Food Assistance: Computerized Information Matching Could Reduce Fraud and
Abuse in the Food Stamp Program (Testimony, 08/05/98, GAO/T-RCED-98-254).

GAO discussed its observations on reducing fraud and abuse in the Food
Stamp Program, focusing on: (1) an overview of the scope of fraud and
abuse in the program; (2) the ways computerized information can be used
to identify and reduce it; and (3) the potential of the House Committee
on Agriculture, Subcommittee on Department Operations, Nutrition and
Foreign Agriculture Chairman's draft legislation to reduce fraud and
abuse in the program.

GAO noted that: (1) fraud and abuse in the Food Stamp Program generally
occurs in the form of either overpayments to food stamp recipients or
trafficking; (2) overpayments occur when ineligible persons are provided
food stamps, as well as when eligible persons are provided more than
they are entitled to receive; (3) overpayments are caused by inadvertent
and intentional errors made by recipients and errors made by state
caseworkers; (4) for 1997, overpayments totalled about $1.4 billion, or
about 7 percent of the food stamp benefits issued that year; (5) errors
also result in underpayments; in fiscal year 1997, such underpayments
totalled about $509 million; (6) with regard to trafficking, the
Department of Agriculture (USDA) estimated that in 1993 (the latest year
of available data) about $815 million in food stamps, approximately 4
percent of the food stamps issued, were traded for cash at retail
stores; (7) no one knows the extent of trafficking between individuals
before the food stamps are redeemed at authorized retailers; (8) while
USDA has reduced the overpayment rate in recent years, further
reductions could result if the food stamp rolls were matched against
computerized information held by various sources in order to identify
ineligible participants; (9) computer matching can provide a
cost-effective mechanism to accurately and independently accomplish
this; (10) some states already conduct data-matching programs, such as
matches with the rolls of other states to find participants receiving
duplicate benefits; (11) by taking a leading role in promoting the use
and sharing of information among federal and state agencies, USDA can
enhance the states' effectiveness in identifying ineligible participants
and reducing overpayments; (12) the Chairman's draft legislation would
establish a computerized matching process that is intended to prevent
inappropriate payments to food stamp households that include deceased
individuals as members; (13) the draft legislation's objectives are in
line with the intent of recommendations contained in GAO's February 1998
report on payments to these households; and (14) more specifically, the
draft legislation requires state agencies to provide information
regarding individuals who receive food stamp benefits to the Social
Security Administration (SSA) and requires SSA to notify the state
agencies of the individuals who are deceased.

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

 REPORTNUM:  T-RCED-98-254
     TITLE:  Food Assistance: Computerized Information Matching Could 
             Reduce Fraud and Abuse in the Food Stamp Program
      DATE:  08/05/98
   SUBJECT:  Food relief programs
             Computer matching
             Overpayments
             Underpayments
             Program abuses
             Fraud
             State-administered programs
             Proposed legislation
             Eligibility determinations
             Vital records
IDENTIFIER:  Food Stamp Program
             California
             Florida
             New York
             Texas
             
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Cover
================================================================ COVER


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

For Release
on Delivery
Expected at
2:00 p.m.  EDT
Wednesday
August 5, 1998

FOOD ASSISTANCE - COMPUTERIZED
INFORMATION MATCHING COULD REDUCE
FRAUD AND ABUSE IN THE FOOD STAMP
PROGRAM

Statement of Robert E.  Robertson,
Associate Director,
Food and Agriculture Issues,
Resources, Community, and Economic
Development Division

GAO/T-RCED-98-254

GAO/RCED-98-254T


(150084)


Abbreviations
=============================================================== ABBREV

  EBT -
  FNS -
  SSA -
  USDA -

============================================================ Chapter 0

Mr.  Chairman and Members of the Subcommittee: 

Thank you for the opportunity to present our observations on reducing
fraud and abuse in the Food Stamp Program and to offer our views on
the Chairman's draft legislation to help prevent the payment of
benefits to households that include deceased individuals as members. 
As you know, the Food Stamp Program is one of the nation's largest
welfare programs and the largest single program administered by the
U.S.  Department of Agriculture (USDA).  In fiscal year 1997, over
$19 billion in food stamps were provided to about 23 million
recipients,\1 down somewhat from recent years.  The program is the
principal component of the government's food assistance safety net. 
Any program of this magnitude will be susceptible to fraud and abuse,
and the Food Stamp Program is no exception.  It has been subject to
both the participation of ineligible recipients and the improper use
of benefits; however, USDA has been able to reduce the overpayment
error rate in recent years and is taking actions to address food
stamp trafficking--that is, exchanging food stamps for cash or other
non-food items. 

We have reported on the improper inclusion of prisoners and deceased
individuals in food stamp households\2 (the value of benefits that a
household receives is partially determined by the number of eligible
household members) and on the extent of trafficking.  Today, we will
(1) provide an overview of the scope of fraud and abuse in the
program, (2) discuss the ways computerized information can be used to
identify and reduce it, and (3) comment on the potential of the
Chairman's draft legislation to reduce fraud and abuse in the
program. 

In summary: 

  -- Fraud and abuse in the Food Stamp Program generally occurs in
     the form of either overpayments to food stamp recipients or
     trafficking.  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
     are caused by inadvertent and intentional errors made by
     recipients and errors made by state caseworkers.  For 1997,
     overpayments totaled about $1.4 billion, or about 7 percent of
     the food stamp benefits issued that year.  Errors also result in
     underpayments; in fiscal year 1997, such underpayments totaled
     about $509 million.  With regard to trafficking, USDA estimated
     that in 1993 (the latest year of available data) about $815
     million in food stamps, approximately 4 percent of the food
     stamps issued, were traded for cash at retail stores.  No one
     knows the extent of trafficking between individuals before the
     food stamps are redeemed at authorized retailers.

  -- While USDA has reduced the overpayment rate in recent years,
     further reductions could result if the food stamp rolls were
     matched against computerized information held by various sources
     in order to identify ineligible participants.  Computer matching
     can provide a cost-effective mechanism to accurately and
     independently accomplish this.  Some states already conduct
     data-matching programs, such as matches with the rolls of other
     states to find participants receiving duplicate benefits.  By
     taking a leading role in promoting the use and sharing of
     information among federal and state agencies, USDA can enhance
     the states' effectiveness in identifying ineligible participants
     and reducing overpayments.

  -- The Chairman's draft legislation would establish a computerized
     matching process that is intended to prevent inappropriate
     payments to food stamp households that include deceased
     individuals as members.  The draft legislation's objectives are
     in line with the intent of recommendations contained in our
     February 1998 report on payments to these households.  More
     specifically, the draft legislation requires state agencies to
     provide information regarding individuals who receive food stamp
     benefits to the Social Security Administration (SSA) and
     requires SSA to notify the state agencies of the individuals who
     are deceased. 


--------------------
\1 For this testimony, food stamps refers to the benefits provided in
the form of coupons or through electronic benefit transfer. 

\2 Food Stamps:  Substantial Overpayments Result From Prisoners
Counted as Household Members (GAO/RCED-97-54, Mar.  10, 1997) and
Food Stamp Overpayments:  Thousands of Deceased Individuals Are Being
Counted as Household Members (GAO/RCED-98-53, Feb.  11, 1998). 


   BACKGROUND
---------------------------------------------------------- Chapter 0:1

The Food Stamp Program provides a safety net to the millions of
low-income individuals and families nationwide who do not otherwise
have the means to obtain a healthy diet.  Food stamp benefits are
calculated to ensure that households have the resources needed to
purchase a model diet plan based on the National Academy of Sciences'
Recommended Dietary Allowances.  USDA's Food and Nutrition Service
(FNS) administers the program in partnership with the states, funding
all of the program's benefits and about 50 percent of the states'
administrative costs.  FNS develops program policy and guidance, such
as nationwide criteria for determining who is eligible for assistance
and the amount of benefits recipients are entitled to receive, and
oversees the states' activities.  The states are responsible for the
day-to-day operation of the program, including meeting with
applicants and determining their eligibility and benefit levels. 

Food stamp recipients must use their benefits only to purchase
allowable food products from retail food stores that FNS authorizes
to participate in the program.  Recipients use food stamp coupons or
an electronic benefit transfer (EBT) card to pay for these items. 
EBT systems use the same electronic funds transfer technology that
many grocery stores use for their debit card payment systems.  The
Personal Responsibility and Work Opportunity Reconciliation Act of
1996 mandates that all states implement EBT systems by October 1,
2002, unless USDA waives the requirement.  As of March 1998, 16
states had implemented EBT systems statewide, with all other states
in some earlier stage of implementation.  Collectively, about 40
percent of all food stamp benefits are now delivered through EBT
systems. 


   SCOPE OF FRAUD AND ABUSE
---------------------------------------------------------- Chapter 0:2

As we noted in our October 1997 testimony before this Subcommittee,
fraud and abuse in the Food Stamp Program generally occur in the form
of either overpayments to food stamp recipients or trafficking. 
Overpayments occur when ineligible persons are provided food stamps,
as well as when eligible persons are provided more than they are
entitled to receive.  In 1997, the states overpaid recipients an
estimated $1.4 billion, or about 7 percent of the approximately $19.6
billion in food stamps issued.  Some of these overpayments are caused
by intentional or unintentional errors by food stamp recipients,
while others are the result of caseworker errors.  In 1996,
approximately 57 percent of the overpayments were caused by
recipients' errors (36 percent unintentional and 21 percent
intentional), and 43 percent were caused by caseworkers' errors.  It
should also be noted that recipient and caseworker errors can result
in underpayments.  According to FNS' data, food stamp recipients were
underpaid by about $509 million in fiscal year 1997. 

In February 1998, we reported on one specific type of food stamp
overpayment, which is the subject of today's hearing--payments made
to households that included deceased individuals as members.  By
matching automated food stamp records from four states--California,
Florida, New York, and Texas--with death information from the Social
Security Administration's Death Master File, we identified nearly
26,000 deceased individuals who were included in households receiving
food stamps in 1995 and 1996.  These households improperly collected
an estimated $8.5 million in food stamp benefits.  SSA already has a
data exchange system in place to notify the states of deceased
individuals who receive Social Security benefits.  However, the
system does not notify the states of deceased individuals who receive
food stamp benefits but do not receive Social Security benefits.  In
part, this is because of restrictions that certain states place on
the use of the data they supply to SSA for its national data base of
deceased individuals.  We found that with adjustments to its current
data system and the removal of restrictions on the use of the death
data provided by states, SSA could provide states more complete
information on all deceased individuals who are included in
households receiving food stamp benefits.  Consistent with these
findings, we made recommendations aimed at making better use of SSA's
national data base of deceased individuals when determining benefits
for food stamp recipients. 

Prior to our February 1998 report, in March 1997, we reported on
another kind of food stamp overpayment--payments to households that
included inmates of correctional institutions.  Federal regulations
prohibit prisoners from participating in the Food Stamp Program.  By
matching automated food stamp records and prison records in four
states--California, Florida, New York, and Texas--we identified over
12,000 inmates who were included in the households receiving food
stamps in calendar year 1995.  These households improperly collected
an estimated $3.5 million in food stamps in 1995.  Subsequently, in
August 1997, the Balanced Budget Act of 1997 (P.L.  105-33, Aug.  5,
1997) included a provision directing the states to ensure that
individuals who are under federal, state, or local detention for more
than 30 days are not participating in the Food Stamp Program. 

We currently have several reviews, either planned or under way, in
which we are using or will use computer matching techniques to
identify other groups of ineligible Food Stamp Program participants. 
At your request, Mr.  Chairman, one of these reviews will examine
participation in the program by individuals who have been
disqualified for violating program rules.  We plan to examine the
disqualification process and to determine, through computer matching,
the extent to which such ineligible participants receive benefits. 

Regarding trafficking--the second main area of fraud and abuse in the
Food Stamp Program--a 1995 FNS study estimated that up to $815
million,\3 or about 4 percent of the food stamps issued, was
exchanged for cash by authorized retailers during fiscal year 1993. 
The study found that the trafficking rate was highest, 13 percent of
food stamps redeemed, among small, privately owned food retailers
that generally do not stock a full line of food.  In contrast,
supermarkets and large grocery stores had an average trafficking rate
of less than 2 percent of the benefits redeemed.  Data on the extent
to which food stamps are exchanged between individuals prior to
reaching authorized retailers are unavailable. 


--------------------
\3 The Extent of Trafficking in the Food Stamp Program, U.S. 
Department of Agriculture, Food and Nutrition Service, Aug.  19,
1995. 


   OVERPAYMENT LEVELS HAVE
   DECLINED, BUT ADDITIONAL
   ACTIONS TO FURTHER REDUCE FRAUD
   AND ABUSE WOULD BE WORTHWHILE
---------------------------------------------------------- Chapter 0:3

USDA's data show that overpayments in the Food Stamp Program have
declined since 1993.  According to the data, the overpayment error
rate at the national level has decreased from 8.27 percent of the
total benefits provided in fiscal year 1993 to 7.28 percent in fiscal
year 1997.  With the support of the Congress, FNS has increased its
emphasis on achieving payment accuracy and has employed various
initiatives to assist the states in reducing the number of errors. 
For example, FNS sponsored national, regional, and state conferences;
provided direct technical assistance to the states; and facilitated
the exchange of state information on effective strategies for
determining accurate payments. 

Given the program's strong reliance on applicants, clients, and
retailers to comply with program regulations and provide accurate and
timely information, state agencies need to have access to information
that will allow them to independently and cost-effectively verify the
information they are provided and identify noncompliance.  Our
reviews have demonstrated that useful information can be obtained
from (1) matching state food stamp rolls against other databases,
such as prisoner rolls, and (2) reconfiguring existing databases to
provide additional useful information to state agencies, such as
death notices. 

Both an FNS study and our own experiences demonstrate that automated
data matches by the states using food stamp records can provide a
cost-effective means of reducing fraud and improving program
integrity.  The cost of conducting computer matches can be relatively
low for the return generated, which includes identifying ineligible
individuals in the application process before any benefits are issued
and preventing additional issuance once an ineligible participant is
identified. 

State agencies have already implemented computerized matches on their
own initiative, such as matching their information with neighboring
state information to detect duplicate participation.  Two state
agencies we visited have taken steps to obtain information from
credit reporting services to ensure that applicants are eligible for
benefits.  In addition to recouping overpayments, matching efforts
help the program realize savings by identifying erroneous information
during the application process, according to the states. 
Furthermore, the states said that these efforts have a deterrent
effect on applicants who may be considering fraudulent activities. 

FNS can further expand on its recent successes in reducing
overpayments by actively encouraging the states to identify ways to
continue to use computerized information to verify information
provided by applicants and by encouraging states to share their
techniques and information.  FNS can demonstrate its leadership in
this regard by identifying sources of information that would be
useful to the states and ensuring that they have access to that
information. 


   DRAFT LEGISLATION ESTABLISHES A
   PROCESS TO PROVIDE STATES WITH
   INFORMATION ON INELIGIBLE
   PARTICIPANTS
---------------------------------------------------------- Chapter 0:4

The objectives of the Chairman's draft legislation are consistent
with the intent of recommendations contained in our recent report on
inappropriate food stamp benefits received by households who include
deceased individuals as household members.  The draft legislation
would require the Secretary of Agriculture to enter into an agreement
with the Commissioner of SSA under which the Commissioner would
establish a cooperative agreement with each state agency that
administers the Food Stamp Program.  Under the cooperative
agreements, the states would provide SSA with information on
individuals who receive food stamp benefits.  SSA would be required
to compare this information to its records of deceased individuals
and notify the state agencies of such individuals on their food stamp
rolls.  In addition, the draft legislation requires the Secretary to
report to the Congress on the progress and effectiveness of the
cooperative arrangements. 

In our view, the draft legislation is a step forward towards helping
the states better identify and remove ineligible participants from
their rolls.  One important suggestion that would strengthen the
draft legislation would involve directly addressing the issue of
state restrictions on the Commissioner's use of death data.  We would
be happy to work with the Subcommittee to help draft language that
would deal with this issue. 


-------------------------------------------------------- Chapter 0:4.1

Thank you again for the opportunity to appear before you today.  We
would be pleased to answer any questions you may have. 


*** End of document. ***