families don't understand what is being asked of 
them. Sometimes they over-report income; sometimes they under-
report income and disqualify themselves. So--
    Ms. Bonamici. And I don't mean to cut you off, but I want 
to know, Mr. Harden, how successful do you expect this change 
to be, and when will we know if it is making a difference, this 
new paper application?
    Mr. Harden. It is something that we have not looked at yet, 
and so I don't have a definite answer on that. But I would 
agree, from what they are proposing it looks to be a positive 
step forward. We just have to look at it in the future.
    Ms. Bonamici. Terrific. And again, emphasis on prevention 
is important.
    I look forward to following up on your recommendations, Ms. 
Neuberger, about positive steps that we can take. It is really 
important.
    Thank you, Mr. Chairman. I yield back.
    Mr. Thompson. [Presiding.] Thank the gentlelady for 
yielding back.
    Now I am pleased to recognize the gentleman from Florida, 
Mr. Curbelo, for 5 minutes.
    Mr. Curbelo. Thank you, Mr. Chairman.
    And I thank our leadership for raising this important 
issue. I served on the Miami-Dade County School Board for 4 
years, and oftentimes families came to my office complaining 
about what they perceived was rampant abuse in a lot of these 
programs. So this is an important issue.
    Any time someone cheats, whether it is an individual or a 
company, in any of these programs, it is low-income families, 
poor families that are losing out. It is the U.S. taxpayer that 
is being defrauded. So I appreciate this very important 
conversation.
    And, Mr. Harden, I want to hone in on WIC, since it is the 
program where there is some evidence of concrete fraud. And I 
want to ask you about the report the GAO published in 2013 
regarding the eligibility determination process for WIC 
applicants at the point of enrollment.
    The GAO enumerated a few concerns in that report, including 
inconsistent income criteria for access into the program. The 
report cites allowable discretion given to state agencies in 
determining income status for a prospective beneficiary at the 
time of application.
    Does the agency believe that allowable discretion means 
that local agencies can use any definition of ``current 
income'' or ``household'' that they would like in any given 
circumstance? Are there guidelines on when they can or cannot 
use certain definitions, and are any of these guidelines 
mandated?
    Mr. Harden. I am going to ask that I can follow up on that 
because I haven't done--we haven't done specific work in that 
area and so I would like to go back and look a little more 
closely at what the criteria are.
    The most recent work that we did on vendor management in 
the WIC program also looked at participant eligibility. We did 
not find issues with participant eligibility, so I would need 
to go back and look a little closer at that to see if I can 
answer your question.
    Mr. Curbelo. Okay. I look forward to hearing from you on 
that. I also--
    Ms. Neuberger. Excuse me. I just wanted to let you know 
that since that--
    Mr. Curbelo. Please.
    Ms. Neuberger.--report, USDA has actually issued updated 
guidance providing much more clarity, and they have embarked on 
reviews looking specifically at whether states and districts 
are--states and clinics are following that guidance.
    Mr. Curbelo. Thank you.
    And this question is for all of you, and if you have time I 
would like to hear from all of you.
    Direct certification: Has it helped prevent fraud, waste, 
and abuse in these programs, or has it made the programs more 
susceptible to it all? I would like to get your impressions on 
that.
    Ms. Neuberger. It has definitely reduced opportunities for 
error. The application process in school meals is a very error-
prone process. Families fill out those applications on their 
own without much help and, as I said, don't necessarily 
understand what is being asked of them.
    Using data from other programs where they are doing a very 
rigorous income determination improves the accuracy of the 
program.
    Mr. Curbelo. Thank you.
    Mr. Harden. And I would agree that it would seem to improve 
the accuracy. That was part of their alternatives that they 
proposed in response to some of our recommendations that they 
are moving forward on. We will have to look at that in the 
future to see how it went.
    Ms. Brown. Yes. I would just like to say that the--whenever 
we see that kind of eligibility that is linked to eligibility 
determinations for another program, the most important question 
is how solid or sound is the original program's eligibility 
process? And in the case of situations like SNAP, where they 
are building so many new avenues for direct certification, SNAP 
does have a much more rigorous process than some of these other 
programs, particularly school meals.
    So it is not perfect, but it has a lower error rate and so 
it provides a good foundation.
    Ms. Lucas-Judy. And I would agree with that, as well. The 
SNAP program has a much lower improper payment rate than the 
school meals program, and in the study that USDA just released 
they found that the certification errors--the errors for people 
being put into the wrong category of eligibility--was much 
lower with direct certification than it was with the 
application process.
    Mr. Curbelo. I thank you all for your testimony.
    And, Mr. Chairman, I yield back.
    Mr. Thompson. Thank the gentleman.
    Now I am pleased to recognize the gentlelady from 
Massachusetts, Ms. Clark, for 5 minutes.
    Ms. Clark. Thank you, Mr. Chairman and Ranking Member 
Fudge, and to all the panelists for being with us today on this 
important topic.
    As we look across our country and see almost 16 million 
children going to bed hungry every night, and we know on this 
committee the direct impact that has on their ability to get to 
school and be ready to learn. When you are hungry, that is 
almost impossible to do, and we have seen it across test scores 
that go up almost 17 percent if you are receiving breakfast at 
school, reduces absenteeism.
    So I think this is a critical topic on how we can do both 
things. We have to reduce error.
    When families are not eligible and receiving this benefit, 
we know that takes it away from families that need it the most. 
But we also--and one of the surprising things to me was in Ms. 
Neuberger's testimony--about one in four children who are 
eligible are not receiving benefits. Is that the right 
statistic?
    Ms. Neuberger. Of the applications that were denied--
    Ms. Clark. Right.
    Ms. Neuberger.--one in four were actually eligible for 
benefits.
    Ms. Clark. Okay. So a smaller number than the way I phrased 
it. But still, that is a large underpayment of benefits.
    So following up on what we have been talking about with 
this application, seems to be the real sticking point as far as 
the difference between SNAP benefits having less rates of 
error. If we can roll out this simplified application form, do 
you think that is our best way in the short term to guarantee 
accuracy plus access for children?
    Ms. Neuberger. I think the most important first step is to 
reduce the number of children going through that application 
process in the first place. So we talked about improving the 
use of SNAP data.
    In addition, there is a demonstration project using 
Medicaid data. That is only going on in seven states. That 
could be expanded.
    And then for the children who end up going through the 
application process, certainly a better application is a step 
in the right direction. That application is available right now 
to any school district.
    And USDA is developing a new model electronic application, 
which also offers opportunities to make the process clearer and 
less error-prone.
    Ms. Clark. And with the electronic application, would that 
be done by families on their own or would there be someone to 
help walk them through that?
    Ms. Neuberger. It could be either way. But one of the 
benefits of electronic environment is that it can ask probing 
questions, so--
    Ms. Clark. And it can give prompts--
    Ms. Neuberger. Yes. That is right.
    Ms. Clark.--to help, because I think there is a lot of 
confusion over net income, gross income, those sort of 
definitions that we are asking families to do on their own.
    Ms. Neuberger. Exactly.
    Ms. Clark. What else do you see as a key area for 
increasing access? How else can we increase access to these 
School Lunch and Breakfast programs?
    Ms. Neuberger. One option that we haven't talked about yet 
is a relatively new provision that is kind of a twist on older 
options called the Community Eligibility Provision. This 
essentially is an option available only to very high-poverty 
schools, but essentially, data from other programs--again, the 
highly accurate data--is used to set the school's reimbursement 
rate. In exchange, they no longer collect applications or track 
who is in which meal category at the school.
    It reduces the opportunities for error and it streamlines 
administration. So schools have more funds available to put 
into meals and have to spend less on paperwork. Also, children 
in those schools have better access because they don't have to 
go through an application process.
    Ms. Clark. Thank you.
    I yield back.
    Mr. Thompson. Thank the gentlelady.
    And I am pleased to recognize the gentleman from Georgia, 
Mr. Carter, for 5 minutes.
    Mr. Carter. Thank you, Mr. Chairman.
    And thank all of you for being here.
    Mr. Chairman, I will be very brief. I have just a couple of 
questions.
    Mr. Harden, you mentioned in your opening testimony about a 
fraud ring in Georgia. Very quickly, can you describe what 
happened there to me? I am from Georgia, so I am obviously very 
interested.
    Mr. Harden. I may have to follow up to have our 
investigators talk to you more--
    Mr. Carter. Okay.
    Mr. Harden.--completely about this, but it is basically--
    Mr. Carter. Very briefly.
    Mr. Harden. Very briefly, it was selling benefits--or 
working with beneficiaries to sell their benefits for pennies 
on the dollar, just like they do with SNAP, paying 50 cents for 
them and giving them cash.
    Mr. Carter. And giving them cash. And then what do they do 
with it?
    Mr. Harden. I would have to get back to you on that. I am 
not well-versed in the investigation details.
    Mr. Carter. So they buy them, but then what do they do with 
the coupons?
    Mr. Harden. Oh, the people that are trafficking them then 
can redeem them for the full value.
    Mr. Carter. Redeem them where?
    Mr. Harden. They would set up stores and they would be WIC 
vendors. And so they would run the benefits through and capture 
the whole amount for themselves and pay the recipients less--
    Mr. Carter. Okay. Okay. I am a WIC vendor in my retail--or 
I was in my retail business, but do you ever audit them to see 
if they are indeed buying those products and--that they are 
getting reimbursed for, that they are turning the coupons in 
for?
    Mr. Harden. Right. And the most recent work that we have 
done on vendor monitoring is where FNS wasn't doing the 
oversight they needed of the vendors themselves to make sure 
that those that should be disqualified are disqualified, the 
high-risk vendors are being looked at, and that if you are 
disqualified under SNAP that you are also disqualified under 
WIC.
    Mr. Carter. Okay.
    Ms. Neuberger. There have actually been some very serious 
issues with vendor errors and fraud in Georgia and elsewhere. 
And one of the points that came up earlier is whether it makes 
sense to--how much to focus on participant fraud.
    And one of GAO's recommendations in this regard was 
actually very important. They recommended that the first step 
is trying to assess the extent of the problem before shifting 
resources. An important reason to do that is because USDA has 
focused their efforts on preventing vendor error and fraud, and 
taking resources away from them may not make sense.
    Mr. Carter. Okay. But I don't think I have ever been 
audited to see, and, you know, we redeem WIC coupons all the 
time but I don't know that I have ever been audited in my 
business to see that I am indeed making those purchases from a 
wholesaler or wherever.
    Ms. Neuberger. There is an ongoing monitoring process--
    Mr. Carter. Not that I want to be audited.
    [Laughter.]
    Ms. Neuberger. I was going to say, in general states--
    Mr. Carter.--make sure you understand that.
    Ms. Neuberger.--states focus their resources on high-risk 
vendors, so maybe you are doing a good job.
    Mr. Carter. Well, let me ask you, Ms. Brown, very quickly, 
what about recipients who were caught selling their coupons? 
What is the punishment?
    Ms. Brown. Well, one of the things that we saw was there is 
a range of options across the states that we looked at. We 
looked at policy manuals for states, and we saw everything from 
a warning letter in a number of states to benefit termination 
from 6 to 12 months in others states.
    What we found in this program as well as other programs 
like SNAP is that the likelihood that a local prosecutor would 
get involved and actually want to take some legal action 
against that program, that benefit recipient, is pretty low.
    Mr. Carter. You said a warning letter?
    Ms. Brown. Yes.
    Mr. Carter. Give me a break. A warning letter? I mean, 
seriously. They know that is wrong.
    Ms. Brown. States have flexibility--
    Mr. Carter. Okay.
    Ms. Brown.--the way the program is set right now.
    Mr. Carter. And one last question.
    And, Mr. Chairman, if you will indulge me for a moment, I 
promised a constituent I would ask this, and if it is outside 
the realm of what we are doing I apologize.
    But many of the food banks now that are participating in 
the Child and Adult Care Food Program and the Summer Food 
Service Program, they are telling me now that they are having 
to do year-long RFPs in order to buy--in order to procure the 
food. Are any of you familiar with that?
    Okay. Well, I apologize. Just FYI, that is causing a lot of 
vendors to drop out, therefore causing the cost to increase. We 
are here talking about waste, fraud, and abuse, and that, to an 
extent, would help with the efficiency of the program. So I 
hope that is something that you will look at, as well.
    Mr. Chairman, that is all I had. I yield back the remainder 
of my time.
    Mr. Thompson. The gentleman made up for that last question 
by yielding back.
    I am now pleased to recognize the gentleman from 
California, Mr. Takano, for 5 minutes.
    Mr. Takano. Thank you, Mr. Chairman.
    Ms. Neuberger, I think we all can agree that helping 
struggling mothers and hungry babies and young children is a 
good thing to do, and it is good public policy. I don't think 
anyone disagrees with that, and I think we all want an 
efficient, well-run program that doesn't allow for abuse.
    We invest considerable money in the WIC program, and you 
recently authorized--authored a report summarizing the research 
on WIC. Can you speak to the return on an investment in the WIC 
program?
    I know we want to minimize unnecessary losses, but can you 
comment on the--what the return on investment is, and is this 
program a good use of taxpayer dollars in general? Is it good 
public policy?
    Ms. Neuberger. Absolutely. One of the most striking things 
about WIC is that it is not only highly effective at things 
like improving birth outcomes and even having positive impact 
on cognitive development, but it is also a very cost-effective 
program.
    The funds that are provided for services are limited so 
that they increase only with inflation, and food costs, which 
are the bulk of WIC expenditures, actually rise much more 
slowly than inflation. So over the last 10 years food costs 
have risen by 28 percent; WIC food costs have risen by only 16 
percent. It is a very sound investment.
    Mr. Takano. Great. So while we want to make sure that 
people aren't doing untoward things online, and we are not 
really sure that is happening, of course, we want to empower 
law enforcement to make sure that people aren't abusing this 
program. The fact that it is good public policy and that it is 
also helping us save dollars, in terms of adverse health 
consequences to malnutrition--children with malnutrition, 
babies with malnutrition.
    Along those lines, childhood obesity has more than doubled 
in the past 30 years and poses a serious health risk. Also, 
there is more and more research coming out showing the long-
term and sometimes irreversible effects of toxic stress on 
babies and young children living in poverty.
    The WIC program provides specific foods, and nutrition 
education, and breastfeeding support to low-income pregnant 
women and very young children. What does the research and 
nutrition science show regarding how WIC benefits--WIC benefits 
the physical, mental, and economic well-being of young 
children, and how might WIC be of particular benefit to young 
children who experience the stressors of living in poverty?
    Ms. Neuberger. There is actually an extraordinary body of 
research showing WIC's effectiveness on a range of measures. So 
participants tend to eat better--more fruits and vegetables, 
more whole grains, lower-fat dairy products. They follow better 
infant feeding practices, like delaying the introduction of 
solid foods or cow's milk.
    In addition, WIC participation is associated with healthier 
births and lower infant mortality, which are very important 
effects. WIC participants who are children have higher 
immunization rates than other low-income children. In fact, 
their rates are comparable to those of more affluent children.
    And recent research has focused on effect on cognitive 
development. So 2-year-olds whose mothers participated in WIC 
when they were pregnant performed better on cognitive tests, 
and those results continue to show up during the school years 
on reading tests.
    So very profound effects in a number of areas.
    Mr. Takano. So the research is extensive. I mean, there is 
widespread scientific agreement in the research arenas that 
show the benefits of this government policy?
    Ms. Neuberger. Yes.
    Mr. Takano. And the key for us is to try and get it right 
to remove all doubt from the public's mind that the program is 
being efficiently administered. But from what I am hearing, I 
mean, the--addressing the needs of a 2-year-old, making sure--
2-year-old, making sure that 2-year-old has got all the right 
nutrition, is going to pay off in terms of that child's 
educational success.
    And of course, I mean, we can do the economic analysis and 
know that the more children that succeed because they have had 
a firm foundation in nutrition, it is going to cost us less 
educationally, it is going to cost us less in terms of the 
health care of that child into adulthood. The obesity that 
affects young children often follows them into adulthood. And a 
lot of these eating habits are established at a very, very 
early age.
    I thank you for your testimony, and thank you for the 
opportunity for us to examine this program.
    Mr. Chairman, I yield back.
    Mr. Thompson. Thank the gentleman.
    Now recognize the gentleman from Virginia, Mr. Brat, for 5 
minutes.
    Mr. Brat. Thank you, Mr. Chairman. I have no questions. I 
yield my time back to the chair for questions.
    Mr. Thompson. Gentleman yields?
    Mr. Brat. Yields.
    Mr. Thompson. For 5 minutes. I--
    Mr. Brat. Five minutes.
    Mr. Thompson. I appreciate that.
    Wanted to follow up where I--where the chairman so 
appropriately cut me off last time. We were kind of going down 
the path of looking at categorical eligibility. I mean, I think 
that is an important tool that was created by past Congresses 
for efficiency purposes, but we want to make sure it is 
accurate.
    And so this sounds like there were some concerns with some 
of the nutrition programs. I would be curious to see which ones 
where we found evidence of kind of abuse when we have done the 
audit on individuals who were categorically eligible according 
to the provision but when the audit was done not so much, you 
know, when we really started to look at the facts.
    And so just briefly, where we have seen evidence of abuse 
of that, and--or fraud, I guess I would classify that as fraud. 
But more importantly, are there any findings or 
recommendations--excuse me--obvious recommendations so that 
essentially we can have a little more confidence that category 
eligibility is accurate?
    Ms. Lucas-Judy. So in our work we did look at some of the 
applications that indicated categorical eligibility, and of the 
six that we had in our sample, three of them were not eligible 
on the basis of the information that they provided.
    It is difficult for school districts to determine whether 
something, you know, is actually accurate on the basis of what 
is in the application; somebody is just checking a box. They 
are supposed to provide a benefit number, for example, if they 
are eligible for SNAP or some other program.
    So somebody can use a number that looks like a SNAP number. 
They can use a number for, you know, a former benefit that they 
are not receiving anymore and get reviews that way.
    So we made recommendations that USDA consider sampling 
categorically eligible applications as part of a standard 
verification process, and the agency said it would consider 
doing that.
    Mr. Thompson. Very good. Sounds like an important 
provision, because category eligibility, like I said, I think 
it has tremendous efficiency, little more ease for people in 
terms of redundancy of applications, but we have to have 
confidence that it is working. And so I appreciate that.
    Someone had mentioned--
    Ms. Neuberger. Point out there--
    Mr. Thompson. Please, go ahead.
    Ms. Neuberger. All of those children could be automatically 
enrolled through direct conversations with a relevant agency. 
They should not be going through the application process at 
all.
    So that would actually be a better way of ensuring 
accuracy. And then states, if there ever were a questionable 
case number, could use the kind of verification for cause that 
you talked about. We should be seeing fewer and fewer of those 
categorically eligible applications.
    Mr. Thompson. Just a question of clarification. Someone, or 
maybe more than one, had mentioned about a Medicaid pilot, 
using Medicaid data. And so this is just a--I am looking for 
clarification on this.
    Pilot is being done. Are they just taking if somebody falls 
in the Medicaid eligibility, or are they truly starting there 
and looking at kind of drilling down and looking--are they 
actually looking at income eligibility within that data? 
Because when you look at eligibility for Medicaid, especially 
after the Affordable Care Act, I mean, there--I mean, it is 
approaching six figures depending on the size of the family. It 
is pretty significant. That is rare, but it is out there.
    So I was just curious of what are they actually looking at 
in terms of the Medicaid pilot?
    Ms. Neuberger. Sure. So the Medicaid pilot is in the school 
meals program. Seven states are participating in it now and 
they can only participate if they are able to look at income 
within the Medicaid system.
    Mr. Thompson. So they actually are looking at Medicaid?
    Ms. Neuberger. So they have to be able to do data-matching 
and make sure that income is below the--
    Mr. Thompson. So it is just not a matter of being basically 
Medicaid-eligible, but they are actually looking at--
    Ms. Neuberger. That is right.
    Mr. Thompson.--incomes within--excellent.
    And I will yield back. Thank you.
    And I am pleased to recognize the gentlelady from 
California, Mrs. Davis, for 5 minutes.
    Mrs. Davis. Thank you, Mr. Chairman.
    Thank you all for being here. I am sorry I missed the--I 
guess the bulk of the hearing, really, but I wanted to then go 
back and just have an opportunity to look a little bit more at 
the community eligibility program and what we have learned from 
that. I know we are looking at waste, fraud, and abuse, but we 
are also interested in efficiency, and where we are able to 
have the dollar, really, going for what we want, which is 
nutrition for children.
    Do we know more or should we be really tasking agencies to 
do more to understand the impact of that overall? You know, in 
terms of studies, in terms of really being able to look over a 
number of years and what the impact of that is, what do we know 
about that? And can you still be challenged in terms of--you 
know, you reached the wrong kids, even though those kids might 
have had an impact on the entire school because they also were 
in a better position?
    Ms. Neuberger. So community eligibility is one of these 
options that make the programs much simpler to run. It 
simplifies the rules. It is highly accurate as a result of 
that, and it means that schools don't have to devote as much 
resources to administrative processes and can really focus on 
providing healthy and appealing meals.
    So it is very positive. Schools have had very positive 
experiences that have tried it.
    Mrs. Davis. I guess what I am looking for--
    Ms. Neuberger. At this point, though, only about half of 
eligible schools are participating, so there is lots more room 
for schools to benefit.
    Mrs. Davis. All right. But when we say that they are doing 
better, how engaged are the studies in really being able to 
track achievement? In what ways are achievement being--
    Ms. Neuberger. So USDA did a comprehensive evaluation. It 
did not look at achievement. It looked at participation in 
meals; it looked at error rates and factors like that.
    We certainly hear anecdotally from schools about improved 
attendance and reduced tardiness, and from teachers that they 
are very enthusiastic about the results that they see in the 
classroom, but those are anecdotal at this point.
    Mrs. Davis. Do you think we should be looking at that 
issue? I mean, it seems to me that it is really quite possible 
to look at studies and not to necessarily use school scores 
or--I mean, there are a variety of ways that you can tell 
whether a child is able to apply their time in school to doing 
better, and whether or not that carries over. Does it carry 
over from week to week? Does it carry over in the summer time?
    You know, all those things, and I am hoping that we would 
have a chance to look at something--
    Ms. Neuberger. Well, there has been quite a lot of research 
on the contribution that school meals can make. So, for 
example, eating a breakfast at school is associated not only 
with better diets and reduced absenteeism, but also better 
academic performance.
    Mrs. Davis. Well, we will hope that we are able to move 
forward with that.
    And the other question is, we know that the WIC program--
and I think many people have addressed this, in terms of the 
efficiency of the program--are there some lessons that we could 
and should be learning from those efficiencies that would carry 
over into a school lunch program that we really haven't 
applied?
    Ms. Neuberger. Well, one thing that we haven't talked about 
WIC that is--in WIC that is actually a very important 
transformation going on within that program is a move toward 
electronic benefits.
    So right now most states are still actually using paper 
vouchers that participants have to take to the store when they 
are grocery shopping. That is a complex process, and it is 
error-prone.
    States are required to transition to electronic benefits by 
2020, and that is a tremendous improvement both from a program 
management and integrity perspective and also from a 
participant perspective.
    Also in WIC there are, in general, opportunities to rely on 
data from other programs, as we have talked about in school 
meals, is very promising--
    Mrs. Davis. The EBT program, which we actually have had a 
bill, helping families in the summer time to be able to access 
meals that children otherwise wouldn't be able to get. They are 
not able to get to some of the programs that are active in the 
summer time, and one could assume that if a child is really 
struggling and having issues around hunger, that they may not 
be really, you know, learning in the summer time from some 
basic opportunities around them.
    Is this something that you think is a good idea and we 
should follow through with that?
    Ms. Neuberger. It is absolutely important to make sure that 
children get the nutrition they need all year round, not just 
through school meals.
    Mrs. Davis. Thank you, Mr. Chairman.
    Chairman Rokita. [Presiding.] Gentlelady yields back.
    I will now yield myself 5 minutes.
    Ms. Brown, let's start with you.
    By the way, thank you all, again, for your testimonies. 
This is very educational for me.
    You, Ms. Brown, have been before us several times, and at 
one of our previous hearings you mentioned that one challenge 
to the implementation of the new school meal regulations was 
the overwhelming volume of guidance issued. Yet, for WIC you 
are recommending more guidance.
    Now, I know these are different programs with different 
participants, but can you address the disparity for us?
    And then I want to turn the same question to Ms. Lucas-
Judy, because you advocated for more guidance, as well.
    Go ahead.
    Ms. Brown. Well, I think the distinction I would like to 
make there is in the school meals program there was a flood of 
guidance that set out expectations and then created some 
changes based on what was initially issued. And while the 
people on the receiving end appreciated the extra help, it was 
confusing to them sometimes and a little overwhelming.
    In the case of the WIC program, what we are asking for is 
the--with the full realization that there are 10,000 clinics 
across the country that are implementing this program, and that 
the states are receiving funds from USDA and it is their job to 
oversee these clinics and how they are implementing it, we are 
making suggestions that USDA would do a better job of making 
sure that the states were overseeing the programs accurately.
    So basically all we are asking USDA to do is improve their 
oversight through what they are asking. For example, when they 
are asking the states to submit a plan once a year, in that 
plan we are suggesting that USDA, and they have agreed, would 
require the states to be more clear on what they are doing to 
monitor some of the abuses that we identified.
    Chairman Rokita. Thank you.
    Ms. Lucas-Judy, anything to add to the idea of how much 
guidance is too much?
    Ms. Lucas-Judy. Sure. USDA already has some guidance out 
for conducting for-cause verification, and what we found in 
talking to school district officials is that they really didn't 
know what it was they were supposed to be looking for. You 
know, for example, what are some red flags that would indicate 
that an application is questionable?
    And so we were suggesting--USDA is in the process of 
collecting data on outcomes of for-cause verifications to find 
out, you know what kind of results they are getting, and so we 
were suggesting that they look at actually distinguishing the 
results for the for-cause verification versus the standard 
verification to figure out if there are places where they could 
use additional guidance, additional clarification to help the 
states--help the school districts do those reviews more 
effectively.
    Chairman Rokita. Okay. Thank you.
    And continuing on with you, Ms. Lucas-Judy, I continue to 
be concerned about the certification process, as well. Your 
report seems to indicate that some of the cases you found were 
indeed intentional. Not might be your word. That is mine.
    But when you give an example that someone who is making 
$26,000 a year in fact reported making $52,000 a year, in 
Indiana I call that intentional. In your opinion, do we know 
how big a problem there is out there with regard to fraud, 
abuse, whatever word you want to use, in the program? And is 
USDA close to figuring that out?
    Ms. Lucas-Judy. Well, as you mentioned, you know, fraud 
involves the willful intent to deceive in getting a benefit, 
and that was something, you know, where we found indicators of 
potential fraud, we referred them to USDA, to the states, and 
to the school districts for further investigation and action 
there.
    As far as the amount of fraud that might be out there, the 
overall improper payment rate for the School Lunch Program, for 
example, was estimated at about 15.25 percent. Not all of that 
is going to be fraud; some of that could be due to other 
factors.
    So USDA just recently released a study where they looked at 
some of those different elements of the improper payments and 
they found that about 8 or 9 percent improper payments rate is 
due to certification errors. Of that, about 70 percent results 
in overpayments. And then of that amount, you have got about 
half that were the result of application errors. So that would 
be the place that they would be looking for potential fraud.
    Chairman Rokita. Thank you.
    And a follow up, another question for you in the 30 seconds 
we have left: The $1,200 range issue that you brought up, what 
is your solution there? Should the range be broadened, or the 
threshold be broadened, or should we--should it be eliminated?
    Ms. Lucas-Judy. That is actually one of the recommendations 
that we made was that USDA do a pilot program to assess using 
data-matching the way that we did to determine, you know, 
because we found applications that had stated income that was 
below the range when, in fact, you know, we found them to be 
above the range. And if the pilot program was successful we 
recommended that USDA seek legislative authority to expand its 
certification process.
    Chairman Rokita. Thank you.
    My time is expired.
    I will now recognize Ms. Fudge for 5 minutes.
    Ms. Fudge. Thank you very much, Mr. Chairman.
    And I thank all of you for your testimony today.
    I thank my colleagues for being here and being involved in 
this discussion.
    Let me just for the record say that I understand fiscal 
responsibility and accountability as well as anyone. I believe 
that those who break the law should be punished.
    I also believe that it is important that when you make 
recommendations to USDA or any other agency you give them the 
opportunity to make the corrections, and I appreciate the fact 
that you have done that and USDA has agreed that they want to 
do it.
    It is important for us to understand a couple of things. 
One is that when we use the words ``waste, fraud, and abuse,'' 
we don't use it in defense; we don't use it in transportation 
and infrastructure. We use it for poor people. We use it in 
domestic programs. We use it in Social Security, Medicaid, and 
Medicare.
    We create a narrative that is stereotypical, that is unfair 
and inaccurate. We are doing it in this committee and we are 
doing it in Agriculture, where I also sit, which has some 
oversight of nutrition.
    I have come to the point where it is my understanding that 
the only thing we are concerned about is poor people and if 
they are scamming the system.
    We didn't do it in Iraq and Afghanistan, where we have 
spent more than $800 billion. I don't recall a hearing about 
waste, fraud, and abuse. Only in these programs.
    I appreciate the fact that you are working very hard to 
make sure that the taxpayers' money is spent appropriately. I 
agree with what you do.
    I also agree that it is important to feed hungry children. 
I agree with that.
    I agree with the fact that we need to have this oversight 
in this committee. What I don't agree with is how we go about 
it, so uneven and heavy-handed.
    And so I want to again thank you for being here. I want to 
thank you for your work.
    But I also want you to understand that this is just not 
about hungry children. This is about how we treat and respect 
people we represent--the taxpayers that send us here.
    Mr. Chairman, I yield back.
    Chairman Rokita. Gentlelady yields back.
    Now it is time for closing remarks.
    I would like to again thank our witnesses for taking the 
time to testify today. Your comments and your ideas are very 
much appreciated.
    And I would like to again turn it over to Ms. Fudge for her 
closing remarks.
    Ms. Fudge. I have no comments to add.
    Chairman Rokita. With that, I will offer my closing 
remarks.
    In addition to the thanks that I just extended to each of 
you, I ask you to continue doing your work. It is important. 
Most of all, it is important to the poor people Ms. Fudge 
talked about.
    We have limited funds. As a member of the Budget Committee, 
I can definitely tell you that we are broke. And we are broke 
through bad decision-making, quite frankly, but that is another 
hearing.
    We need to get limited funds to those children who need it 
the most, and that is our goal here. That should be the goal of 
all of government.
    You have done your jobs in exemplary fashion in that 
regard. Your work needs to continue.
    Please help us. Please help us stay on the USDA and other 
agencies that need to get these reforms in place so that we can 
get these funds to the kids that desperately need them.
    And the goal, frankly, should be to get the kids off these 
programs. Our success should not be measured by how many are on 
these programs. Our success should be measured by how many we 
can elevate off these programs.
    So with that, hearing no more--seeing no more business 
before the committee, this committee remains adjourned.
    [Questions submitted for the record and their responses 
follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 

       
    [Whereupon, at 11:26 a.m., the subcommittee was adjourned.]

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