Food Stamp Program: Program Integrity and Participation 	 
Challenges (27-JUN-01, GAO-01-881T).				 
								 
The Food and Nutrition Service (FNS) and the states have taken	 
actions to reduce fraud, waste, and abuse in the Food Stamp	 
Program. GAO's past work has found FNS and the states need to	 
make better use of electronic data to track individuals and	 
storeowners who may be trafficking in food stamp benefits. GAO	 
also found that financial sanctions and enhanced funding have	 
been at least partially successful in focusing states' attention 
on minimizing payment errors. However, this ''carrot and stick'' 
approach can only accomplish so much. Food stamp regulations for 
determining eligibility and benefits are extremely complex and	 
their application is 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 with which 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 reduce payment error rates and promote program 
participation by eligible recipients. FNS has begun to look at	 
options for simplifying requirements for determining benefits.	 
However, in view of the upcoming reauthorization, it is critical 
that FNS follow through with this process and develop options	 
that strike an appropriate balance between the sometimes	 
competing objectives of ensuring program integrity and		 
encouraging eligible individuals to participate. To be		 
successful, this process must include a continuing dialogue with 
all appropriate stakeholders, including congressional members and
state officials, and must ensure that actions are taken to	 
streamline the program while at the same time improving program  
integrity.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-881T					        
    ACCNO:   A01275						        
  TITLE:     Food Stamp Program: Program Integrity and Participation  
             Challenges                                                       
     DATE:   06/27/2001 
  SUBJECT:   Food relief programs				 
	     Eligibility determinations 			 
	     Erroneous payments 				 
	     Federal/state relations				 
	     State-administered programs			 
	     Internal controls					 
	     Program abuses					 
	     Food Stamp Program 				 
	     National School Lunch Program			 
	     Temporary Assistance for Needy Families		 
	     Program						 
								 

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GAO-01-881T
     
Testimony

Before the Subcommittee on Department Operations, Oversight, Nutrition, and
Forestry, Committee on Agriculture, House of Representatives

United States General Accounting Office

GAO For Release on Delivery Expected at 2: 00 p. m. EDT Wednesday, June 27,
2001 FOOD STAMP PROGRAM

Program Integrity and Participation Challenges

Statement of Robert E. Robertson, Director Education, Workforce, and Income
Security Issues

GAO- 01- 881T

Page 1 GAO- 01- 881T

Mr. Chairman and Members of the Subcommittee: Thank you for inviting me here
today to discuss our observations on the administration of the Food Stamp
Program. As you know, the U. S. Department of Agriculture?s (USDA) Food
Stamp Program helps lowincome individuals and families obtain a more
nutritious diet by supplementing their income with food stamp benefits.
USDA?s Food and Nutrition Service (FNS) and the states jointly implement the
Food Stamp Program, which is to be reauthorized in fiscal year 2002. The
Food Stamp Program provided about $15 billion in benefits to over 17 million
lowincome individuals in the United States during fiscal year 2000.

The information I am presenting today is based on our past work related to
two fundamental challenges that the Food Stamp Program faces now and will
continue to face in future years: (1) ensuring the integrity of the program,
and (2) minimizing program barriers that might impede eligible individuals
from participating in the program.

In summary, both FNS and the states have taken steps to ensure the integrity
of the Food Stamp Program. For example, under FNS? quality control system,
FNS uses sanctions and incentives to encourage states to reduce their
benefit payment error rates. It has also promoted the exchange of
information among states about potentially successful initiatives for
improving payment accuracy. For their part, states have implemented various
quality control measures including using electronic data matching to
identify ineligible participants and providing special training for food
stamp workers who determine whether applicants are eligible and the amount
of benefits that they receive. The combined overpayment and underpayment
error rate for the Food Stamp Program was about 9 percent of payments made
in fiscal year 2000. The greatest potential for further reducing these
errors may rest with actions aimed at simplifying the extremely complex
rules for determining eligibility and calculating benefits. Simplifying the
Food Stamp Program may also encourage more eligible individuals to
participate in the program. FNS estimates that only about 59 percent of
eligible people participated in the program in 1998, down from 71 percent in
1994. Furthermore, children?s participation in the Food Stamp Program has
dropped more sharply than the number of children living in poverty,
indicating a growing gap between need and assistance. Many reasons may exist
for the decline in overall food stamp participation. For example, in 1999,
we reported that state and local initiatives designed to reduce Temporary
Assistance for Needy Families (TANF) caseloads contributed to the decline in
the food stamp rolls. We made several recommendations to FNS on actions it
should take

Page 2 GAO- 01- 881T

related to these initiatives, and in turn, FNS has taken steps intended to
ensure that eligible people receive food stamp benefits.

The Food Stamp Program provides low- income households with paper coupons or
electronic benefits that can be redeemed for food in about 156,000 stores
across the nation. In fiscal year 2001, the Congress appropriated $20.1
billion for the Food Stamp Program. FNS establishes regulations for
implementing the Food Stamp Program, reviews states? operating plans to
ensure compliance with the regulations, and funds food stamp benefits and
about half of the states? administrative costs. The states administer the
program by determining whether households meet the program?s income and
asset requirements, calculating monthly benefits for qualified households,
and issuing benefits to participants. Household eligibility and benefit
amounts are based on nationwide federal criteria, including household size
and income, assets, housing costs, and work requirements. 1

FNS monitors states? performance by assessing how accurately they determine
food stamp eligibility and calculate benefits. Under FNS? quality control
system, the states calculate their payment errors by annually drawing a
statistical sample of at least 300 to 1,200 active cases, depending on the
average monthly caseload. The states review case information and make 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, and make adjustments to the state?s overpayment and underpayment
errors as necessary. 2

Until the mid- 1990s, most recipients used benefits provided in the form of
coupons to purchase allowable food. According to FNS, as of March 2001, 41
states, the District of Columbia, and Puerto Rico have operational food
stamp EBT systems. Thirty- nine of these systems are operating statewide.
All states are to implement EBT systems by October 1, 2002, unless USDA
waives the requirement. By providing benefits electronically, the federal

1 According to FNS, a household?s gross income cannot exceed $1, 848 per
month for a family of four, and its net income- gross income minus allowable
deductions- cannot exceed $1, 421.

2 To determine each state?s combined payment error rate, FNS adds
overpayments and underpayments, then divides that sum by the total food
stamp benefits paid by the state. Background

Page 3 GAO- 01- 881T

government saves time and money because the process of providing the coupons
is eliminated. Furthermore, an EBT system creates an electronic record of
each food stamp transaction, making it easier to identify and document
instances of fraud and abuse in the program.

Recent legislative initiatives to reform welfare have also affected Food
Stamp Program operations. Specifically, the Personal Responsibility and Work
Opportunity Reconciliation Act of 1996 (PRWORA), which was passed in 1996 to
reform the nation?s welfare system, also modified aspects of the Food Stamp
Program. 3 To reform welfare, PRWORA replaced the Aid to Families with
Dependent Children entitlement program with the TANF program and gave the
states responsibility for administering TANF through block grant funding. In
implementing welfare reform, the states have, for example, used PRWORA?s
flexibility to (1) require that applicants look for jobs before their TANF
applications are processed; (2) offer one- time, lump- sum payments (known
as diversion payments) to potential applicants rather than enroll them in
the TANF program; and (3) disqualify individuals from participation in the
Food Stamp Program if they have committed TANF violations, thereby reducing
the household?s total food stamp benefit. 4 Almost all of the states use a
single application for the food stamp and welfare programs to reduce
administrative costs, even though the eligibility rules for these two
programs are different.

Though welfare reform retained the Food Stamp Program as an entitlement for
qualifying participants, it tightened eligibility requirements and eased
administrative requirements. It disqualified able- bodied adults without
dependents who, during the preceding 36- month period, received food stamp
benefits for at least 3 months but worked less than 20 hours per week. 5
Similarly, the act required that the states, by August 1997, remove from
their rolls most permanent resident aliens who were previously eligible to
receive food stamps. 6 In addition, PRWORA replaced

3 P. L. 104- 193, Aug. 22, 1996. 4 See Welfare Reform: States Are
Restructuring Programs to Reduce Welfare Dependence (GAO/ HEHS- 98- 109,
June 18, 1998).

5 States may ask FNS to waive the work requirement for groups of individuals
who live in an area where the unemployment rate is over 10 percent or there
are not enough jobs. 6 As of Nov. 1, 1998, the Agricultural Research,
Extension, and Education Reform Act of 1998 (P. L. 105- 185) restored
eligibility for the Food Stamp Program to permanent resident aliens who (1)
were living in the United States when PRWORA was enacted in Aug. 1996 and
were over 65, or (2) are under age 18.

Page 4 GAO- 01- 881T

several specific administrative requirements with more general standards
that give states more flexibility in operating their food stamp programs.

Over the years, we have reported on program integrity concerns in the Food
Stamp Program. 7 Fraud, waste, and abuse in the program generally occur in
the form of either improper payments to food stamp recipients or trafficking
in food stamp benefits. 8 The states and FNS have taken steps to reduce
inaccurate payments to food stamp recipients and reduce trafficking in food
stamp benefits. However, all of the state officials we contacted for a
recent study believe that the most effective way to reduce payment errors
and program costs is to simplify food stamp rules, such as those pertaining
to program eligibility.

Inaccurate payments can be in the form of overpayments or underpayments to
food stamp recipients. Overpayments occur when ineligible persons are
provided food stamps, as well as when eligible persons are provided more
than they are entitled to receive. Overpayments can be caused by inadvertent
or intentional errors made by recipients and caseworkers. According to FNS?
quality control system, the states overpaid food stamp recipients about $976
million in fiscal year 2000 and underpaid recipients about $360 million.
Together, overpayment and underpayment errors amounted to about 9 percent of
food stamp benefits. About 54 percent of these errors occurred when state
food stamp workers made mistakes, such as misapplying complex food stamp
rules in calculating benefits. The remaining 46 percent of the errors
occurred because participants, either inadvertently or deliberately, did not
provide accurate information to state food stamp offices. While the states
and FNS have taken steps to address payment errors, state officials told us
that they believe simplifying food stamp rules will have the greatest impact
on reducing payment errors and program cost.

7 See Food Assistance: Reducing Food Stamp Benefit Overpayments and
Trafficking (GAO/ RCED- 95- 198, June 23, 1995); Food Stamp Program:
Storeowners Seldom Pay Financial Penalties Owed for Program Violations (GAO/
RCED- 99- 91, May 11, 1999); and Food Stamp Program: Better Use of
Electronic Data Could Result in Disqualifying More Recipients Who Traffic
Benefits (GAO/ RCED- 00- 61, Mar. 7, 2000.) 8 Trafficking of food stamp
benefits is the exchange of food stamps for cash or certain nonfood items.
It occurs when a storeowner gives a recipient a discounted cash payment
(often 50 cents on the dollar) for food stamp benefits and then redeems the
benefits at full face value from the government. Inaccurate Benefits

and Trafficking of Food Stamp Benefits Affect Program Integrity

Steps Have Been Taken to Address Inaccurate Payments, but Program
Simplification May Be Needed

Page 5 GAO- 01- 881T

In a recent report we identified states? efforts to minimize food stamp
payment errors and examined what FNS has done or could do to encourage and
assist the states in reducing such errors. 9 We found that all 28 states we
contacted had taken action in recent years to reduce payment errors. 10
While these states took various actions to reduce payment error rates, most
states took the following five actions:

 verified the accuracy of benefit payments calculated by state food stamp
workers through supervisory and other types of case file reviews,

 provided specialized training for state food stamp workers,

 analyzed quality control data to identify causes of common payment errors
and develop corrective actions,

 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

 used computer software programs to assist caseworkers in determining
benefit amounts.

Some states also increased the frequency with which certain types of food
stamp households must provide documentation in order to maintain their
eligibility for food stamp benefits- a process called recertification. For
example, even though FNS regulations require that food stamp households be
recertified only annually, almost half of the states we contacted 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 make appropriate adjustments to household benefits,
possibly avoiding a payment error. However, more frequent certification can
also inhibit program participation for eligible participants because it
creates additional reporting burdens for food stamp recipients.

9 See Food Stamp Program: States Seek to Reduce Payment Errors and Program
Complexity (GAO- 01- 272, Jan. 19, 2001). 10 These states, which included 14
with payment error rates below the national average and 14 above the
average, delivered about 74 percent of all food stamp benefits in fiscal
year 1999. States and FNS Have Taken

Action to Reduce Payment Errors

Page 6 GAO- 01- 881T

FNS has taken several steps to encourage states to minimize their payment
error rates, including providing financial incentives to states that have
error rates substantially below the national average and imposing financial
sanctions on states that exceed the national average. When error rates are
too high, states are required to either pay a penalty fee 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. In fiscal year 2000, FNS imposed $46 million in
financial sanctions on 18 states whose error rates were above the national
average of 9 percent. In that same year, FNS provided $55 million in
enhanced funding to 11 states whose payment error rates were less than or
equal to 5. 9 percent- well below the national average.

FNS also has reduced the opportunity for payment errors by allowing the
states to reduce food stamp reporting requirements for certain recipients.
For example, FNS expanded the availability of waivers related to reporting
requirements, such as the waiver that raises the earned income changes that
households must report. 11 FNS was concerned that the increase in employment
among 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 because eligible households may not view
food stamp benefits as worth the time and effort it takes to obtain them. As
a result of these concerns, FNS established regulations in November 2000
that gave 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.

Finally, FNS has promoted initiatives to improve payment accuracy through
the exchange of ?best practices? information among states. Since 1996, FNS
has compiled catalogs of states? payment accuracy practices that provide
information designed to help other states develop and implement similar
initiatives.

11 Other waivers include one that 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. Another 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.

Page 7 GAO- 01- 881T

While imposing financial sanctions, offering incentives, and granting
waivers related to food stamp reporting requirements can help states reduce
payment errors, the 28 state officials we spoke with believed that
simplifying the complex food stamp requirements for determining eligibility
and calculating benefits offered the greatest potential for additional
reductions in payment errors. In supporting simplification, the state
officials generally cited caseworkers? difficulty in correctly applying food
stamp rules to determine eligibility and calculate benefits. 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. The states also cited
the need to simplify food stamp rules for determining the valuation of
vehicles. The Food Stamp Act of 1977 was recently revised to allow the
states to use the same vehicle valuation rules that they use for TANF, if
these rules would result in fewer assets attributed to the household. 12

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. 13 The Food Stamp Program
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.

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, the process of 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. 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

12 See The Agriculture, Rural Development, Food and Drug Administration, and
Related Agencies Appropriations Act for fiscal year 2001 (P. L. 106- 387).
13 While USDA?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. State Officials Believe

Simplifying Food Stamp Rules May Be Most Effective in Reducing Errors and
Program Costs

Page 8 GAO- 01- 881T

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, unreported changes and
child support payments often result in a payment error.

In our view, simplifying the program?s rules and regulations offers an
opportunity to, among other things, reduce payment error rates and promote
program participation by eligible recipients. We have recommended that FNS
develop and analyze options to simplify requirements for determining program
eligibility and benefits and, if warranted, submit legislative proposals to
simplify the program. As part of its preparations for the program?s upcoming
reauthorization, FNS has begun to examine alternatives for improving the
Food Stamp Program, including options to simplify requirements for
determining benefits.

While payment errors affect whether food stamp recipients receive
appropriate food stamp benefits, trafficking results in the improper use of
benefits. In March 2000, FNS estimated that stores trafficked in about $660
million a year in food stamp benefits, or about 3- 1/ 2 cents of every
dollar of food stamp benefits issued. 14 In the past, we have reported on
federal efforts to identify storeowners who engage in trafficking, the
amount of penalties assessed and collected against these storeowners, and
states? efforts to identify and disqualify recipients who engage in
trafficking. 15 We discovered the following:

 FNS does not sufficiently use electronic databases to identify storeowners
who engage in trafficking. While FNS and USDA?s Office of Inspector General
use a variety of sources, including EBT databases, to identify suspect
traffickers, we have noted in various reports that electronic data could be
used more effectively to identify additional storeowners and recipients
engaged in trafficking. In addition, we found that most states with
statewide EBT systems were not independently analyzing EBT data

14 In May 2001, FNS began working with USDA?s Economic Research Service to
provide input for a study that will develop data collection methods, using
electronic data, and a framework for annually measuring and reporting on the
extent of trafficking in the United States.

15 See Food Stamp Program: Information on Trafficking Food Stamp Benefits
(GAO/ RCED- 98- 77, Mar. 26, 1998); GAO/ RCED- 99- 91, May 11, 1999; and
GAO/ RCED- 00- 61, Mar. 7, 2000. Better Use of Electronic

Data Needed to Reduce Trafficking

Page 9 GAO- 01- 881T

to identify recipients who may be trafficking in food stamp benefits.

 While FNS almost always assessed penalties against storeowners when its
investigations showed they had violated the program?s requirements,
storeowners generally did not pay the assessed financial penalties.
According to agency officials, the small percentage of fines they are able
to collect reflect the difficulties involved in collecting this type of
debt, such as problems in locating debtors and their refusal to pay.
However, we found that weaknesses in the agency?s debt collection procedures
and practices also contributed to low collections.

We made several recommendations to FNS on ways it could improve the
integrity of the program by more effectively using EBT data, including
providing guidelines to states on reviewing electronic data. FNS has begun
to take steps to implement our recommendations. In addition, along with
USDA?s Office of Inspector General, we recognize the importance of improving
state use of EBT data and we are working with USDA to determine best
practices for using these data to identify food stamp recipients and
storeowners who may be defrauding or abusing the program.

Participation in the Food Stamp Program has dropped by about 33 percent
during the past 4- 1/ 2 years. The monthly average number of participants
declined from 25.5 million in fiscal year 1996 to about 17.1 million in the
first half of fiscal year 2001. Although factors such as the strong U. S.
economy and tighter eligibility requirements have been cited as primary
reasons for the dramatic decline in food stamp participation in recent
years, there remains a large gap between the number of people eligible to
receive benefits and the number participating in the program. Some of this
gap may be explained by other factors, such as past initiatives designed to
reduce TANF caseloads, confusion about eligibility requirements after the
passage of PRWORA, and administrative burdens placed on food stamp
participants that might discourage participation. The Strong Economy

and Other Factors Have Reduced the Number of People Eligible for Food
Stamps, Yet Many Who Are Eligible Are Not Participating

Page 10 GAO- 01- 881T

In 1999 we reported that the strong U. S. economy was one of the primary
factors contributing to the decline in food stamp participation. 16 Since
more people were employed and earning more money, the number of people who
met the program?s income eligibility standard decreased. In addition, the
length of time some people spent on the food stamp rolls was reduced because
they found new jobs more quickly. Finally, when the economy is strong, the
percentage of eligible people participating in the program may be indirectly
lowered. This is because, as households? income levels rise and food stamp
benefits fall proportionally, households may decide not to apply or seek
recertification for these benefits, especially when they approach the
minimum benefit level of $10 per month.

We also reported that tighter food stamp eligibility requirements have also
contributed to the decline in food stamp participation. Specifically, the
passage of PRWORA tightened eligibility requirements for able- bodied adults
without dependents, making fewer people eligible for food stamps. During
fiscal year 1997, participation in the Food Stamp Program by these two
groups fell by about 714,000 people, accounting for about 25 percent of the
decline in food stamp participation that year.

While some of the decline in participation can be explained by factors that
reduce the overall number of people eligible to receive benefits, an
increasing percentage of people eligible for food stamp benefits are not
participating in the program. Specifically, FNS estimates that only about 59
percent of eligible people in the United States received food stamp benefits
in September 1998- a 12 percentage- point drop from the estimated 71 percent
of eligible people participating in September 1994. In addition, there is
evidence to suggest that a growing gap exists between the number of children
living in poverty- an important indicator of children?s need for food
assistance- and the number of children receiving food stamp assistance.
Between 1995 and 1999, the number of children receiving food stamp benefits
declined by 33 percent, while the number of children living in poverty
declined by only 17 percent. Further, during this

16 Food Stamp Program: Various Factors Have Led to Declining Participation
(GAO/ RCED- 99- 185, July 2, 1999). A Strong Economy and

Tighter Eligibility Requirements Have Reduced the Number of People Eligible
for Food Stamps

Other Factors May Explain Why Many Individuals Eligible for Food Stamps Are
Not Participating

Page 11 GAO- 01- 881T

same period of time, the number of children served free lunches in USDA?s
National School Lunch Program increased by about 4 percent. 17

Table 1: Comparison of the Number of Children Receiving Food Stamps With the
Number of Children Living in Poverty, 1989- 99

Number in thousands

Year Children who received

food stamps a Children living in poverty b

1989 9,442 12,590 1990 10,139 13,431 1991 11,960 14,341 1992 13,364 15,294
1993 14,211 15,727 1994 14,407 15,289 1995 13,879 14,665 1996 13,212 14,463
1997 11,868 14,113 1998 10,546 13,467 1999 9,354 12,109 a Totals are
estimates by fiscal year.

b Totals are estimates by calendar year. Source: FNS for food stamp data;
the U. S. Bureau of the Census, within the U. S. Department of Commerce, for
poverty data.

In 1999, we reported that state and local initiatives designed to reduce the
TANF caseloads contributed to the decline in their food stamp rolls. 18 In
several states and localities, FNS identified barriers to food stamp
participation and policies that improperly removed eligible households with
children from the food stamp rolls as a sanction for a TANF violation. This
occurred, in part, because FNS had still not established regulations that
implemented PRWORA?s revisions to the Food Stamp Act and the guidance it had
already issued was considered nonbinding. In addition, we found that only
three of FNS? seven regional offices regularly conducted annual reviews of
each state in their jurisdiction, even though FNS? regulations require such
reviews. FNS regional offices had not examined

17 To be eligible for a free lunch, a child must come from a household whose
income is at or below 130 percent of the federal poverty guideline. 18 GAO/
RCED- 99- 185, July 2, 1999.

Page 12 GAO- 01- 881T

program access in nine states and the District of Columbia from October 1996
through June 1999. These reviews have previously identified obstacles, such
as gaining access to benefits, which might inhibit individuals from
participating in the program.

To ensure that eligible people receive food stamp benefits, we recommended
that FNS establish regulations requiring that the states (1) inform each
applicant for assistance of the right to apply for food stamps during the
first meeting and (2) limit sanctions on the food stamp benefits to only the
individual- not the household- who does not comply with a welfare
requirement. FNS established regulations in November 2000 and January 2001
that implemented both parts of our recommendation. We also recommended that
FNS give higher priority to aggressively targeting obstacles related to
participants? access to food stamp benefits in reviewing states? food stamp
operations. Since our report was issued, FNS has conducted participant
access reviews in each of the 50 states; Washington, D. C.; and the Virgin
Islands.

A 1999 report noted that most nonparticipating households estimated to be
eligible for food stamp participation- including those who had previously
participated in the program- did not apply because they did not think they
were eligible. 19 The food stamp directors of four FNS regional offices
agreed that implementation of TANF has been an important factor in the
decline in participation in their regions. According to these directors,
many people do not apply for food stamps because they assume that if they
are ineligible for TANF, they are also ineligible for food stamps. We
recommended that FNS publicize eligibility requirements for the Food Stamp
Program and distinguish them from the eligibility requirements for TANF. 20
Soon after that recommendation was made, FNS launched a public awareness
campaign to better publicize food stamp eligibility requirements in hopes of
improving participation.

In addition, recent research has indicated that some eligible households may
not participate in the Food Stamp Program because of the perceived

19 Michael Ponza, James C. Ohls, Lorenzo Moreno, and others, Customer
Service in the Food Stamp Program (Washington, D. C.: Mathematica Policy
Research, Inc., July 1999). 20 GAO/ RCED- 99- 185, July 2, 1999.

Page 13 GAO- 01- 881T

difficulty of doing so. 21 Specifically, those who were aware they were
eligible for food stamps but chose not to participate most often cited
reasons related to the administrative burden of applying, such as the time
and costs involved. One survey found that, on average, applicants spent
nearly 5 hours and made at least two trips to the local food stamp office to
apply for food stamps. If states are increasing the frequency with which
certain types of households must be recertified to reduce the likelihood of
payment errors, program participation may be inhibited because of the
additional reporting burdens for food stamp recipients.

FNS and the states have taken actions to reduce fraud, waste, and abuse in
the Food Stamp Program. Our past work has found that FNS and the states need
to make better use of electronic data to track individuals and storeowners
who may be trafficking in food stamp benefits. We also found that financial
sanctions and enhanced funding have been at least partially successful in
focusing states? attention on minimizing payment errors. However, this
?carrot and stick? approach can accomplish only so much. Food stamp
regulations for determining eligibility and benefits are extremely complex
and their application is 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 with which 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 reduce payment error rates and promote program participation
by eligible recipients. FNS has begun to look at options for simplifying
requirements for determining benefits. However, in view of the upcoming
reauthorization, it is critical that FNS follow through with this process
and develop options that strike an appropriate balance between the sometimes
competing objectives of ensuring program integrity and

21 Mathematica Policy Research, Inc., July 1999; and Shelia Rafferty
Zedlewski with Amelia Gruber, Former Welfare Families Continue to Leave the
Food Stamp Program ( Washington, D. C.: Urban Institute, March 2001).
Concluding

Observations

Page 14 GAO- 01- 881T

encouraging eligible individuals to participate. To be successful, this
process must include a continuing dialogue with all appropriate
stakeholders, including congressional members and state officials, and must
ensure that actions are taken to streamline the program while at the same
time improving program integrity.

Mr. Chairman, this concludes my prepared statement. I will be happy to
answer any questions that you or other members of the Subcommittee may have.

For future contacts regarding this testimony, I can be contacted at (202)
512- 7215. Key contributors to this testimony were Dianne Blank, Elizabeth
Morrison, Debra Prescott, and Suzanne Lofhjelm.

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