Food Assistance: Reducing the Trafficking of Food Stamp Benefits
(Testimony, 07/19/2000, GAO/T-RCED-00-250).

Pursuant to a congressional request, GAO discussed the improper
trafficking of food stamp benefits, focusing on: (1) federal efforts to
identify storeowners who engage in trafficking; (2) the amount of
penalties assessed and collected against these storeowners; and (3) the
extent to which states with statewide electronic benefit transfer (EBT)
systems are identifying and disqualifying recipients who engage in
trafficking.

GAO noted that: (1) the Food and Nutrition Service (FNS) and the
Department of Agriculture's (USDA) Office of Inspector General (OIG) use
a variety of databases to analyze transaction patterns to identify
suspect traffickers; (2) they then conduct costly and time-consuming
investigations to confirm actual trafficking; (3) while FNS and the OIG
have identified thousands of storeowners who have trafficked benefits,
there are opportunities to identify additional trafficking storeowners
who are likely to be engaged in trafficking by more effectively using
EBT data; (4) under the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996, federal agencies may use EBT data alone,
without the expense of conducting an undercover investigation, to take
action against storeowners violating the requirements of the Food Stamp
Program; (5) storeowners generally did not pay the financial penalties
they were assessed for trafficking; (6) for example, from 1993 through
1998, FNS and the courts assessed or levied about $78 million in
financial penalties and interest against storeowners for violating Food
Stamp Program regulations, primarily for trafficking; (7) however, they
collected only $11.5 million, or about 13 percent of the total
penalties; (8) FNS wrote off as uncollectible another $49 million, or 55
percent, of the total assessed or levied; (9) the remaining debt was
pending collection at the time of GAO's review; (10) most states with
statewide EBT systems were not analyzing EBT data to identify recipients
who may have been trafficking food stamp benefits; (11) of the 29 states
with statewide electronic benefit systems, as of April 1, 1999, only
4--Florida, Missouri, South Carolina, and Texas--independently analyzed
their electronic databases to identify suspect recipients; (12)
additionally, since 1994, USDA's OIG has identified about 34,000
suspected traffickers in Maryland and provided this information to that
state; (13) all five of these states invested the resources to
investigate suspect recipients and disqualify those engaged in
trafficking; and (14) during 1998 and 1999, these five states were
responsible for disqualifying about 99 percent of the 6,873 individuals
nationwide who were removed from the Food Stamp Program for trafficking.

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

 REPORTNUM:  T-RCED-00-250
     TITLE:  Food Assistance: Reducing the Trafficking of Food Stamp
	     Benefits
      DATE:  07/19/2000
   SUBJECT:  Program abuses
	     Food relief programs
	     Federal/state relations
	     Fines (penalties)
	     Fraud
	     Internal controls
	     Law enforcement
	     Retail facilities
	     Debt collection
	     Electronic funds transfer
IDENTIFIER:  Food Stamp Program
	     USDA Electronic Benefit Transfer System
	     Florida
	     Missouri
	     South Carolina
	     Texas
	     Maryland

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GAO/T-RCED-00-250

Mr. Chairman and Members of the Task Force:

Thank you for the opportunity to present our observations on how to reduce
the [Author ID1: at Mon Jul 10 12:22:00 2000 ]improper trafficking of food
stamp benefits-exchanging food stamps for cash or certain nonfood items. As
you know, t[Author ID1: at Mon Jul 10 12:22:00 2000 ]T[Author ID1: at Mon
Jul 10 12:22:00 2000 ]he Food Stamp Program, one of the nation's largest
assistance programs for low-income Americans[Author ID1: at Mon Jul 10
12:22:00 2000 ], provid[Author ID1: at Mon Jul 10 13:19:00 2000 ]ed [Author
ID1: at Mon Jul 10 12:22:00 2000 ]$16 billion in benefits to about 18
million recipients in 1999. [Author ID1: at Mon Jul 10 13:19:00 2000 ]
And[Author ID1: at Mon Jul 10 13:28:00 2000 ], like many programs, the
[Author ID1: at Mon Jul 10 13:28:00 2000 ]Food Stamp Program is susceptible
to[Author ID1: at Mon Jul 10 13:28:00 2000 ] fraud, waste, and abuse[Author
ID1: at Mon Jul 10 13:28:00 2000 ]. When benef[Author ID1: at Mon Jul 10
13:31:00 2000 ]its are [Author ID1: at Mon Jul 10 13:31:00 2000 ]improperly
exchanged for cash, the storeowner gives a recipient a discounted cash
payment[Author ID1: at Mon Jul 10 13:28:00 2000 ] (often 50 cents on the
dollar) for food stamp benefits[Author ID1: at Mon Jul 10 13:28:00 2000 ].
[Author ID1: at Mon Jul 10 13:28:00 2000 ]T[Author ID1: at Mon Jul 10
13:31:00 2000 ]he storeowner [Author ID1: at Mon Jul 10 13:28:00 2000 ]then
redeems the benefits at full face value from the government.[Author ID1: at
Mon Jul 10 13:28:00 2000 ] welfare programs [Author ID1: at Mon Jul 10
12:22:00 2000 ]and the largest single program administered by the U. S.
Department of Agriculture (USDA)[Author ID1: at Mon Jul 10 13:32:00 2000 ].
[Author ID1: at Mon Jul 10 12:22:00 2000 ] In 1999, USDA provided
about[Author ID1: at Mon Jul 10 13:32:00 2000 ] $16 billion in benefits to
about 18 million recipients[Author ID1: at Mon Jul 10 13:19:00 2000 ].
[Author ID1: at Mon Jul 10 13:32:00 2000 ] [Author ID1: at Mon Jul 10
12:23:00 2000 ]Due to the improved national economy, the program has
steadily declined since 1992 when about $27 billion in benefits were
provided to 24 million recipients. [Author ID1: at Mon Jul 10 13:32:00 2000
]Until the mid-1990s, most recipients were provided coupons to purchase
food, but currently about 70 percent of all benefits are provided
electronically through a card that works [Author ID1: at Tue Jul 11 09:21:00
2000 ]much [Author ID1: at Tue Jul 11 09:22:00 2000 ]like a debit ca[Author
ID1: at Tue Jul 11 09:21:00 2000 ]rd at the grocery checkout counter.[Author
ID1: at Tue Jul 11 09:22:00 2000 ].[Author ID1: at Mon Jul 10 13:35:00 2000
] [Author ID1: at Mon Jul 10 13:36:00 2000 ] All the transactions are
recorded in databases that can be analyzed to identify trafficking. The U.
S. Department of Agriculture's (USDA) Food and Nutrition Service (FNS), in
partnership with the states, administers the Food Stamp Program. [Author
ID0: at ]

[Author ID0: at ]

Our testimony today focuses on[Author ID1: at Mon Jul 10 13:37:00 2000 ]
various aspects of the trafficking problem[Author ID1: at Mon Jul 10
13:36:00 2000 ] that we have addressed over the past 3 years.[Author ID1: at
Mon Jul 10 13:37:00 2000 ] [Author ID1: at Mon Jul 10 13:35:00 2000 ]The
Food Stamp Program, l[Author ID1: at Mon Jul 10 13:27:00 2000 ]ike many
large programs, is susceptible to fraud, waste, and abuse[Author ID1: at Mon
Jul 10 13:28:00 2000 ]. This involves [Author ID1: at Mon Jul 10 13:27:00
2000 ]the participation of ineligible recipients, overpayments and
underpayments to recipients, and the improper use of benefits such as
trafficking-- --the exchange of food stamps for cash or certain non-food
items. Food stamp trafficking is a serious violation of program regulations
and normally involves two parties-a recipient and a storeowner. A storeowner
typically gives a recipient a discounted cash payment for food stamp
benefits (often 50 cents on the dollar). Then, the storeowner redeems the
benefits at full face value from the government.[Author ID1: at Mon Jul 10
13:28:00 2000 ][Author ID0: at ]

[Author ID0: at ]

In the past we have reported on such matters as the improper inclusion of
prisoners and deceased individuals in food stamp households and recipients
receiving benefits from more than one state. Today, however, our discussion
of the Food Stamp Program will focus on trafficking and our three
reports[Author ID1: at Mon Jul 10 13:38:00 2000 ] In particular, we [Author
ID1: at Mon Jul 10 13:38:00 2000 ]have reported on [Author ID1: at Mon Jul
10 13:38:00 2000 ]that addressed [Author ID1: at Mon Jul 10 13:38:00 2000
](1) the nature and extent of the trafficking problem, (2) [Author ID1: at
Tue Jul 11 09:22:00 2000 ]) [Author ID1: at Tue Jul 11 09:22:00 2000
]federal efforts to identify storeowners who engage in trafficking, (2) the
amount of [Author ID1: at Tue Jul 11 09:23:00 2000 ] to collect millions of
dollars in [Author ID1: at Tue Jul 11 09:23:00 2000 ]penalties assessed and
collected [Author ID1: at Tue Jul 11 09:23:00 2000 ]against[Author ID1: at
Mon Jul 10 13:38:00 2000 ]those[Author ID1: at Mon Jul 10 13:38:00 2000 ]
these [Author ID1: at Tue Jul 11 09:23:00 2000 ]storeowners who t[Author
ID1: at Tue Jul 11 09:23:00 2000 ]s[Author ID1: at Tue Jul 11 09:23:00 2000
],rafficked,[Author ID1: at Tue Jul 11 09:23:00 2000 ] and (33[Author ID1:
at Tue Jul 11 09:23:00 2000 ]) the extent to which states with statewide
electronic benefit transfer (EBT) systems are identifying and disqualifying
recipients who engage in trafficking.

In summary, we found the following[Author ID1: at Tue Jul 11 09:23:00 2000
]:

- - A draft USDA study (soon to be released) found that about $660 million,
about 3.5 percent of all benefits, was trafficked at retail stores. A 1995
USDA study had found that trafficking totaled about $815 million,
approximately 4 percent of the food stamps issued. No one knows the extent
of trafficking between individuals before the benefits are redeemed at
authorized stores. Overpayments occur when ineligible persons are provided
benefits, as well as when eligible persons are provided more than they are
entitled to receive. Overpayments are caused by inadvertent and intentional
errors made by recipients and state caseworkers. The latest information
indicates that overpayments in 1999 totaled about $1.1 billion, or about 7
percent of the food stamp benefits issued last year. Errors also result in
underpayments of benefits to recipients; in fiscal year 1999, such
underpayments totaled about $450 million or about 2.9 percent of benefits
issued. [Author ID0: at ]

[Author ID1: at Tue Jul 11 09:24:00 2000 ]

   * FNS and USDA's Office of Inspector General (OIG) use a variety of
     databases to analyze transaction patterns to identify suspect
     traffickers. They then conduct costly and time-consuming investigations
     to confirm actual trafficking. While [Author ID1: at Tue Jul 11
     09:27:00 2000 ]FNS and the OIG, along with [Author ID1: at Tue Jul 11
     09:28:00 2000 ] have[Author ID1: at Tue Jul 11 09:28:00 2000 ]s[Author
     ID1: at Tue Jul 11 09:28:00 2000 ] identified thousands of storeowners
     who [Author ID1: at Tue Jul 11 09:28:00 2000 ]that [Author ID1: at Tue
     Jul 11 09:28:00 2000 ]have trafficked benefits, there are opportunities
     to identify additional trafficking storeowners who are likely to be
     engaged in trafficking by more effectively using EBT data. Under the
     Personal Responsibility and Work Opportunity Reconciliation Act of
     1996, federal agencies may use EBT data alone, without the expense of
     conducting an uncover investigation, to take action against storeowners
     violating the requirements of the Food Stamp Program.

   * Storeowners generally did not pay the financial penalties they were
     assessed for trafficking. For example, from 1993 through 1998, FNS and
     the courts assessed or levied about $78 million in financial penalties
     and interest against storeowners for violating Food Stamp Program
     regulations, primarily for trafficking. However, they collected only
     $11.5 million, or about 13 percent of the total penalties. FNS wrote
     off as uncollectible another $49 million, or 55 percent, of the total
     assessed or levied. The remaining debt was pending collection at the
     time of our review.

   * Most states with statewide EBT systems were not analyzing EBT data to
     identify recipients who may have been trafficking food stamp benefits.
     Of the 29 states with statewide electronic benefit systems, as of April
     1, 1999, only 4--Florida, Missouri, South Carolina, and
     Texas--independently analyzed their electronic databases to identify
     suspect recipients. Additionally, since 1994, USDA's OIG has identified
     about 34,000 suspected traffickers in Maryland and provided this
     information to that state. All five of these states invested the
     resources to investigate suspect recipients and disqualify those
     engaged in trafficking. During 1998 and 1999, these five states were
     responsible for disqualifying about 99 percent of the 6,873 individuals
     nationwide who were removed from the Food Stamp Program for
     trafficking.

In recent reports, we have recommended various ways that FNS can improve its
debt collection activities and better use electronic data to identify
suspected storeowner and recipient traffickers. We have also recommended
that FNS use electronic data to routinely develop reliable estimates of the
extent of trafficking and establish goals and strategies for reducing
recipient trafficking on the basis of these estimates. Appendix I lists our
recommendations and describes the actions FNS has taken to address them.

Background

FNS administers the Food Stamp Program in partnership with the states. It
funds all of the program's food stamp benefits and about 50 percent of the
states' administrative costs. FNS is primarily responsible for developing
the program's policies and guidelines, authorizing retail food stores to
participate in the program, and monitoring storeowners' compliance with the
program's requirements. Its 58 field offices assess financial penalties
against storeowners who violate program regulations. Storeowners violate the
program's requirements when they accept food stamps for nonfood items such
as paper towels, accept food stamp benefits when they are not authorized to
participate in the program, or traffick in food stamp benefits. The states
are specifically responsible for investigating recipients alleged to be
engaged in trafficking and for disqualifying those found trafficking.

According to a 1995 FNS study, about $815 million, or about 4 percent of the
food stamps issued, was trafficked at 9 percent of authorized retail stores
during fiscal year 1993. The study found that most trafficking occurred in
small grocery stores. Last week, FNS released an updated study. This study
estimated that stores trafficked about $660 million a year, or about 3ï¿½
cents of every dollar of food stamp benefits issued, and that most
trafficking occurred in small stores. Our 1998 analysis of 432 trafficking
cases found comparable results--most trafficking occurred in small stores.
Data on the extent of trafficking between parties prior to reaching
authorized retailers are unavailable.

In addition to determining the eligibility of individuals applying for food
stamps, the states are responsible for investigating recipients alleged to
be engaged in trafficking and for disqualifying those found trafficking.
Typically, a recipient found guilty of trafficking is disqualified from the
program for 1 year for the first offense, 2 years for the second offense,
and permanently for the third offense or for trafficking an amount that
exceeds $500. To disqualify an individual from the program, the states often
conduct costly, time-consuming investigations--interviews with the suspect,
undercover observations of transactions, and a more detailed analysis of the
recipient's shopping habits.

Recipients use food stamp coupons or an electronic benefit transfer card to
pay for allowable foods. Food stamp electronic systems use the same
electronic fund transfer technology that many grocery stores use for their
debit card payment systems. After a food stamp recipient receives a card and
a personal identification number, the recipient purchases food by
authorizing the transfer of the food stamp benefits from a federal account
to a retailer's account. At the grocery checkout counter, the recipient's
card is run through an electronic reader, and the recipient enters a
personal identification number to access the food stamp account.

Under the Personal Responsibility and Work Opportunity Reconciliation Act of
1996, all states must implement EBT systems by October 1, 2002, unless USDA
waives the requirement. Currently, 37 states and the District of Columbia
have statewide EBT systems.

Federal Efforts to Identify Storeowners Who Engage in Trafficking

FNS and USDA's OIG use a variety of sources, including EBT databases and
USDA's fraud hotline, to analyze transaction patterns to identify suspect
traffickers. This initial effort is generally followed up with costly and
time-consuming investigations, including undercover investigations, to
confirm actual trafficking. Through these efforts, FNS and the OIG have
identified thousands of storeowners who have trafficked benefits. The OIG
has reported that it spends about 50 percent of its investigative resources
on addressing trafficking and oversight of the Food Stamp Program-the single
largest program administered by USDA.

We found that FNS could have identified additional storeowners who violated
program regulations if it more effectively used EBT data. For example, each
month FNS prepares a list of hundreds of stores in each region that appear
to be highly likely to be violating program regulations, such as
trafficking. Two of the six FNS field offices we visited further analyzed
the data and took administrative action to penalize offending storeowners.
However, the four other FNS field offices were not sure what to do with the
data. Moreover, the head of one of the field offices told us that one
monthly report indicated that over 100 of the stores in her area were
probably engaged in trafficking, but she lacked the resources to further
analyze the data on any of these stores and take action against them.
Further, FNS had no feedback system to inform headquarters of how many of
the stores on the list of likely traffickers were actually reviewed in
detail. Such information would enable headquarters officials to know the
extent to which the listings were examined. At the time of our review, FNS
had no assurance that the stores on the monthly lists were consistently
reviewed.

FNS had made limited use of this information because it had not developed an
effective plan for reviewing and acting upon the data, including designating
responsible staff. FNS officials told us that they need more personnel to
analyze the data on stores that are likely to be trafficking food stamp
benefits. Greater use of EBT data would enable FNS to better leverage its
enforcement resources. Moreover, the Personal Responsibility and Work
Opportunity Reconciliation Act of 1996 permits FNS to use EBT data alone,
without the expense of conducting an uncover investigation, to take action
against storeowners violating the requirements of the Food Stamp Program.

To improve FNS field offices' use of EBT data, we recommended that FNS
develop guidance for its field offices for use in reviewing EBT data to
identify and assess penalties against storeowners who violate Food Stamp
Program regulations. FNS agreed and has initiated corrective actions to
implement the recommendation.

Amount of Storeowner Financial Penalties Assessed and Collected

We found that FNS almost always assessed penalties against storeowners when
its investigations showed that storeowners had violated requirements of the
Food Stamp Program. However, storeowners generally did not pay the financial
penalties they were assessed for trafficking. For example, from 1993 through
1998, FNS and the courts assessed or levied about $78 million in financial
penalties and interest against storeowners for violating Food Stamp Program
regulations, primarily for trafficking. However, they collected only $11.5
million, or about 13 percent of the total penalties. FNS wrote off as
uncollectible another $49 million, or 55 percent of the total assessed or
levied. The remaining debt was pending collection at the time of our review.

According to agency officials, this small percentage of fines collected (13
percent) reflects the difficulties involved in collecting this type of debt,
such as problems in locating debtors as well as their refusal to pay.
However, weaknesses in the agency's debt collection procedures and practices
also contributed to low collections. For example, FNS has not consistently
implemented federal policies, practices, and procedures that are designed to
ensure the effective management and collection of debt. FNS has not
consistently and aggressively collected debt, assessed interest on unpaid
debt, written off uncollectible debt in a timely manner, or established
procedures to identify the causes of delinquencies and develop the
correction actions needed.

To improve FNS' debt collection activities, we recommended that FNS develop
the corrective actions needed to make its debt collection more effective.
FNS agreed and has initiated corrective actions to implement the
recommendation.

Extent to Which States Use EBT Systems to Identify and Disqualify Recipients
Who Traffick

Of the 29 states with statewide electronic benefit systems, as of April 1,
1999, only 4--Florida, Missouri, South Carolina, and Texas--independently
analyzed their electronic databases to identify suspect recipients. These
states viewed this activity as essential to their efforts to improve the
integrity of the Food Stamp Program. Additionally, since 1994, USDA's Office
of Inspector General has identified about 34,000 suspected traffickers in
Maryland and provided this information to that state. All five of these
states relied upon the results of detailed analysis of EBT databases to
identify suspect recipients and invested the resources necessary to
investigate these recipients and disqualify those engaged in trafficking.
For example, for fiscal years 1998 and 1999, these five states were
responsible for disqualifying about 99 percent of the 6,873 individuals
nationwide who were removed from the Food Stamp Program for trafficking
benefits. Although not as aggressive, nine other states investigated suspect
recipients--identified by other sources, such as FNS through its efforts in
disqualifying storeowners--and disqualified those who engaged in
trafficking. The remaining 15 states did not disqualify any recipient for
trafficking during the 2-year period.

Florida and Texas analyze their EBT data to identify stores likely to be
engaged in trafficking and then identify likely trafficking recipients using
those stores. As a result, Texas identified hundreds of recipients suspected
of trafficking at stores identified as likely to be engaged in trafficking.
On the other hand, FNS generally limits its identification of food stamp
recipients to the few cases that it needs to support its actions against a
storeowner. After recipients are identified as suspected traffickers, the
states investigate to confirm whether trafficking actually occurred before
disqualifying those found to be trafficking.

Other states take a different approach. For example, Missouri identifies
suspect recipient traffickers by profiling all recipients in the EBT
database without regard to specific stores. From January through August
1999, Missouri identified about 500 recipients suspected of trafficking food
stamp benefits. Since 1994, Maryland has disqualified about 7,700 recipients
out of about 34,000 referred by OIG as possible traffickers, including 3,000
during fiscal years 1998 and 1999. These referrals were associated with
eight storeowners who were convicted for trafficking.

Of the 15 states that had not taken any action against trafficking
recipients, 5 had received referrals of suspected recipients from FNS.
According to officials in these states, they did not investigate suspect
recipients because the investigations were time-consuming and costly and it
was not cost-effective to do so. The officials in the five states that
disqualified about 99 percent of all those removed from the program
nationwide for trafficking agreed that acting against suspect traffickers
was not cost-effective. However, these officials and FNS officials agree
that identifying suspect recipients and disqualifying those who traffic is
an essential activity for maintaining the integrity of the Food Stamp
Program. They maintain that their efforts act as a deterrent by discouraging
other recipients from engaging in trafficking. In this regard, FNS has
established improving the integrity of the program as a major goal in
complying with the principles of the Government Performance and Results Act
of 1993 (Results Act).

Although EBT data have been available in varying degrees since 1993 to
analyze food stamp transactions for trafficking, FNS has only recently taken
steps to encourage the states to target recipients engaged in trafficking.
In July 1999, FNS instructed its seven regional offices to prepare plans on
how to work with states to best use the EBT data now available to identify,
investigate, and disqualify trafficking recipients. We reviewed the seven
draft plans that were developed and found that they were all different, but
they generally included such activities as defining the federal and state
roles for identifying recipients suspected of trafficking and developing
processes for routinely sharing information. All these plans provide that
FNS would submit to the states the names of suspect recipients associated
with storeowners disqualified from the program. However, states could target
a more extensive list of suspect recipients for investigation. FNS' plans do
not set goals for the number of recipients to be investigated and/or
disqualified. Furthermore, none of the draft plans described how they
contributed to FNS' overall effort to reduce trafficking. The FNS regions
are just beginning to implement the plans.

In our March 2000 report, we reported that FNS was not able to measure the
effectiveness of its or the states' efforts in reducing the overall level of
trafficking because it lacked current, reliable information on the extent of
trafficking. FNS' estimate, developed in 1995, used 1993 data and did not
rely on EBT data. With the introduction of EBT systems in 1993, FNS has an
important tool for developing current estimates of the extent of trafficking
at the local, state, and national levels. Using these estimates, FNS could
establish goals for reducing trafficking on the basis, for example, of the
value of benefits trafficked each year. FNS could then develop strategies to
efficiently and effectively reduce trafficking and use EBT data to measure
the extent to which it was achieving its goals. On July 13, 2000, FNS
released an update to its 1995 study. The new study estimated stores to be
trafficking at $660 million, about 3ï¿½ cents on every dollar of food stamp
benefits provided.

FNS' actions to help the states reduce recipient trafficking was not being
guided by the best available estimate of the extent of trafficking, which
would enable it to better set appropriate goals and strategies, as
prescribed by the Results Act. Instead, as proposed in the draft regional
plans, FNS would work with the states only to investigate the number of
suspect recipients identified as being involved with specific trafficking
storeowners. In its fiscal year 2000 performance plan, FNS' goal is to
disqualify 1,201 stores annually. FNS could realize this goal but not
substantially reduce the overall level of trafficking because the stores
disqualified might be those stores with relatively low levels of
trafficking. FNS has not set priorities for targeting the trafficking
stores--for example, based on the volume of transactions and/or the value of
the benefits trafficked. If FNS set such priorities and identified these
storeowners, additional states might have an incentive to examine more
suspect recipients purchasing at these stores because the likelihood of
recipient trafficking would be greater.

To help states improve their review of EBT data and to obtain a reliable
estimate of the extent of trafficking, we recommended that FNS (1) determine
the best techniques for using EBT data to identify suspected recipient
traffickers and work with states to implement these techniques and (2) use
EBT data to periodically develop reliable estimates of the extent of
trafficking and use these estimates to develop goals and appropriate
strategies for reducing trafficking. FNS agreed and has initiated corrective
actions to implement both of these recommendations.

- - - -

This concludes my statement. I would be pleased to answer any questions that
you may have.

Contact and Acknowledgment

For future contacts regarding this testimony, please contact Lawrence J.
Dyckman on (202) 512-5138. Individuals making key contributions to this
testimony and/or to the reports on which it was based include Ron E. Wood,
John Boyle, and Richard B. Shargots.

[Author ID1: at Tue Jul 11 09:20:00 2000 ]

Recommendations Contained [Author ID1: at Tue Jul 11 09:20:00 2000 ]in
G[Author ID1: at Tue Jul 11 09:20:00 2000 ]AO[Author ID0: at ]

Reports [Author ID1: at Tue Jul 11 09:20:00 2000 ]and Subsequent Agency
Action[Author ID1: at Tue Jul 11 09:20:00 2000 ]s[Author ID1: at Tue Jul 11
09:20:00 2000 ]

[Author ID1: at Tue Jul 11 09:20:00 2000 ]

Food Stamp Program: Storeowners Seldom Pay Financial Penalties Owed for
Program Violations, (GAO/RCED-99-91, M[Author ID1: at Tue Jul 11 09:20:00
2000 ]ay 11, 1999[Author ID1: at Tue Jul 11 09:20:00 2000 ])[Author ID1: at
Tue Jul 11 09:20:00 2000 ]

[Author ID1: at Tue Jul 11 09:20:00 2000 ]

GAO Recommendations [Author ID1: at Tue Jul 11 09:20:00 2000 ]

[Author ID0: at ]

To improve the integrity of the Food Stamp Program, we recommended that the
Secretary of Agriculture direct the Administrator, [Author ID1: at Tue Jul
11 09:20:00 2000 ]Food and Nutrition Service (FNS[Author ID1: at Tue Jul 11
09:20:00 2000 ]), to[Author ID0: at ]

[Author ID0: at ]

   * develop guidance that specifies its field staff's responsibilities,
     duties, and guidelines in reviewing data on electronic benefit
     transfers to identify and assess penalties against storeowners who
     violate Food Stamp Program regulations;[Author ID1: at Tue Jul 11
     09:20:00 2000 ]

   * develop the corrective actions necessary, as required by the Federal
     Claims Collection Standards, to help prevent delinquencies and
     defaults, and determine the priority and resources it needs to assign
     to make debt collection more effective; and[Author ID1: at Tue Jul 11
     09:20:00 2000 ]

   * complete the actions needed to refer delinquent debts with storeowner
     taxpayer identification numbers to Treasury electronically in a timely
     manner. [Author ID1: at Tue Jul 11 09:20:00 2000 ]

[Author ID1: at Tue Jul 11 09:20:00 2000 ]

Agency Action[Author ID1: at Tue Jul 11 09:20:00 2000 ]

[Author ID0: at ]

FNS agreed with each of the GAO recommendations and has initiated actions to
implement them. Regarding the first recommendation, [Author ID1: at Tue Jul
11 09:20:00 2000 ]FNS has issued several policy memorandums to the field and
plans to issue a set of national guidelines for field staff use when
reviewing and analyzing EBT data. Regarding the second recommendation,
FNS[Author ID1: at Tue Jul 11 09:20:00 2000 ] has developed and implemented
a strategy to refer all appropriate delinquent retailer debt, including
retailer Taxpayer Identification Numbers, to the Treasury Department for
collection. Regarding the third recommendation, FNS is developing the
computer software necessary for the electronic transmission of retailer debt
to the Treasury Department.[Author ID0: at ]

[Author ID1: at Tue Jul 11 09:20:00 2000 ]

Food Stamp Program: Better Use of Electronic Data Could Result in
Disqualifying More Recipients Who Traffic Benefits (GAO/RCED-00-61, M[Author
ID1: at Tue Jul 11 09:20:00 2000 ]arch 7, 2000[Author ID1: at Tue Jul 11
09:20:00 2000 ])[Author ID1: at Tue Jul 11 09:20:00 2000 ]

[Author ID0: at ]

GAO Recommendations[Author ID0: at ]

[Author ID0: at ]

To improve the integrity of the Food Stamp Program, we recommended that the
Secretary of Agriculture direct the Administrator of the Food and Nutrition
Service to[Author ID0: at ]

[Author ID0: at ]

   * work with the five states currently using EBT data to determine the
     best techniques for using these data to identify suspected recipient
     traffickers and work with the other states with statewide EBT systems
     to implement the best techniques, as appropriate[Author ID1: at Tue Jul
     11 09:20:00 2000 ], and [Author ID1: at Tue Jul 11 09:20:00 2000 ]

   * use EBT data to periodically develop reliable estimates of the extent
     of trafficking and use these estimates to develop goals and appropriate
     strategies for reducing trafficking. [Author ID0: at ]

[Author ID1: at Tue Jul 11 09:20:00 2000 ]

Agency Action[Author ID1: at Tue Jul 11 09:20:00 2000 ]

[Author ID0: at ]

FNS agreed with both of the GAO recommendations and has initiated actions to
implement them. FNS stated that it fully agrees with GAO's recommendation to
work with the five states which have been identified as currently using EBT
data to identify suspected recipient traffickers and with the other states
with statewide EBT systems to implement the best techniques, as appropriate.
In the near future, FNS expects to publish a final regulation on recipient
claims, which will provide an increased financial incentive for states to be
more aggressive in the pursuit of recipients who traffic in EBT benefits.
Under this new regulation, states will be able to retain 35 percent of each
collection[Author ID1: at Tue Jul 11 09:20:00 2000 ].[Author ID0: at ]

[Author ID0: at ]

With regard to the second recommendation, FNS agree[Author ID1: at Tue Jul
11 09:20:00 2000 ]d and[Author ID1: at Tue Jul 11 09:20:00 2000 ], in July
2000, has issued an update to its 1995 report on the extent of food stamp
trafficking. FNS also reported that it [Author ID1: at Tue Jul 11 09:20:00
2000 ]would use these estimates to develop goals and appropriate strategies
for reducing trafficking. However, [Author ID1: at Tue Jul 11 09:20:00 2000
]according to FNS, current law explicitly prohibits FNS from using Food
Stamp Program funds to conduct studies and evaluations. FNS stated that
restoration of funding to conduct this work is critical to effective
implementation of this recommendation.[Author ID1: at Tue Jul 11 09:20:00
2000 ]

[Author ID1: at Tue Jul 11 09:20:00 2000 ]

(150196)[Author ID1: at Tue Jul 11 09:20:00 2000 ]

  
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