Food Stamp Program: States Seek to Reduce Payment Errors and Program
Complexity (Letter Report, 01/19/2001, GAO/GAO-01-272).

In fiscal year 2000, the Department of Agriculture's Food Stamp Program,
administered jointly by Agriculture's Food and Nutrition Service (FNS)
and the states, provided $15 billion in benefits to an average of 17.2
million low-income persons each month. FNS, which pays the full cost of
food stamp benefits and half of the states' administrative costs,
promulgates program regulations and oversees program implementation. The
states run the program, determining whether households meet eligibility
requirements, calculating monthly benefits the households should
receive, and issuing benefits to participants. FNS assesses the accuracy
of states' efforts to determine eligibility and benefits levels. Because
of concerns about the integrity of Food Stamp Program payments, GAO
examined the states' efforts to minimize food stamp payment errors and
what FNS has done and could do to encourage and assist the states reduce
such errors. GAO found that all 28 states it examined had taken steps to
reduce payment errors. These steps included verifying the accuracy of
benefit payments calculated through supervisory and other types of
casefile reviews, providing specialized training for food stamp workers,
analyzing quality control data to determine causes of errors and
developing corrective actions, matching food stamp rolls with other
federal and state computer databases to identify ineligible
participants, and using computer software to assist caseworkers in
determining benefits. To reduce payment errors, FNS has imposed
financial sanctions on states with high error rates and has waived
certain reporting requirements.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GAO-01-272
     TITLE:  Food Stamp Program: States Seek to Reduce Payment Errors
	     and Program Complexity
      DATE:  01/19/2001
   SUBJECT:  Sanctions
	     Internal controls
	     Food relief programs
	     Federal/state relations
	     State-administered programs
	     Overpayments
	     Reporting requirements
IDENTIFIER:  Food Stamp Program

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GAO-01-272
A

Report to the Secretary of Agriculture

January 2001 FOOD STAMP PROGRAM

States Seek to Reduce Payment Errors and Program Complexity

GAO- 01- 272

Letter 3 Appendixes Appendix I: Scope and Methodology 22

Appendix II: States' Payment Error Rates and Efforts to Collect Overpayments
23

Appendix III: Factors in Calculating the Excess Shelter Cost Deduction 30

Appendix IV: FNS' Financial Sanctions and Enhanced Funding 32 Appendix V:
States' Use of Reporting Waivers 34 Appendix VI: GAO Contacts and Staff
Acknowledgments 36

Tables Table 1: Food Stamp Combined Payment Error Rates by State, Fiscal
Years 1993 to 1999 23

Table 2: Food Stamp Dollar Error and Payment Error Rates by State, Fiscal
Year 1999 25 Table 3: States' Collection of Food Stamp Overpayments by
Collection Method, Fiscal Year 1999 27

Table 4: FNS' Financial Sanctions of States, Fiscal Years 1995 to 1999 32
Table 5: FNS' Enhanced Funding for States With Low Error Rates,

Fiscal Years 1995 to 1999 33 Figure Figure 1: National Payment Error Rate
for the Food Stamp Program, Fiscal Years 1993 to 1999 6

Abbreviations

FNS Food and Nutrition Service SUA standard utility allowance

January 19, 2001 Lett er

The Honorable Dan Glickman The Secretary of Agriculture

Dear Mr. Secretary: In fiscal year 2000, the U. S. Department of
Agriculture's Food Stamp Program provided $15 billion in benefits to a
monthly average of 17.2 million low- income individuals in the 50 states;
Washington, D. C.; Guam; and the Virgin Islands. Agriculture's Food and
Nutrition Service (FNS) and the states jointly implement the Food Stamp
Program. FNS, which pays the full cost of food stamp benefits and about half
of the states' administrative costs, promulgates program regulations and
oversees program implementation. The states administer the program: they
determine whether households meet eligibility requirements, calculate
monthly benefits that households should receive, and issue benefits to
participants.

The states' accuracy in determining eligibility and benefit levels is
assessed annually by FNS' quality control system. According to the quality
control system, the states overpaid food stamp recipients an estimated $1. 1
billion in fiscal year 1999 and underpaid recipients $450 million. 1
Together, these

errors amounted to nearly 10 percent of food stamp benefits. About 56
percent of these errors occurred when state food stamp workers made
mistakes, such as misapplying complex food stamp rules in calculating
benefits. The remaining 44 percent of the errors occurred because
participants, either inadvertently or deliberately, did not provide accurate

information to state food stamp offices when required. Because of
congressional interest in assuring the integrity of Food Stamp Program
payments, we (1) identified the states' efforts to minimize food stamp
payment errors, and (2) examined what FNS has done and could do to encourage
and assist the states in reducing such errors. In doing this work, we
analyzed information obtained through structured interviews with state food
stamp officials in 28 states, including 14 states with payment error rates
below the national average and 14 states with error rates above the national
average (see app. I). These 28 states delivered 74

percent of all food stamp benefits in fiscal year 1999. We also obtained and
1 Fiscal year 1999 is the most current year for which FNS could provide
quality control data. A monthly average of 18. 2 million individuals
received $15.8 billion in food stamp benefits in that year.

analyzed information from officials at FNS' headquarters and seven regional
offices. We performed our work from February through November 2000 in
accordance with generally accepted government auditing

standards. Results in Brief All 28 states we contacted had taken actions in
recent years to reduce

payment errors. Specifically, most states (1) verified the accuracy of
benefit payments calculated by state food stamp workers through supervisory
and other types of case file reviews, (2) provided specialized training for
state food stamp workers, (3) analyzed quality control data to identify
causes of common payment errors and develop corrective actions,

(4) matched food stamp rolls with other federal and state computer databases
to identify ineligible participants or verify income and asset information
provided by food stamp recipients, and (5) used computer software programs
to assist caseworkers in determining benefits. Because many factors can
affect error rates, it is difficult to isolate the impact of any one action
a state may have taken to reduce its error rate. However, most of the state
food stamp officials cited case file reviews as one of the most effective
tools for reducing payment errors. State food stamp officials said their
primary challenge to reducing payment errors in recent years

stemmed from the priority their states have given to implementing welfare
reform, which competes with the Food Stamp Program for management attention
and resources. FNS has primarily used three approaches to encourage the
states to minimize their payment error rates. First, relying on the results
of its quality control system, FNS has imposed financial sanctions-$ 31
million in fiscal year 1999- on states whose error rates were above the
national average, and provided enhanced funding-$ 39 million in 1999- to
states whose payment error rates were below 6 percent. Second, FNS has

reduced the opportunity for payment errors by allowing the states to reduce
food stamp reporting requirements for certain recipients. For example, in
July 1999, FNS began to grant waivers that allowed the states to require
that food stamp recipients report income changes once every 3 months, rather
than when a change occurred. It should be pointed out, however, that these
waivers help reduce error rates in part by changing the definition of a
payment error; they do not necessarily reduce program benefit costs.
Finally, FNS' regional offices have promoted the exchange of information
among states about potentially successful initiatives for

reducing payment errors. While all three of these approaches can help the
states reduce payment errors, state food stamp officials believe that the

action offering the greatest potential for additional reductions involves
fundamentally simplifying the complex food stamp requirements for
determining eligibility and calculating benefits. Additionally, FNS
officials and others have noted that simplification may offer other
benefits, including greater program participation by eligible recipients- an
overall goal of the Food Stamp Program- and decreased administrative costs.

FNS has taken initial steps in examining options for modifying the Food
Stamp Program, including simplification. However, it is unclear the extent
to which FNS will systematically develop and analyze the advantages and
disadvantages of various simplification options. Accordingly, to help ease
program administration and potentially reduce payment errors, we are
recommending that the FNS Administrator develop options to simplify
requirements for determining program eligibility and benefits for

consideration in the congressional debate on the Food Stamp Program
reauthorization. Background FNS' quality control system measures the states'
performance in accurately

determining food stamp eligibility and calculating benefits. Under this
system, the states calculate their payment errors by annually drawing a
statistically valid sample of at least 300 to 1,200 active cases, depending
on the average monthly caseload; by reviewing the case information; and by
making home visits to determine whether households were eligible for
benefits and received the correct benefit payment. FNS regional offices
validate the results by reviewing a subset of each state's sample to
determine its accuracy, making adjustments to the state's overpayment and

underpayment errors as necessary. To determine each state's combined payment
error rate, FNS adds overpayments and underpayments, then divides the sum by
total food stamp benefit payments. As shown in figure 1, the national
combined payment error rate for the Food Stamp Program was consistently
above 9 percent from fiscal year 1993 through fiscal year 1999. About 70
percent of the food stamp payment errors resulted in overpayments to
recipients, while about 30 percent resulted in underpayments. FNS' payment
error statistics do not account for the

states' efforts to recover overpayments; in fiscal year 1999, the states
collected $213 million in overpayments. (See app. II for information about
states' error rates and collections of overpayments.)

Figure 1: National Payment Error Rate for the Food Stamp Program, Fiscal
Years 1993 to 1999

Percentage

12

Combined

10

Overpayments

8 6 4

Underpayments

2 0

1993 1994 1995 1996 1997 1998 1999 Source: FNS.

Errors in food stamp payments occur for a variety of reasons. For example,
food stamp caseworkers may miscalculate a household's eligibility and
benefits because of the program's complex rules for determining who are
members of the household, whether the value of a household's assets (mainly
vehicles and bank accounts) is less than the maximum allowable,

and the amount of a household's earned and unearned income and deductible
expenses. Concerning the latter, food stamp rules require caseworkers to
determine a household's gross monthly income and then calculate a net
monthly income by determining the applicability of six allowable deductions:
a standard deduction, an earned income deduction, a dependent care
deduction, a medical deduction, a child support deduction, and an excess
shelter cost deduction. (See app. III for the factors that state caseworkers
consider in calculating a household's excess shelter cost deduction.) The
net income, along with other factors such as family size, becomes the basis
for determining benefits. Other payment errors occur after benefits have
been determined primarily because households do not

always report changes in income that can affect their benefits and the

states do not always act on reported changes, as required by food stamp law.

To reduce the likelihood of payment errors, FNS regulations require that
states certify household eligibility at least annually, and establish
requirements for households to report changes that occur after
certification. In certifying households, states are required to conduct
faceto- face interviews, typically with the head of the household, and
obtain pertinent documentation at least annually. In establishing reporting
requirements, the states have the option of requiring households to use

either (1) monthly reporting, in which households with earned income file a
report on their income and other relevant information each month; or (2)
change reporting, in which all households report certain changes, including
income fluctuations of $25 or more, within 10 days of the change. According
to FNS, many states have shifted from monthly reporting to change reporting
because of the high costs associated with administering a monthly reporting
system. However, change reporting is error- prone because households do not
always report changes and the states do not always act on them in a timely
fashion, if at all.

All States We Each of the 28 states we contacted has taken many actions to
reduce Contacted Took payment error rates. Further, 80 percent of the states
took each of five

actions: (1) case file reviews by supervisors or special teams to verify the
Actions to Reduce

accuracy of food stamp benefit payments, (2) special training for Payment
caseworkers, (3) analyses of quality control data to identify causes of

Errors payment errors, (4) electronic database matching to identify
ineligible participants and verify income and assets, and (5) use of
computer software programs to assist caseworkers in determining benefits. It
is difficult to link a specific state action to its effect on error rates
because other factors also affect error rates. However, almost all state
food stamp

officials cited case file reviews by supervisors and others as being one of
their most effective tools for reducing error rates. Additionally, state
officials most often cited the competing pressure of implementing welfare

reform as the primary challenge to reducing food stamp payment errors in
recent years.

States Took Various Actions The following subsection summarizes our findings
on state actions to to Reduce Payment Error

reduce payment errors. Rates

? Case file reviews to verify payment accuracy: In 26 of the 28 states we
contacted, supervisors or special teams reviewed case files to verify the
accuracy of benefit calculations and to correct any mistakes before the
state's quality control system identified them as errors. Supervisory
reviews, used by 22 states, typically require that supervisors examine a
minimum number of files compiled by each caseworker. For example, Alaska
requires monthly supervisory review of five cases for each

experienced caseworker and all cases for each new caseworker. Furthermore,
20 states, including many of the states using supervisory review, use
special teams to conduct more extensive reviews designed to identify
problems in specific offices, counties, or regions. Reviewers correct
mistakes before they are detected as quality control errors, where possible;
identify the reasons for the mistakes; and prescribe

corrective actions to prevent future errors. For example, in Genesee County,
Michigan, the teams read about 2,800 case files, corrected errors in nearly
1,800, and provided countywide training in such problem areas

as shelter expenses and earned income. In Massachusetts, caseworkers
reviewed all case files in fiscal year 2000 because of concerns that the
state's error rate would exceed the national average and that FNS would
impose financial sanctions. Massachusetts corrected errors in about 13
percent of the case files reviewed; these would have been defined as payment
errors had they been identified in a quality control review. ? Special
training for caseworkers: In addition to the training provided to new
caseworkers, 27 states provided a range of training for new and

experienced caseworkers aimed at reducing payment errors. For example, these
states conducted training specifically targeted to calculating benefits for
certain categories of food stamp households, such as those with earned
income or those with legal noncitizens, for which rules are more likely to
be misapplied. 2 Many states also conducted training to update caseworkers
and supervisors on food

stamp policy changes that affect how benefits are calculated; new policies
often introduce new calculation errors because caseworkers are unfamiliar
with the revised rules for calculating benefits, according to several state
officials.

2 The Personal Responsibility and Work Opportunity Reconciliation Act of
1996 (P. L. 104- 193, Aug. 22, 1996) tightened food stamp eligibility
requirements, in part, by disqualifying most permanent resident aliens.
Subsequently, the Agricultural Research, Extension, and Education Reform Act
of 1998 (P. L. 105- 185) restored eligibility to permanent resident aliens
who were lawfully residing in the United States as of August 22, 1996, and
(1) were age 65 or older at that time or (2) are either disabled or under
age 18.

? Analysis of quality control data: Twenty- five states conducted special
analyses of their quality control databases to identify common types of
errors made in counties or local offices for use in targeting corrective

actions. For example, California created a quality control database for the
19 largest of its 54 counties and generated monthly reports for each of the
19 counties to use. Georgia assigned a staff member to review each
identified quality control error and work with the appropriate supervisor or
worker to determine why the error occurred and how it could be prevented in
the future. With this process, officials said, counties are much more aware
of their error cases, and now perceive quality control as a tool for
reducing errors. In Michigan, an analysis of quality control data revealed
that caseworkers were misinterpreting a

policy that specified when to include adults living with a parent in the
same household, and changes were made to clarify the policy. ? Electronic
database matching: All 28 states matched their food stamp

rolls against other state and federal computer databases to identify
ineligible participants and to verify participants' income and asset
information. For example, all states are required to match their food stamp
rolls with state and local prisoner rolls. 3 In addition, most states
routinely match their food stamp participants with one or more of the

following: (1) their department of revenue's “new hires”
database (a listing of recently employed individuals in the state) to verify
income, (2) the food stamp rolls of neighboring states to identify possible
fraud, and (3) their department of motor vehicle records to verify assets.
Officials in four states said the “new hires” match reduced
payment errors by allowing caseworkers to independently identify a change in
employment status that a household had not reported and that would likely
affect its benefits. Mississippi food stamp officials said the vehicle match
helped reduce payment errors because caseworkers verified the value of
applicants' vehicles as part of determining eligibility.

? Computer assistance in calculating benefits: Twenty- three states had
developed computer software for caseworkers to use in determining an
applicant's eligibility and/ or in calculating food stamp benefit amounts.
Twenty- two of the states have software that determines eligibility and
calculates benefits based on information caseworkers enter; the

remaining states' software is limited to calculating benefits after the 3
Effective June 2000, states also are required to match food stamp rolls with
the Social Security Administration's master file of deceased individuals.
However, Maryland officials have found many false matches because records
data were incorrectly entered or were outof- date.

caseworker has determined eligibility. These programs may also crosscheck
information to correct data entry errors; provide automated alerts that, for
example, a household member is employed; and generate

reminders for households, for example, to schedule an office visit. The most
advanced software programs had online interview capabilities, which
simplified the application process. Some states had automated case
management systems that integrated Food Stamp Program records with their
Medicaid and other assistance programs, which facilitated the administration
of these programs.

Some states took other actions to reduce their payment errors. For example,
even though FNS regulations only require that food stamp households be
recertified annually, 16 states increased the frequency with which certain
types of food stamp households must provide pertinent documentation for
recertifying their eligibility for food stamp benefits. In particular, 12 of
the 16 states now require households with earned income to be recertified
quarterly because their incomes tend to fluctuate, increasing the likelihood
of payment errors. More frequent certification

enables caseworkers to verify the accuracy of household income and other
information, allowing caseworkers to make appropriate adjustments to the
household's benefits and possibly avoid a payment error. However, more
frequent certification can also inhibit program participation because it
creates additional reporting burdens for food stamp recipients. 4

In addition to more frequent certification, five states reported that they
access credit reports and public records to determine eligibility and
benefits. Seven states have formed change reporting units in food stamp
offices serving certain metropolitan areas, so that participants notify
these centralized units, instead of caseworkers, about starting a new job or
other reportable changes. States Believe That Case

Food stamp officials in 20 of the 28 states told us that they have primarily
File Reviews Have Been Key

relied on case file reviews by supervisors and others to verify payment to
Reducing Error Rates

accuracy and reduce payment errors. For example, Georgia officials noted one
county's percentage of payment errors dropped by more than half as a 4 A
1996 survey found that, on average, (1) applicants spent nearly 5 hours and
made at least two trips to the local food stamp office to apply for food
stamps and (2) recipients spent nearly 2- 1/ 2 hours and made at least one
trip to the local office to recertify eligibility. See Mathematica Policy
Research, Inc., Customer Service in the Food Stamp Program (July 1999).

result of the state's requirement that management staff in 10 urban counties
re- examine files after a supervisor's review. In each of the past 3 years,
Ohio food stamp administrators have reviewed up to 100 cases per county per
year and have awarded additional state funding to counties with low error
rates. In fiscal year 1999, the counties used $2.5 million in state funds

primarily for payment accuracy initiatives. There was less consensus about
the relative usefulness of other initiatives in reducing payment errors.
Specifically, food stamp officials in 13 states told us that special
training for caseworkers was one of their primary initiatives; officials in
8 states cited recertifying households more frequently; officials in 6
states identified the use of computer software to determine eligibility and/
or benefits; officials in 5 states identified computer database matches; and
officials in 4 states cited analyses of

quality control data. Implementation of Welfare

Food stamp officials in 22 of the states we contacted cited their states'
Reform Has Taken Priority implementation of welfare reform as a challenge to
reducing error rates in recent years. 5 In particular, implementing welfare
reform programs and

Over Error Reduction policy took precedence over administering the Food
Stamp Program in

Efforts many states- these programs competed for management attention and

resources. In Connecticut, for example, caseworkers were directed to help
participants find employment; therefore, the accuracy of food stamp payments
was deemphasized, according to state officials. Similarly, Hawaii officials
said agency leadership emphasized helping recipients to find employment and
instituted various programs to accomplish this, which

resulted in less attention to payment accuracy. Furthermore, officials from
14 states said welfare reform led to an increase in the number of working
poor. This increased the possibility of errors because the income of these

households is more likely to fluctuate than income of other food stamp
households.

5 The Personal Responsibility and Work Opportunity Reconciliation Act of
1996 replaced the Aid to Families with Dependent Children program with the
Temporary Assistance for Needy Families program and gave the states
responsibility for administering the new program with block grant funding.
The act encouraged welfare recipients to find employment by setting a
lifetime limit of 5 years on the receipt of program benefits and
establishing financial penalties for states that fail to ensure that a
specified minimum percentage of their welfare households work or participate
in work- related activities each year.

State food stamp officials cited three other impediments to their efforts to
reduce payment errors, although far less frequently. First, officials in 12
states cited a lack of resources, such as a shortage of caseworkers to
manage food stamp caseloads, as a challenge to reducing error rates.
Georgia, Mississippi, and Texas officials said caseworker turnover was high,
and New Hampshire officials said they currently have a freeze on hiring new
caseworkers. Second, officials in 10 states cited problems associated with
either using, or making the transition from, outdated automated systems as
challenges to reducing payment errors. For example,

New Hampshire officials found that their error rate increased from 10. 2
percent in fiscal year 1998 to 12. 9 percent in fiscal year 1999 after they
began to use a new computer system. In addition, Connecticut and Maryland
officials noted that incorporating rules changes into automated systems is
difficult and often results in error- prone manual workarounds until the
changes are incorporated. Finally, officials in nine states told us

that food stamp eligibility revisions in recent years, particularly for
legal noncitizens, have increased the likelihood of errors.

FNS Has Encouraged To encourage the states to reduce error rates, FNS has
employed financial

States to Reduce sanctions and incentives, approved waivers of reporting
requirements for

certain households, and promoted initiatives to improve payment accuracy
Payment Error Rates,

through the exchange of information among the states. However, state food
but Simplifying Food

stamp officials told us the single most useful change for reducing error
Stamp Rules May

rates would be for FNS to propose legislation to simplify requirements for
determining Food Stamp Program eligibility and benefits. Simplifying food

Reduce Errors Further stamp rules would not necessarily alter the total
amount of food stamp

benefits given to participants, but it may reduce the program's
administrative costs (the states spent $4.1 billion to provide $15.8 billion
in food stamp benefits in fiscal year 1999). FNS officials and others
expressed concern, however, that some simplification options may reduce FNS'
ability to precisely target benefits to each individual household's needs.

FNS Has Used Three The three principal methods FNS has used to reduce
payment errors in the

Principal Methods to states are discussed in the following subsections.
Reduce States' Payment Errors

Financial Sanctions and As required by law, FNS imposes financial sanctions
on states whose error Enhanced Funding

rates exceed the national average. These states are required to either pay

the sanction or provide additional state funds- beyond their normal share of
administrative costs- to be reinvested in error- reduction efforts, such as
additional training in calculating benefits for certain households. FNS
imposed $30.6 million in sanctions on 16 states with payment error rates
above the national average in fiscal year 1999 and $78. 2 million in
sanctions on 22 states in fiscal year 1998- all of which were reinvested in
errorreduction efforts. 6 (See app. IV.)

Food stamp officials in 22 states reported that their agencies had increased
their commitment to reducing payment errors in recent years; officials in 14
states stated that financial sanctions, or the threat of sanctions, was the
primary reason for their increased commitment. For example, when the Texas
Department of Human Services requested money to cover sanctions prior to
1995, the Texas legislature required the department to report quarterly on
its progress in reducing its payment error rate. Officials in Texas, which
has received enhanced funding for the past 2 fiscal years, cited the
department's commitment and accountability to the Texas legislature as
primary reasons for reducing the error rate over the years and

for maintaining their focus on payment accuracy. FNS also rewards states
primarily on the basis of their combined payment error rate being less than
or equal to 5.9 percent- well below the national average. FNS awarded $39.2
million in enhanced funding to six states in fiscal year 1999 and $27.4
million to six states in fiscal year 1998. In the past 5 years, 16 states
have received enhanced funding at least once. Officials in

one state told us that the enhanced funding remained in the state's general
fund, while officials in four states said the enhanced funding supplemented
the state's appropriation for use by the Food Stamp Program and other
assistance programs. For example, in Arkansas, the food stamp agency used
its enhanced funding for training, systems development, and

equipment. Arkansas officials told us that enhanced funding was a major
motivator for their agency, and they have seen an increase in efforts to
reduce payment errors as a direct result. Waivers to Reporting

In July 1999, FNS announced that it would expand the availability of
Requirements

waivers of certain reporting requirements placed on food stamp households.
FNS was concerned that the increase in employment among

6 In fiscal year 1999, FNS reduced sanctions for states that had a high
percentage of households with legal noncitizens and households with earned
income because these households were more prone to payment errors than other
food stamp households.

food stamp households would result in larger and more frequent income
fluctuations, which would increase the risk of payment errors. FNS also was
concerned that the states' reporting requirements were particularly
burdensome for the working poor and may, in effect, act as an obstacle to
their participation in the program. 7 This is because eligible households
may not view food stamp benefits as worth the time and effort it takes to
obtain them. As of November 2000, FNS had granted reporting waivers to 43
states, primarily for households with earned income. (See app. V.) The three
principal types of waivers are explained below:

? The threshold reporting waiver raises the earned income changes that
households must report to more than $100 per month. (Households still must
report if a member gains or loses a job.) Without this waiver, households
would be required to report any wage or salary change of $25 or more per
month. Ohio uses this type of waiver (with a smaller

$80- per- month threshold) specifically for self- employed households. Ohio
credits the use of this and other types of reporting waivers to the decrease
in its error rate from 11.2 percent in 1997 to 8.4 percent in 1999.

? The status reporting waiver limits the changes that households must report
to three key events: (1) gaining or losing a job, (2) moving from part- time
to full- time employment or vice versa, and (3) experiencing a change in
wage rate or salary. This waiver eliminates the need for households to
report fluctuations in the number of hours worked, except if a member moves
from part- time to full- time employment. Texas officials cited the
implementation of the status reporting waiver in 1994 as a primary reason
that their error rate dropped by nearly 3

percentage points (from over 12 percent) in 1995. Texas' error rate reached
a low of about 4. 6 percent in 1999. 7 Food stamp participation declined by
34 percent, from a monthly average of 27.5 million participants in fiscal
year 1994 to a monthly average of 18. 2 million participants in fiscal year
1999. This decline includes a reduction in (1) the number of individuals
eligible for food stamp benefits, reflecting the strong U. S. economy and
tighter food stamp eligibility

requirements for legal immigrants and able- bodied adults without
dependents, and (2) the percentage of eligible individuals participating in
the program. FNS estimates that only about 62 percent of eligible people in
the United States received food stamp benefits in September 1997- a 9- point
drop from 71 percent of eligible people participating in September 1994.

? The quarterly reporting waiver eliminates the need for households with
earned income to report any changes during a 3- month period, provided the
household provides required documentation at the end of the period. 8 The
waiver reduces payment errors because any changes that occurred during a
quarter were not considered to be errors and households more readily
understood requirements for reporting changes. Food stamp officials in
Arkansas, which implemented a quarterly reporting waiver in 1995, believe
that their quarterly reporting waiver is a primary reason for their
subsequent stable error rate. FNS expects that reporting waivers will reduce
the number of payment

errors made because households are more likely to report changes and, with
fewer reports to process, the states will be able to process changes
accurately and within required time frames. However, the lower payment error
rates that result from these waivers are primarily caused by a redefinition
of a payment error, without reducing the Food Stamp Program's benefit costs.
For example, a pay increase of $110 per month that is not reported until the
end of the 3- month period is not a payment error under Arkansas' quarterly
reporting waiver, while it would be an error

if there were no waiver. As a result, the quarterly reporting waiver may
reduce FNS' estimate of overpayments and underpayments. FNS estimated, in
July 1999, that the quarterly waiver would increase food stamp benefit

costs by $80 million per year, assuming that 90 percent of the states
applied for the waiver.

Of the 10 states that do not have a reporting waiver, 7 require monthly
reporting for households with earned income. The advantage of monthly
reporting is that benefits are issued on the basis of what has already
occurred and been documented. In addition, regular contact with food

stamp households allows caseworkers to quickly detect changes in the
household's situation. However, monthly reporting is more costly to
administer and potentially can exacerbate a state's error rate, particularly
if it cannot keep up with the volume of work. A Hawaii food stamp official

told us that monthly reporting contributed to recent increases in Hawaii's
error rate because caseworkers have not processed earned income 8 In
November 2000, FNS promulgated regulations that give the states the option
to require

food stamp households with earned income to report changes semiannually,
unless a change would result in a household's gross monthly income exceeding
130 percent of the monthly poverty income guideline ($ 1,533 per month for a
family of three).

changes on time, while Connecticut officials said their food stamp workers
were making mistakes by rushing to meet deadlines.

Fostering Communication As part of the food stamp quality control program,
FNS' seven regional Among States offices have assembled teams of federal and
state food stamp officials to identify the causes of payment errors and ways
to improve payment accuracy. Each region also has held periodic conferences
in which states

from other regions were invited to highlight their successes and to respond
to questions about implementing their initiatives. Examples of topics at
recent conferences in FNS' northeastern region included best payment
accuracy practices and targeting agency- caused errors. FNS' regional
offices also have made funds available for states to send representatives to
other states to learn first- hand about initiatives to reduce payment
errors.

Since 1996, FNS has compiled catalogs of states' payment accuracy practices
that provide information designed to help other states develop and implement
similar initiatives.

Simplifying Food Stamp Rules Food stamp officials in all 28 states we
contacted called for simplifying

Could Reduce Payment Errors complex Food Stamp Program rules, and most of
these states would like to and Administrative Costs

see FNS involved in advocating simplification. In supporting simplification,
the state officials generally cited caseworkers' difficulty in correctly
applying food stamp rules to determine eligibility and calculate benefits.
For example, Maryland's online manual for determining a household's food

stamp benefits is more than 300 pages long. Specifically, the state
officials cited the need to simplify requirements for (1) determining a
household's deduction for excess shelter costs and (2) calculating a
household's earned and unearned income. 9 Food stamp officials in 20 of the
28 states we contacted said simplifying the

rules for determining a household's allowable shelter deduction would be one
of the best ways to reduce payment errors. 10 The Food Stamp Program 9 The
states also cited the need to simplify food stamp rules for determining the
valuation of vehicles. The Agriculture, Rural Development, Food and Drug
Administration, and Related Agencies Appropriations Act for fiscal year 2001
(P. L. 106- 387) revised the Food Stamp Act of 1977 to allow the states to
use the same vehicle valuation rules that they use for their

Temporary Assistance for Needy Families program, if these rules would result
in a lower attribution of resources to the household.

10 While Agriculture's appropriations act for fiscal year 2001 increased the
amount of the shelter deduction for food stamp households, it did not change
the way that the deduction is calculated.

generally provides for a shelter deduction when a household's monthly
shelter costs exceed 50 percent of income after other deductions have been
allowed. Allowable deductions include rent or mortgage payments, property
taxes, homeowner's insurance, and utility expenses. Several state

officials told us that determining a household's shelter deduction is prone
to errors because, for example, caseworkers often need to (1) determine
whether to pro- rate the shelter deduction if members of a food stamp
household share expenses with others, (2) determine whether to use a
standard utility allowance rather than actual expenses, and (3) verify
shelter expenses, even though landlords may refuse to provide required
documentation.

Food stamp officials in 18 states told us that simplifying the rules for
earned income would be one of the best options for reducing payment errors
because earned income is both the most common and the costliest source of
payment errors. Generally, determining earned income is prone

to errors because caseworkers must use current earnings as a predictor of
future earnings and the working poor do not have consistent employment and
earnings. 11 Similarly, officials in six states told us that simplifying the
rules for unearned income would help reduce payment errors. In particular,
state officials cited the difficulty caseworkers have in estimating child
support payments that will be received during the certification period
because payments are often intermittent and unpredictable. Because
households are responsible for reporting changes in unearned income of $25
or more, differences between estimated and actual child support payments
often result in a payment error.

FNS officials and advocates for food stamp participants, however, have
expressed concern about some possible options for simplifying the rules for
determining eligibility and calculating benefits. For example, in
determining a household's allowable shelter deduction, if a single standard
deduction were used for an entire state, households in rural areas would

likely receive greater benefits than they would have using actual expenses,
while households in urban areas would likely receive smaller benefits. In
this case, simplification may reduce FNS' ability to precisely target
benefits to each individual household's needs. FNS officials also pointed
out that likely reductions in states' payment error rates would reflect
changes to the

11 A Pennsylvania official noted that once a payment error occurs, it can be
exacerbated because benefits are sensitive to income fluctuations- generally
a $3 change in monthly income results in a $1 change in food stamp benefits.

rules for calculating food stamp benefits rather than improved performance
by the states.

FNS has begun to examine alternatives for improving the Food Stamp Program,
including options for simplifying requirements for determining benefits, as
part of its preparations for the program's upcoming reauthorization. More
specifically, FNS hosted a series of public forums, known as the National
Food Stamp Conversation 2000, in seven cities attended by program
participants, caseworkers, elected officials,

antihunger advocates, emergency food providers, health and nutrition
specialists, food retailers, law enforcement officials, and researchers.
Simplification of the Food Stamp Program was one of the issues discussed at
these sessions as part of a broad- based dialogue among stakeholders about
aspects of the program that have contributed to its success and features
that should be strengthened to better achieve program goals. FNS is
currently developing a variety of background materials that will integrate
the issues and options raised in these forums. FNS has not yet begun to
develop proposed legislation for congressional consideration in
reauthorizing the Food Stamp Program.

Conclusions FNS and the states have taken actions aimed at reducing food
stamp payment errors, which currently stand at about 10 percent of the
program's

total benefits. Financial sanctions and enhanced funding have been at least
partially successful in focusing states' attention on minimizing errors.
However, this “carrot and stick” approach can only accomplish so
much, because food stamp regulations for determining eligibility and
benefits are extremely complex and their application inherently error- prone
and costly

to administer. Furthermore, this approach, carried to extremes, can create
incentives for states to take actions that may inhibit achievement of one of
the agency's basic missions- providing food assistance to those who are in
need. For example, increasing the frequency that recipients must report
income changes could decrease errors, but it could also have the

unintended effect of discouraging participation by the eligible working
poor. This would run counter not only to FNS' basic mission but also to an
overall objective of welfare reform- helping people move successfully from
public assistance into the workforce.

Simplifying the Food Stamp Program's rules and regulations offers an
opportunity to, among other things, reduce payment error rates and promote
program participation by eligible recipients. FNS has taken initial steps in
examining options for simplification through its forums with

stakeholders. However, it is unclear the extent to which FNS will build on
these ideas to (1) systematically develop and analyze the advantages and
disadvantages of various simplification options, and (2) if warranted,

submit the legislative changes needed to implement simplification proposals.
Recommendations To help ease program administration and potentially reduce
payment

errors, we recommend that the Secretary of Agriculture direct the
Administrator of the Food and Nutrition Service to (1) develop and analyze
options for simplifying requirements for determining program eligibility and
benefits; (2) discuss the strengths and weaknesses of these options with
representatives of the congressional authorizing committees; and (3) if
warranted, submit legislative proposals to simplify the program. The
analysis of these options should include, among other things, estimating

expected program costs, effects on program participation, and the extent to
which the distribution of benefits among recipients could change. Agency
Comments and

We provided the U. S. Department of Agriculture with a draft of this report
Our Evaluation

for review and comment. We met with Agriculture officials, including the
Director of the Program Development Division within the Food and Nutrition
Service's Food Stamp Program. Department officials generally agreed with the
information presented in the report and provided technical clarifications,
which we incorporated as appropriate. Department officials also agreed with
the thrust of our recommendations. However, they

expressed reservations about the mechanics of implementing our
recommendation that they discuss simplification options with representatives
of the congressional authorizing committees. In particular,

they noted the importance of integrating consultation on policy options with
the process for developing the President's annual budget request. In
addition, they urged a broader emphasis on consideration of policy options

that meet the full range of program objectives, including, for example,
ending hunger, improving nutrition, and supporting work. We agree that
simplification options should be discussed in the larger context of
achieving program objectives. However, we believe that an early dialogue
about the advantages and disadvantages of simplification options will
facilitate the congressional debate on one of the most important and
controversial issues for reauthorizing the Food Stamp Program.

Copies of this report will be sent to the congressional committees and
subcommittees responsible for the Food Stamp Program; the Honorable Jacob
Lew, Director, Office of Management and Budget; and other interested
parties. We will also make copies available upon request.

Please contact me at (202) 512- 5138 if you or your staff have any questions
about this report. Key contributors to this report are listed in appendix
VI.

Sincerely yours, Robert E. Robertson Director, Education, Workforce, and

Income Security Issues

Appendi Appendi xes x I

Scope and Methodology To examine states' efforts to minimize food stamp
payment errors, we analyzed information obtained through structured
telephone interviews with state food stamp officials in 28 states. We
selected the 28 states to include states with the lowest payment error
rates, states with the highest error rates, and the 10 states with the most
food stamp participants in fiscal year 1999. Overall, the states we
interviewed included 14 states with payment error rates below the national
average and 14 states with error rates above the national average. They
delivered about 74 percent of all food stamp benefits in fiscal year 1999.
We supplemented the structured interviews with information obtained from
visits to Maryland, Massachusetts, Michigan, and Texas.

To examine what the Department of Agriculture's Food and Nutrition Service
(FNS) has done and could do to help states reduce food stamp payment errors,
we relied in part on information obtained from our telephone interviews, as
well as with information obtained from discussions with officials at FNS'
headquarters and each of its seven

regional offices. We also analyzed FNS documents and data from its quality
control system.

States' Payment Error Rates and Efforts to

Appendi x II

Collect Overpayments Table 1: Food Stamp Combined Payment Error Rates by
State, Fiscal Years 1993 to 1999

Percent

State FY 1993 FY 1994 FY 1995 FY 1996 FY 1997 FY 1998 FY 1999

Alabama 8. 1 5. 8 7. 0 5. 8 8. 7 7. 7 11. 3 Alaska 4. 6 9. 2 5. 1 7. 5 11. 8
14. 2 15. 9 Arizona 12.1 15. 3 13.5 8. 4 7.4 5. 9 6.9 Arkansas 6.4 5. 4 5.7
4. 5 5.2 6. 0 4.5 California 9. 1 10. 5 9.5 9. 3 9.9 12. 5 11.3 Colorado 7.5
7. 4 6.4 7. 7 8.6 10. 7 9. 0 Connecticut 7.9 7. 8 8.5 10. 7 9. 7 13. 1 13. 9
Delaware 7. 6 10.1 9. 4 8.7 12. 7 12.5 16. 9 District of Columbia 9.0 9. 6
9.3 6. 8 7.5 10. 7 12.1 Florida 17.0 13. 6 11.1 9. 7 10. 3 12. 9 9.4 Georgia
11.1 11. 5 11.0 10. 3 12.0 13. 7 10.9 Guam 12. 3 9.9 7. 5 9.6 7. 0 10. 3 10.
1 Hawaii 3.8 4. 7 3.8 4. 0 4.5 4. 8 6.8 Idaho 8. 5 10.6 6. 7 6.3 7. 4 10. 5
10. 9 Illinois 10. 2 9. 5 11. 7 12. 4 14. 3 14. 0 14. 8 Indiana 16. 6 17. 7
16. 4 9.7 9. 3 6.8 8. 1 Iowa 10. 2 11. 4 11. 6 12. 2 9. 8 13.4 9. 3 Kansas
7.6 7. 6 8.1 7. 5 7.5 11. 1 9. 0 Kentucky 5.2 5. 5 4.7 5. 3 5.8 7. 4 7.7
Louisiana 9.3 5. 6 7.2 6. 0 5.6 7. 7 7.4 Maine 7. 5 7.5 6. 5 7.4 7. 2 10. 2
8. 8 Maryland 10. 7 11. 2 12. 1 11. 3 12. 8 15. 4 13. 6 Massachusetts 6.0 5.
8 5.0 4. 7 8.2 7. 5 9.3 Michigan 8.6 8. 7 9.6 11. 2 11.9 17. 7 17.6
Minnesota 9. 5 8.8 6. 6 7.0 7. 0 5.2 6. 7 Mississippi 10.0 9. 2 10. 0 10. 0
7.0 6. 0 4.9 Missouri 11. 2 11. 2 13. 0 13. 4 12. 9 8.3 8. 6 Montana 7.7 6.
9 8.2 8. 7 9.2 7. 3 8.1 Nebraska 11. 0 12. 0 8. 7 10.5 12. 0 16.7 14. 2
Nevada 9.0 6. 9 9.4 10. 6 12.2 8. 9 8.1 New Hampshire 12. 4 14.7 10. 3 9. 4
10. 1 10. 2 12. 9 New Jersey 8.3 8. 8 8.7 8. 7 9.0 11. 9 12.9 New Mexico 10.
5 8.9 7. 6 8.0 7. 5 10. 6 10. 4 New York 12. 4 10. 1 9. 5 8. 9 10. 1 12. 9
10. 5

(Continued From Previous Page)

State FY 1993 FY 1994 FY 1995 FY 1996 FY 1997 FY 1998 FY 1999

North Carolina 9. 9 9. 5 8. 1 10.0 10. 7 10.8 9. 3 North Dakota 8. 0 6. 0 6.
0 6. 1 11. 0 9.4 8. 0 Ohio 14. 4 14. 5 14. 6 12. 6 11. 2 9.3 8. 4 Oklahoma
10. 0 10. 8 11. 1 10. 2 8.1 10. 9 11.9 Oregon 9. 4 9. 9 9. 0 11.2 13. 0 13.5
10. 5 Pennsylvania 9.1 8. 4 9.0 9. 2 8.7 9. 9 10. 8 Rhode Island 5.6 7. 0
5.2 6. 7 7.1 7. 0 7.1 South Carolina 10. 9 5.1 6. 2 6.3 6. 3 8.1 5. 8 South
Dakota 3.8 3. 2 3.6 3. 5 3.0 2. 1 2.2 Tennessee 16. 7 9. 9 10. 6 9.0 12. 1
8. 7 8. 6 Texas 11. 4 12.5 8. 7 6.5 6. 8 5.3 4. 6 Utah 7.2 8. 6 8.0 9. 6 7.6
9. 7 12. 6 Vermont 11.4 6. 3 9.1 10. 9 9. 7 13. 3 12. 1 Virgin Islands 5. 2
5.9 5. 4 8.8 7. 4 6.6 5. 9 Virginia 10. 8 11. 6 13. 4 14. 0 13. 0 11. 1 11.
9 Washington 9. 3 9. 7 8. 5 11.3 14. 6 15.2 8. 6 West Virginia 13. 6 13. 9
11. 1 12. 4 11. 2 11. 4 8. 9 Wisconsin 9. 5 10. 5 12. 2 11. 4 13. 7 14. 6
13. 4 Wyoming 7. 0 8.9 7. 6 7.4 9. 1 4.8 2. 9

National average 10. 8 10. 3 9. 7 9. 2 9. 8 10.7 9. 9

Source: FNS

Table 2: Food Stamp Dollar Error and Payment Error Rates by State, Fiscal
Year 1999 Total Annual

Dollars Dollars

payment Overpayment

Underpayment Combined issuance

overissued underissued

errors error rate

error rate error rate State

(thousands) (thousands)

(thousands) (thousands)

(percent) (percent)

(percent)

Alabama $346,450 $33,225 $5, 890 $39,115 9. 6 1.7 11. 3 Alaska 48, 890 5,779
2, 019 7, 798 11.8 4. 1 15. 9 Arizona 232, 827 11,362 4, 773 16,135 4. 9 2.1
6. 9 Arkansas 209,874 7, 744 1, 784 9, 528 3.7 0. 9 4. 5 California 1, 805,
881 143,026 61, 942 204,968 7. 9 3.4 11. 3 Colorado 144,721 9, 103 3, 951
13,054 6. 3 2.7 9. 0 Connecticut 149,596 16,306 4, 488 20,794 10.9 3. 0 13.
9 Delaware 32, 314 3,593 1, 871 5, 464 11.1 5. 8 16. 9 District of Columbia
80, 181 7,625 2, 093 9, 718 9.5 2. 6 12. 1 Florida 819, 257 47,435 29, 821
77,256 5. 8 3.6 9. 4 Georgia 513, 637 40,269 15, 563 55,832 7. 8 3.0 10. 9
Guam 31, 221 2,488 678 3, 166 8.0 2. 2 10. 1 Hawaii 179,885 9, 660 2, 608
12,268 5. 4 1.5 6. 8 Idaho 45, 308 3,063 1, 894 4, 957 6.8 4. 2 10. 9
Illinois 767, 080 84,379 29, 072 113,451 11.0 3. 8 14. 8 Indiana 255,421
14,814 5, 926 20,740 5. 8 2.3 8. 1 Iowa 103,388 6, 513 3, 071 9, 584 6.3 3.
0 9. 3 Kansas 80, 360 5,320 1, 897 7, 217 6.6 2. 4 9. 0 Kentucky 336,772
18,758 7, 241 25,999 5. 6 2.2 7. 7 Louisiana 462,648 23,780 10, 178 33,958
5. 1 2.2 7. 4 Maine 89,118 6, 033 1, 800 7, 833 6.8 2. 0 8. 8 Maryland
237,311 23,897 8, 401 32,298 10.1 3. 5 13. 6 Massachusetts 205,052 14,272 4,
880 19,152 7. 0 2.4 9. 3 Michigan 514,831 63,736 26, 823 90,559 12.4 5. 2
17. 6 Minnesota 170, 672 7,783 3, 618 11,401 4. 6 2.1 6. 7 Mississippi 231,
740 7,763 3, 615 11,378 3. 4 1.6 4. 9 Missouri 348,113 22,210 7, 624 29,834
6. 4 2.2 8. 6 Montana 52, 398 2,971 1, 273 4, 244 5.7 2. 4 8. 1 Nebraska 66,
150 7,230 2, 176 9, 406 10.9 3. 3 14. 2 Nevada 56, 060 3,134 1, 430 4, 564
5.6 2. 6 8. 1 New Hampshire 30,746 3, 062 892 3, 954 10.0 2. 9 12. 9 New
Jersey 345,707 33,603 11, 097 44,700 9. 7 3.2 12. 9 New Mexico 144,188
11,521 3, 475 14,996 8. 0 2.4 10. 4

(Continued From Previous Page)

Total Annual

Dollars Dollars

payment Overpayment

Underpayment Combined issuance

overissued underissued

errors error rate

error rate error rate State

(thousands) (thousands)

(thousands) (thousands)

(percent) (percent)

(percent)

New York 1,464,474 93,873 59, 311 153,184 6. 4 4.1 10. 5 North Carolina
434,765 27,608 12, 608 40,216 6. 4 2.9 9. 3 North Dakota 25, 690 1,588 473
2, 061 6.2 1. 8 8. 0 Ohio 536,385 34,007 11, 210 45,217 6. 3 2.1 8. 4
Oklahoma 221,448 20,041 6, 267 26,308 9. 1 2.8 11. 9 Oregon 190,451 15,503
4, 495 19,998 8. 1 2.4 10. 5 Pennsylvania 704,175 54,574 21, 407 75,981 7. 8
3.0 10. 8 Rhode Island 61, 300 2,716 1, 600 4, 316 4.4 2. 6 7. 1 South
Carolina 251,171 10,851 3, 667 14,518 4. 3 1.5 5. 8 South Dakota 36, 974 717
92 809 1. 9 0.3 2. 2 Tennessee 424, 614 29,129 7, 601 36,730 6. 9 1.8 8. 6
Texas 1, 255, 473 40,677 16, 447 57,124 3. 2 1.3 4. 6 Utah 73, 203 5,893 3,
294 9, 187 8.1 4. 5 12. 6 Vermont 34,293 3, 368 778 4, 146 9.8 2. 3 12. 1
Virgin Islands 22,193 925 375 1, 300 4.2 1. 7 5. 9 Virginia 282,345 22,446
11, 011 33,457 8. 0 3.9 11. 9 Washington 260,240 15,745 6, 506 22,251 6. 1
2.5 8. 6 West Virginia 208,103 14,650 3, 829 18,479 7. 0 1.8 8. 9 Wisconsin
123, 795 11,872 4, 741 16,613 9. 6 3.8 13. 4 Wyoming 19,468 343 224 567 1.8
1. 2 2. 9

Total $15,768,357 $1,107,980 $449, 799 $1, 557,779 7. 0 2.9 9. 9

Table 3: States' Collection of Food Stamp Overpayments by Collection Method,
Fiscal Year 1999

Dollars in Thousands U. S. Treasury offset program State Recoupment a and
other federal collections b Other c Total

Alabama $990 $1,053 $562 $2, 604 Alaska 155 12 131 298 Arizona 1, 228 421
975 2, 624 Arkansas 238 318 295 850 California 11,694 6, 968 6, 851 25, 513
Colorado 773 1, 693 933 3, 398 Connecticut 681 241 385 1, 308 Delaware 195
331 170 695 District of Columbia 376 290 11 676 Florida 3, 048 4,461 652 8,
162 Georgia 3, 104 2,633 1, 792 7, 529 Guam 128 0 52 181 Hawaii 1, 324 40
412 1,776 Idaho 122 204 127 454 Illinois 5, 317 9,858 1, 000 16, 175 Indiana
686 1, 936 431 3, 053 Iowa 266 438 357 1, 061 Kansas 704 921 196 1, 821
Kentucky 427 412 644 1, 482 Louisiana 2,346 1, 680 538 4, 563 Maine 336 34
214 585 Maryland 1,216 905 306 2, 427 Massachusetts 103 150 1,557 1, 810
Michigan 3,178 3, 759 -331 6, 607 Minnesota 1, 745 1,746 1, 671 5, 163
Mississippi 1, 661 1,872 720 4, 253 Missouri 1,272 1, 476 d 1,729 Montana
260 195 89 544 Nebraska 383 153 46 583 Nevada 189 187 90 465 New Hampshire
84 101 115 300 New Jersey 5,748 4, 122 1, 266 11, 137 New Mexico 1,310 1,
020 97 2, 427 New York 7,927 5, 624 1, 433 14, 984

(Continued From Previous Page)

U. S. Treasury offset program State Recoupment a and other federal
collections b Other c Total

North Carolina 759 1, 380 1, 039 3, 178 North Dakota 200 222 115 537 Ohio
2,409 5, 471 1, 661 9, 541 Oklahoma 626 419 151 1, 196 Oregon 1,121 1, 456
846 3, 422 Pennsylvania 6,623 4, 424 2, 537 13, 584 Rhode Island 53 53 104
210 South Carolina 1,869 493 619 2, 981 South Dakota 118 23 62 203 Tennessee
2, 128 2,267 863 5, 258 Texas 5, 198 12,924 6, 836 24, 957 Utah 116 213 254
583 Vermont 161 180 40 381 Virgin Islands 77 0 35 112 Virginia 529 949 681
2, 159 Washington 852 1, 783 156 2, 792 West Virginia 908 528 447 1, 883
Wisconsin 661 1,180 848 2, 690 Wyoming 73 127 25 225

Total $83,696 $89,348 $40, 086 $213, 130

a When a claim is established against a household still actively
participating in the Food Stamp Program, the state may reduce the
household's monthly benefits until the overpayment has been collected,
provided the household does not make other payment arrangements. b When
claims against households no longer participating in the program have gone
uncollected, states

may submit them to the U. S. Department of the Treasury Offset Program.
Figures include collections through offset and voluntary payments made by
the household. c Includes all state methods except for recoupment and
federal collections through the Treasury Offset Program. Households that are
financially able to pay the claim at one time, for example, may make a lump
sum cash payment. The state agency is responsible for establishing a payment
schedule for

households that are unable to pay the entire amount of the claim at one
time. d Data on other state collections were not available for Missouri.
Source: FNS.

Factors in Calculating the Excess Shelter Cost

Appendi x I II

Deduction Source: FNS' 1997 Food Stamp Desk Reference Guides

FNS' Financial Sanctions and Enhanced

Appendi x V I Funding Table 4: FNS' Financial Sanctions of States, Fiscal
Years 1995 to 1999

Dollars in Thousands

State FY 1995 FY 1996 FY 1997 FY 1998 FY 1999

Alabama $0 $0 $0 $0 $219 Alaska 0 0 199 570 980 Arizona 6, 029 0 0 0 0
California 0 28 0.2 6, 381 0 Connecticut 0 389 0 898 1, 145 Delaware 0 0 321
97 653 District of Columbia 0 0 0 0 61 Florida 2, 451 324 155 4,003 0
Georgia 1, 162 825 2, 589 4,412 0 Guam 0 5 0 0 0 Illinois 4, 261 11, 556 18,
539 8,861 3, 861 Indiana 17,277 76 0 0 0 Iowa 531 1,359 0 735 0 Kansas 0 0 0
13 0 Maryland 2,110 1,632 2, 776 5,847 1, 019 Michigan 0 3, 389 2, 771
26,820 19, 773 Mississippi 29 254 0 0 0 Missouri 5,271 9,003 3, 675 0 0
Nebraska 0 146 331 2, 281 529 Nevada 0 197 413 0 0 New Hampshire 13 1 2 0 96
New Jersey 0 0 0 534 1,303 New York 0 0 79 6, 981 0 North Carolina 0 361 294
3 0 North Dakota 0 0 39 0 0 Ohio 24,609 11, 783 1, 224 0 0 Oklahoma 644 314
0 7 119 Oregon 0 1, 070 2, 126 1, 409 0 Tennessee 442 0 2, 262 0 0 Utah 0 16
0 0 141 Vermont 0 129 0 207 69 Virginia 6,174 10, 909 3, 667 56 50
Washington 0 2, 076 8, 541 6, 104 0 West Virginia 517 2,762 390 103 0

(Continued From Previous Page)

State FY 1995 FY 1996 FY 1997 FY 1998 FY 1999

Wisconsin 1, 383 1,019 2, 340 1,842 606

Total $72,386 $59,623 $52, 733 $78,164 $30, 624 a

Note: As required by law, FNS imposes financial sanctions on states whose
combined error rate exceeds the national average. States are required to pay
the sanction or provide additional state funds, beyond their normal share of
administrative costs, for reinvestment in error reduction efforts. a FNS
adjusted financial sanctions for fiscal year 1999 to take into account
states that had high proportions of households with earned income and/ or
immigrants. Source: FNS.

Table 5: FNS' Enhanced Funding for States With Low Error Rates, Fiscal Years
1995 to 1999

Dollars in Thousands

State FY 1995 FY 1996 FY 1997 FY 1998 FY 1999

Alabama $0 $1, 070 $0 $0 $0 Alaska 1,096 0 0 0 0 Arizona 0 0 0 298 0
Arkansas 809 3, 165 2, 709 0 4, 099 Hawaii 1,624 1, 520 1, 884 1, 700 0
Kentucky 5, 084 3, 045 1,012 0 0 Louisiana 0 0 3, 095 0 0 Massachusetts 5,
558 5, 789 0 0 0 Minnesota 0 0 0 4,495 0 Mississippi 0 0 0 0 5, 161 Rhode
Island 845 0 0 0 0 South Carolina 0 0 0 0 758 South Dakota 613 700 704 653
714 Texas 0 0 0 19,742 27, 941 Virgin Islands 255 0 0 0 0 West Virginia 517
0 0 0 0 Wyoming 0 0 0 557 549

Total $16, 401 $15, 289 $9, 404 $27,445 $39, 222

Note: States qualify for enhanced funding if (1) their combined payment
error rate is less than or equal to 5.9 percent, and (2) their negative case
error rate- which measures the frequency with which states improperly denied
food stamp benefits to qualified applicants- is below the national weighted
average for the prior fiscal year. Source: FNS.

Appendi x V

States' Use of Reporting Waivers a a c

d c

d $100

b Hour

$100 b

Hour or Status

Quarterly Five- Waivers

or Waivers $80 No $80 Status

Quarterly Five- No Alabama

Montana

Alaska

Nebraska

Arizona

Nevada

Arkansas

New Hampshire

California

New Jersey

Colorado

New Mexico

Connecticut

New York

Delaware

North Carolina

District of Columbia

North Dakota

Florida

Ohio

Georgia

Oklahoma

Guam

Oregon

Hawaii

Pennsylvania

Idaho

Rhode Island

Illinois

South Carolina

Indiana

South Dakota

Iowa

Tennessee

Kansas

Texas

Kentucky

Utah

Louisiana

Vermont

Maine

Virgin Islands

Maryland

Virginia

Massachusetts

Washington

Michigan

West Virginia

Minnesota

Wisconsin

Mississippi

Wyoming

Missouri Note: Some states have more than one reporting waiver in place. In
November 2000, FNS promulgated regulations that gave the states the option
to require households with earned income to report semiannually, unless a
household has changes that result in its gross monthly income

exceeding 130 percent of the monthly poverty income guideline for its
household size. To qualify for this option, a state must have a
certification period of 6 months or more. a The threshold reporting waiver
raises the earned income changes that households must report to more than
$100 per month. (Households still must report if a member gains or loses a
job.) Without this waiver, households would be required to report any wage
or salary change of $25 or more per month.

b The status reporting waiver limits the income changes that households must
report to three key events: (1) gaining or losing a job, (2) moving from
part- time to full- time employment or vice versa, and (3) a change in the
wage rate or salary. c The quarterly reporting waiver eliminates the need
for households with earned income to report any

changes during a 3- month period, provided the household provides required
documentation at the end of the period. d The 5- hour reporting waiver
limits changes that households must report to three key events: (1) gaining
or losing a job; (2) a change in wage rate or salary; and (3) a change in
hours worked of more than 5 hours per week, if this change is expected to
continue for more than a month. Source: FNS.

Appendi x VI

GAO Contacts and Staff Acknowledgments GAO Contacts Robert E. Robertson,
(202) 512- 5138 Richard Cheston, (202) 512- 5138 Acknowledgments In addition
to those named above, Christine Frye, Debra Prescott, and

Michelle Zapata made key contributions to this report.

(150167) Lett er

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GAO United States General Accounting Office

Page 1 GAO- 01- 272 Reducing Food Stamp Payment Errors

Contents

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Page 3 GAO- 01- 272 Reducing Food Stamp Payment Errors United States General
Accounting Office

Washington, D. C. 20548 Page 3 GAO- 01- 272 Reducing Food Stamp Payment
Errors

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Appendix I

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Appendix II

Appendix II States' Payment Error Rates and Efforts to Collect Overpayments

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Appendix II States' Payment Error Rates and Efforts to Collect Overpayments

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Appendix II States' Payment Error Rates and Efforts to Collect Overpayments

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Appendix II States' Payment Error Rates and Efforts to Collect Overpayments

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Appendix II States' Payment Error Rates and Efforts to Collect Overpayments

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Appendix III

Appendix III Factors in Calculating the Excess Shelter Cost Deduction

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Appendix IV

Appendix IV FNS' Financial Sanctions and Enhanced Funding

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Appendix V

Appendix V States' Use of Reporting Waivers

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Appendix VI

United States General Accounting Office Washington, D. C. 20548- 0001

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