SPEAKERS CONTENTS INSERTS
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50–430 CC
1998
1998
FOOD STAMP VERIFICATION ACT OF 1998
HEARING
BEFORE THE
SUBCOMMITTEE ON DEPARTMENT OPERATIONS,
NUTRITION, AND FOREIGN AGRICULTURE
OF THE
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
SECOND SESSION
ON
H.R. 4366
AUGUST 5, 1998
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Serial No. 105–59
Printed for the use of the Committee on Agriculture
COMMITTEE ON AGRICULTURE
ROBERT F. (BOB) SMITH, Oregon, Chairman
LARRY COMBEST, Texas,
Vice Chairman
BILL BARRETT, Nebraska
JOHN A. BOEHNER, Ohio
THOMAS W. EWING, Illinois
JOHN T. DOOLITTLE, California
BOB GOODLATTE, Virginia
RICHARD W. POMBO, California
CHARLES T. CANADY, Florida
NICK SMITH, Michigan
TERRY EVERETT, Alabama
FRANK D. LUCAS, Oklahoma
RON LEWIS, Kentucky
HELEN CHENOWETH, Idaho
JOHN N. HOSTETTLER, Indiana
ED BRYANT, Tennessee
MARK FOLEY, Florida
SAXBY CHAMBLISS, Georgia
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RAY LaHOOD, Illinois
JO ANN EMERSON, Missouri
JERRY MORAN, Kansas
ROY BLOUNT, Missouri
CHARLES W. (CHIP) PICKERING, Mississippi
BOB SCHAFFER, Colorado
JOHN R. THUNE, South Dakota
WILLIAM L. JENKINS, Tennessee
JOHN COOKSEY, Louisiana
CHARLES W. STENHOLM, Texas,
Ranking Minority Member
GEORGE E. BROWN, Jr., California
GARY A. CONDIT, California
COLLIN C. PETERSON, Minnesota
CALVIN M. DOOLEY, California
EVA M. CLAYTON, North Carolina
DAVID MINGE, Minnesota
EARL F. HILLIARD, Alabama
EARL POMEROY, North Dakota
TIM HOLDEN, Pennsylvania
SCOTTY BAESLER, Kentucky
SANFORD D. BISHOP, Jr., Georgia
BENNIE G. THOMPSON, Mississippi
SAM FARR, California
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JOHN ELIAS BALDACCI, Maine
MARION BERRY, Arkansas
VIRGIL H. GOODE, Jr., Virginia
MIKE McINTYRE, North Carolina
DEBBIE STABENOW, Michigan
BOB ETHERIDGE, North Carolina
CHRISTOPHER JOHN, Louisiana
JAY W. JOHNSON, Wisconsin
LEONARD L. BOSWELL, Iowa
Professional Staff
PAUL UNGER, Majority Staff Director
GREG ZERZAN, Chief Counsel
STEPHEN HATERIUS, Minority Staff Director
VERNIE HUBERT, Minority Counsel
Subcommittee on Department Operations, Nutrition, and ForeignAgriculture
BOB GOODLATTE, Virginia, Chairman
THOMAS W. EWING, Illinois
Vice Chairman
CHARLES T. CANADY, Florida
NICK SMITH, Michigan
MARK FOLEY, Florida
RAY LaHOOD, Illinois
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JOHN R. THUNE, South Dakota
EVA M. CLAYTON, North Carolina
BENNIE G. THOMPSON, Mississippi
MARION BERRY, Arkansas
GEORGE E. BROWN, Jr., California
SANFORD D. BISHOP, Jr., Georgia
(ii)
C O N T E N T S
H.R. 4366, To require the Secretary of Agriculture to enter into an agreement with the Commissioner of Social Security to take certain actions to ensure that food stamp benefits are not provided for deceased individuals; and to amend the Food Stamp Act of 1977 to require State agencies to verify that such benefits are not provided for such individuals.
Goodlatte, Hon. Bob, a Representative in Congress from the State of Virginia, opening statement
Witnesses
Robertson, Robert E., Associate Director, Food and Agriculture Issues, Resources, Community, and Economic Development Division, General Accounting Office
Prepared statement
Watkins, Shirley, Under Secretary, Food and Consumer Services, U.S. Department of Agriculture
Prepared statement
Submitted Material
American Public Human Services Association, statement
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FOOD STAMP VERIFICATION ACT OF 1998
WEDNESDAY, AUGUST 5, 1998
House of Representatives,
Subcommittee on Department Operations,
Nutrition and Foreign Agriculture,
Committee on Agriculture,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:00 p.m., in room 1300, Longworth Office Building, Hon. Bob Goodlatte (chairman of the subcommittee) presiding.
Present: Representatives Goodlatte, Clayton, and Berry.
Staff present: Kevin Kramp, staff director, Subcommittee on Department Operations, Nutrition and Foreign Agriculture; Callista Bisek, assistant clerk/scheduler; Wanda Worsham, clerk, and Danelle Farmer, minority staff consultant.
OPENING STATEMENT OF HON. BOB GOODLATTE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF VIRGINIA
Mr. GOODLATTE. Good afternoon. This hearing of the Subcommittee on Department of Operations, Nutrition and Foreign Agriculture to review H.R. 4366, legislation to prevent deceased individuals from receiving Food Stamp benefits, is now called to order.
The purpose of this hearing is to receive testimony and written statements reviewing my legislation to ensure that deceased people do not receive Food Stamp Benefits. This hearing is another step in our continuing fight against the waste, fraud, and abuse that denigrates the Food Stamp Program.
In February of this year the General Accounting Office published an audit of four large States that account for 35 percent of the Nation's participants in the Food Stamp Program. They found that nearly 26,000 deceased individuals were included in households receiving food stamps. These households improperly collected an estimated $8.5 million in food stamp benefits. Waste, fraud, and abuse cannot be tolerated. While there may be differences of opinion on how this money should be spent, I believe we can all agree that the nutritional needs of deceased individuals are substantially less than the needs of the living, and this abuse must end.
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Under food stamp rules, households must notify their welfare office of any change in the makeup of the household within 10 days. The GAO report titled, ''Food Stamp Overpayments: Thousands of Deceased Individuals are Being Counted as Household Members,'' shows that the names of the deceased individuals it found were counted in the food stamp household for an average of 4 months, and in a few instances the deceased persons were counted for the full 2 years of the review.
I introduced H.R. 4366, the Food Stamp Verification Act of 1998, in response to this report. This bill requires the Secretary of Agriculture to enter into an information sharing agreement with the Social Security Administration. H.R. 4366 is largely modeled after Senator Lugar's S. 1733, that allows the Social Security Administration to share all of its information on deceased individuals with State agencies administering food stamps. This would enable States to use the most comprehensive information available on deceased persons, and cross-check it with their food stamp roles.
I look forward to hearing the witnesses' testimony today. We have assembled uniquely qualified witnesses that will provide insight into the effectiveness of computer-matching in the fight against waste, fraud, and abuse in the Food Stamp Program.
At this point in the record I would ask that a copy of H.R. 4366 be inserted as well as any statements that Members may have.
[H.R. 4366 follows:]
"The Official Committee record contains additional material here."
STATEMENT OF HON. MARION BERRY
Thank you Chairman Goodlatte and Ranking Member Clayton. I appreciate the opportunity to participate in today's hearing and I support the chairman wholeheartedly in working to eliminate fraud and abuse in the Food Stamp Program.
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The Food Stamp Program was established in May 1939. In October 1939, the first person was caught fraudulently participating in the system. Today, the Food Stamp Program remains the backbone of our national nutrition safety net. Continuing to protect the safety net from fraud and abuse is essential to ensuring the program's long term viability. By implementing new technology and encouraging the coordination between the State and Federal Government we can contribute to making the program operate more efficiently.
A General Accounting Office report completed this February presented evidence that thousands of deceased individuals are being counted as household members of families receiving Food Stamp Programs benefits. This subcommittee is taking an appropriate step in the right direction by considering legislation that will enable the State agencies that manage the benefits to more easily find violators and be notified when someone has passed away so they will be removed from the program.
Thank you Mr. Chairman
Mr. GOODLATTE. At this time, we'll go ahead with the testimony of our first panel, and we should be joined shortly by the ranking member, Mrs. Clayton, of North Carolina, who has been detained, and we will entertain her opening statement when she arrives.
I am pleased to welcome our first panel: Mr. Robert Robertson, Associate Director, Food and Agriculture Issues, Resources, Communities, and Economic Development Division of the General Accounting Office. Mr. Robertson is accompanied by Mr. Keith Olson, Assistant Director of Food and Agriculture Issues, Resources, Community, and Economic Development Division, General Accounting Office.
We would also like to welcome the Honorable Shirley Watkins, Under Secretary for Food and Nutrition Services at the U.S. Department of Agriculture. Ms. Watkins is accompanied by Ms. Bonnie O'Neil, Associate Deputy Administrator of the Food Stamp Program, Food and Nutrition Service, and Ms. Marilyn O'Connell, Associate Commissioner, Office of Program Benefits Policy, Social Security Administration.
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I'd like to welcome all of you and let you know that your written statements will be made a part of the record, and we would be pleased to receive your testimony at this point beginning with Mr. Robertson. Welcome.
STATEMENT OF ROBERT E. ROBERTSON, ASSOCIATE DIRECTOR, FOOD AND AGRICULTURE ISSUES, RESOURCES, COMMUNITY AND ECONOMIC DEVELOPMENT DIVISION, GENERAL ACCOUNTING OFFICE
Mr. ROBERTSON. Good afternoon. I'd like to reintroduce the gentleman to my right here, Keith Olson. He is from our San Francisco regional office, and he is responsible for leading the bulk of the work that our comments today will be based on. So I'm very happy to have him with me this afternoon.
Let me begin by thanking you for allowing us to participate in these hearings. We always appreciate appearing before your subcommittee. I'm going to go ahead and summarize my prepared statement. And what I'll basically do is briefly touch upon three topics.
First, I'll talk a little bit about the nature of, and extent of, fraud and abuse in the Food Stamp Program.
Second, I'm going to talk about the opportunities to use computer-matching in reducing fraud and abuse in the program.
And finally, I'm going to talk about the topic of the day, which is your draft legislation which is aimed at reducing improper food stamp benefits to households who include deceased individuals.
As I said, I'm going to begin with a real quick synopsis of the scope, the nature, of the food stamp fraud and abuse. As we noted in our October 1997 appearance before this subcommittee, fraud and abuse in the Food Stamp Program generally occurs in the form of either overpayments to food stamp recipients or trafficking. Today, obviously, we're focusing on the overpayment side of things.
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Overpayments occur when ineligible people obtain food stamps, as well as when eligible people obtain more than they are entitled to receive. In 1997 the States overpaid food stamp recipients an estimated $1.4 billion or about 7 percent of the value of the food stamps issued that particular year. Some of these overpayments result from errors intentional and unintentional made by food stamp recipients, while the remainder are the result of caseworker errors.
The hearings today are concerned with one particular type of food stamp overpayment, that being an overpayment to a household that includes a deceased individual as a member. Mr. Chairman, we do have some idea of the scope of this particular problem based on our February 1998 report, as you mentioned earlier.
In that report, we matched 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, and identified nearly 26,000 deceased individuals who were included in households receiving food stamps during the 1995 and 1996 period. These households improperly collected an estimated $8.5 million in food stamp benefits.
Now, how can this particular type of overpayment, as well as certain other types of overpayments be reduced? Well, the answer to that question is a perfect segue into my second topic, which is the use of computer information matching.
Based on our February report, as well as our earlier work using computer-matching to identify prisoners who were improperly included in food stamp households, we believe that computer-matching can provide a cost-effective mechanism to reduce certain types of overpayments. In fact, some States are already conducting data-matching programs such as matches with the roles of other States to find participants receiving duplicate benefits.
Our bottom line here, Mr. Chairman, is that by taking a leading role and promoting the use and sharing of information among Federal and State agencies, USDA can enhance the State's effectiveness in identifying ineligible participants and reducing overpayments.
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Finally, concerning the third topic I wanted to cover, our views on the draft legislation under discussion today should come as no big surprise. In short, the objectives of the proposed legislation make a great deal of sense to us, and are consistent with the intent of the recommendations in our February report. More specifically, the bill requires State agencies to provide information regarding individuals who receive food stamp benefits to the Social Security Administration, and requires SSA and notify the State agencies of the individuals who are deceased.
In our view, the draft legislation is the first step towards establishing a process that could assist States in obtaining information they need to prevent overpayment to households that include deceased individuals as members. However, we believe that the draft legislation could be strengthened by directly addressing issues related to the restrictions placed on the use of some of the data in SSA's national database of deceased individuals. In that respect, we'd be happy to work with the subcommittee to draft language to address these issues.
That concludes my summary and will be happy to answer questions after I assume everybody else has spoken.
[The statement of Mr. Robertson appears at the conclusion of the hearing.]
Mr. GOODLATTE. Thank you, Mr. Robertson.
Mr. ROBERTSON. Thank you.
Mr. GOODLATTE. Ms. Watkins, we're always glad to have you join us.
STATEMENT OF SHIRLEY WATKINS, UNDER SECRETARY FOR FOOD AND NUTRITION SERVICES, U.S. DEPARTMENT OF AGRICULTURE
Ms. WATKINS. Thank you so much, Mr. Chairman, and to the committee members. I appreciate you allowing us an opportunity to join you this afternoon to talk about an issue that is very close to this administration's heart. I'd like to request that our written testimony be a part of the record, as you have already indicated.
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Mr. GOODLATTE. Without objection, so ordered.
Ms. WATKINS. And then I will make a few comments.
Joining me today is Ms. Marilyn O'Connell, who is with the Office of the Social Security Administration and Program Benefits Policy; and Ms. Bonnie O'Neil, from our Food and Nutrition Services office who is the Associate Deputy Administrator for the Food Stamp Program.
We want to just perhaps start out and sharing with you that this Nation's most important program in protecting the safety net and nutrition benefit for people in this country, is the Food Stamp Program. And one of the things that we want to ensure is that we are protecting the integrity of this program, which is one of President Clinton's and Secretary Dan Glickman's highest priorities.
The Food Stamp Program was designed to deliver nutrition assistance to the neediest people in this country, and it is the Nation's safety net to prevent hunger and provide for long-term preventive nutrition-related health risk to our neediest people. And we want to make certain that we are protecting that program and we will not tolerate any fraud, waste or abuse in this program, and I have the mandate from Secretary Glickman to ensure that this happens.
Two years ago, Congress passed, and the President signed, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. And this landmark legislation and several subsequent laws helped USDA, in partnership with the States, to move aggressively. One, to tighten the eligibility screening and dramatically increase penalties against recipients who misuse the program. Two, to pursue aggressively, the recovery of improperly issued benefits, and to tighten eligibility and increase penalties of retailers who are committing fraud. And No. 4, expand the rapidly Electronic Benefit Transfer System.
And I want to share with you some of the highlights of the Department's food stamp, anti-fraud efforts, Mr. Chairman, and I want to thank this subcommittee for all of the work that you have done in helping to give us the authority to do what we need to do in this program. And also, to thank GAO for its help in coming up with some recommendations that we can ultimately help prevent fraud and abuse in the program.
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Preventing food stamp benefits from being improperly issued is the Department's first line of defense against abuse and misuse of the Food Stamp Program. And we are working very closely with States to reduce overpayments in making certain that only those households are receiving the eligible amount.
I am pleased to report that over the years, since 1993, we have been able to reduce the error rate. We still have a long way to go, even though in fiscal year 1996 the error rate was the lowest ever achieved. It's inched up just a little bit in 1997 and we are seeing about a 66 percentage point; that's about a half a percentage point higher this year than we had hoped for 1997. But we will continue our aggressive efforts with the State to get these error rates down. We have reduced the overpayment errors totaling nearly $860 million since fiscal year 1993. But as I indicated to you, Mr. Chairman, we have a long way to go and we will continue to work on that aggressively.
Another unreported change that can cause a household to receive more benefits than it should comes about from the failure of the household to report when a household member moves out, when a household member is incarcerated, or when a household member dies. And you are correct, Mr. Chairman, and we agree with you, that it's not the deceased that needs nutritional assistance, but only the living. When those households inadvertently or deliberately provide inaccurate information, FNS encourages the States to do computer matches with Social Security, with State wage databases, and use other sources such as the Department of Motor Vehicles. We're encouraging States to use every available resource so that they can match all of the information, so we can be assured that only those people who are eligible for those benefits are receiving the food stamp benefits.
Last March, Mr. Robertson already indicated that GAO released the report detailing the issuance of food stamps to the deceased individuals. And they concluded that we could improve the integrity of the Food Stamp Program if States use a comprehensive database such as the Social Security Administration's Death Master File. We're very pleased that we are working aggressively with the Social Security Administration, and I feel confident that the work that we can do jointly will help us to achieve what GAO recommended.
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On April 24 of this year, our FNS Administrator sent all State Human Services Commissioners a copy of the GAO report, along with a letter encouraging them to use the databases that was available to them, and to keep us informed as to how they were using the death match activities. And the States have responded to us that they are very strongly supportive of this access, and they want to use this information on the Social Security Administration's Death Master File.
We support efforts to facilitate the sharing of the death information between Social Security Administration and the State food stamp agencies. And we believe that a mandated match by State Food Stamp agencies using this information, and other State vitals statistics data, will be consistent in strengthening the Food Stamp Program's existing match requirement.
Another area that GAO and this subcommittee recommended, and with our encouragement, we're now moving to match nationwide information on the prison inmates with food stamp caseloads.
So we have those two that we are working aggressively with the States on and will continue to do so. We need to make certain that we strengthen our enforcement program of integrity, and eliminate fraud by strengthening those penalties, not only against the recipients, but against retailers as well.
And thanks to the 1996 welfare reform law, the Department now has the authority to suspend retailers immediately for the most various program offenses, trafficking in the food stamp and EBT benefits. Although retailers are, essentially, our partners in the Food Stamp Program, store authorization to participate is a privilege and it is not a right. And to participate, a store owner has to apply directly to one of our field offices, providing that office with information on the store's sales and foodstock, the owner's Social Security number, business tax returns, and other business information. And to the extent possible, and where our resources are available, our FNS field staff conducts store visits so that we can authorize those stores. And in order to make sure that a store, in fact, is a real food store, not a liquor store, or a dry cleaners, or an empty store front, that is devoted to some illegal activities.
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So we currently have 186,000 authorized retailers participating in the Food Stamp Program nationwide. Last year, we had contract staff to help us reform both pre-and post-authorization visits to these stores so that we could gather the information, assuring us that these businesses were actually being conducted by the stores. This year, our staff and contractors will conduct approximately 35,000 pre- and post-authorization store visits, and this will significantly improve our overall retailer integrity.
FNS has about 48 compliance branch investigators that are dedicated to uncovering abuse by authorized retailers. And during the last 5 years, we have investigated over 23,000 stores for a variety of violations. In over 7,000 of the cases, evidence gathered was enough for us to disqualify these stores, or to demand a civil money penalty in lieu of disqualification.
So we are doing an awful lot to make certain that we have no fraud and abuse in these programs. Last year, we successfully deployed an automated, EBT anti-fraud system that was called ALERT, and that ALERT system records EBT transactions electronically.
So we are doing a variety of things that will help us to ensure that we are using the latest technology, and electronic benefit is one of those and we see any use of new technologies that will help us to ensure that we have no fraud, waste or abuse in this program. We have a number of States who are using EBT, and we expect by the year 2002, all of our States will be issuing food stamp benefits electronically. We hope that this will help us to ensure the integrity of our nutritional safety net program, in our Food Stamp Program.
In closing, Mr. Chairman, I want to thank both you and the members of this committee for your interest and commitment in working with the Department in protecting the integrity of the Food Stamp Program. And I can assure you that we will work with you and this committee to make certain that we can protect the integrity of our Food Stamp Safety Net Program for the people who are most in need in this country.
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That concludes my remarks, Mr. Chairman, and Ms. O'Connell, and Ms. O'Neil and I will be glad to answer any questions that you or other members of the committee may have.
[The statement of Ms. Watkins appears at the conclusion of the hearing.]
Mr. GOODLATTE. Thank you, Ms. Watkins. And before we do that, I want to welcome the ranking member of the committee, Congresswoman Clayton from North Carolina, for any statements she'd like to make before we begin questioning.
Mrs. CLAYTON. Just briefly, just to commend you for having the hearing on an issue that's important to make sure that we do, as Under Secretary Watkins said, that the integrity or the purpose of the food stamp is met, and certainly, we defraud those people who need food greatly when we indeed misspend, either intentionally or unintentionally. I do have questions at the appropriate time but thank you for having this hearing.
Mr. GOODLATTE. Thank you, Mrs. Clayton.
Ms. Watkins, was the GAO report the first you learned that deceased individuals were receiving food stamp benefits in excessive numbers?
Ms. WATKINS. In excessive numbers, yes, Mr. Chairman.
Mr. GOODLATTE. Does the Department have any internal auditor review mechanism to search out these sorts of problems? Last year, we had the problem with prisoners receiving food stamp benefits when they were in the slammer getting three squares a day and obviously shouldn't be qualifying for food stamp benefits. And that required a simple legislative solution of requiring that the States run a match between their welfare rolls and their prison rolls to find these folks, which is basically what the GAO had done in a few communities and States around the country. Now this year, we have the problem with deceased individuals.
Do you have any kind of internal operation to review, to find when things are starting to get out of control in certain areas?
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Ms. WATKINS. We do have internal operations, Mr. Chairman, and it's almost impossible for us to do all of the internal, I guess, controls necessary. Because many of these activities are taking place at the State, so it would take an enormous staff in order for us to do everything at the Federal level, and that's why we have to depend so on our partners. And with GAO's support and this committee's support, in helping us to look at some other options, we also depend on others to help us look for a variety of other options and make some recommendations to us also.
Mr. GOODLATTE. Thank you. Does the Department support H.R. 4366 and Senator Lugar's version in the Senate, S–1733?
Ms. WATKINS. Mr. Chairman, we want to work with both you and Mr. Lugar and this committee to ensure that we're doing everything humanly possible to protect the program integrity of the Food Stamp Program, and all of our nutritional assistance program, regardless to what they are. So, we are delighted to work with you and Mr. Lugar in helping to find equitable ways to make certain that these programs—that we are protecting program integrity.
Mr. GOODLATTE. Thank you. The next question I ask both you and Ms. O'Connell, from the Social Security Administration, how effective is computer-matching in fighting waste, fraud, and abuse in the Food Stamp Program?
Ms. WATKINS. I think both of us would probably agree, and I'll let Ms. O'Connell speak for the Social Security Administration, but anytime that you can use matching information to help Federal agencies work together, obviously, that is going to be much more effective than one agency trying to do it. We'd like to see some seamless approach in all of our programs so that you don't have all of the duplication. And if we can piggyback off of their information and use their expertise, obviously, that's going to be a lot more beneficial. And we certainly support working with all of the Federal agencies to help us do our job since we don't have as much money as we'd like to it. We obviously can't do it by ourselves.
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Mr. GOODLATTE. Thank you. Ms. O'Connell.
Ms. O'CONNELL. Social Security takes advantage of almost any type of computer-matching activity we can veil, and that's within our statutes to monitor our own programs. We find that's a very cost-efficient method of detecting overpayments in our programs or finding instances of fraud. We think it would be very useful in the Food Stamp Program.
Mr. GOODLATTE. Thank you. Ms. Watkins, you testified that the USDA supports requirements on State food stamp agencies. Do you think the requirements in this bill are strong enough?
Ms. WATKINS. I think the requirements are strong enough. We may want to look at what the overriding costs are for implementing some of the provisions and what kind of timeframe are we talking about. So I think there are some things that we perhaps would want to work with you on, as we work through this.
Mr. GOODLATTE. Thank you. Mr. Robertson, you testified that the overpayment error rate has been reducing in recent years. What do you attribute that to?
Mr. ROBERTSON. Well, I think the FNS has implement a lot of initiatives over the last few years that have impacted on this overpayment rate, many of which were discussed earlier this morning. The one factor that perhaps wasn't mentioned was a very simple and fundamental one, and that was that, in essence, FNS, a few years ago, just made it a priority to reduce overpayment rates, made a commitment to reduce overpayment rates and communicated this commitment to the State. So I think that was a big contributing factor to the improvements that we've seen over the last few years.
Mr. GOODLATTE. That's good. Do you have any additional suggestions you would make to them to keep the error rate on the decline?
Mr. ROBERTSON. Certainly, they have to maintain the emphasis they've placed on reducing error rate. Plus, based on our work in using computer-matching to identify ineligibles, we think that FNS could play a lead role in encouraging States and other Federal agencies to use information sharing, to use computer-matching, to reduce the overpayment rate.
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Mr. GOODLATTE. In that regard, you had testified I believe, that some States already conduct the data-matching programs. Is that something they've initiated on their own or is it a federally-sponsored initiative?
Mr. ROBERTSON. Well, in regard to the matching to identify prisoners, and in regard to the matching to identify deceased individuals, that in my understanding has been a State initiative.
Mr. GOODLATTE. OK, well, we now have Federal legislation regarding prisoners.
Mr. ROBERTSON. Yes.
Mr. GOODLATTE. At the time we did our work it was all right, very good. Now we will have also, hopefully, when this bill passes, a similar requirement that not just some States but all States participate in that for deceased persons as well.
At this time I would recognize Mrs. Clayton.
Mrs. CLAYTON. Thank you, Mr. Chairman.
The GAO ordered, made several recommendations, Under Secretary Watkins, and they all seemed reasonable and they acknowledge some movement and progress on the part of the Food Stamp Program. Do you find any of these recommendations difficult to implement, and that a year from now we shouldn't see that all of them are implemented? Is there anything in their implementation that—recommendations that you find troubling or the capacity or the structure is not there?
Ms. WATKINS. I don't find any of the recommendations difficult to implement. It may take a great deal of time for us to get some of the things done. As we approach the Year 2000 issue, we're dealing with a variety of things here, so it may take us just a little bit more time to get some of the things done. I don't think it's impossible. I think it's something that's doable, and I think it's something that we should do.
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Mrs. CLAYTON. Well, the recommendation of the data match seems reasonable and logical but sometimes data matching isn't as simply done as said because there is a capacity structure. You have to be able to, you know, not only compare but the instruments to compare it. And I didn't know if there was a problem there so I just raised that just so that one has thought this through. Not to say the recommendations shouldn't be carried out, but if there's a real commitment to that, one thinks through the difficulties, whether it's technical or structural or not, in terms of that.
And towards that end, I was just wondering—in playing off the GAO's comments, so much of this is related to the crime itself or the vendor, for people to tell us when someone in their family is dead. And I could think about a number of things that are related to that, that not only food stamp being sent to a deceased person but other benefits sent to deceased. How often in the Social Security would that problem, the data which we're going to match as a raw data, how quickly is it for Social Security to know that you send a monthly check? Is there ever an opportunity you may send a check the next month and the next month because someone didn't tell you that the person had died? I'm just trying to think this through.
Ms. O'CONNELL. The answer is, I think, yes, although we feel we have pretty good feedback on getting the death information.
Mrs. CLAYTON. Right.
Ms. O'CONNELL. Ninety percent of the data we get on death comes from funeral homes, families, friends, relatives.
Mrs. CLAYTON. Okay.
Ms. O'CONNELL. And, of course, most of that relates to our beneficiaries because most of that is within 7 days of the death.
Mrs. CLAYTON. And that's right. Social Security also administers Medicare of the hospitals and——
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Ms. O'CONNELL. No, we don't administer Medicare.
Mrs. CLAYTON. You don't? OK. I'm in error then. So you just pay the Social Security—you pay your Medicare premiums through the Social Security?
Ms. O'CONNELL. Right. Health Care Financing Administration administers it, but we——
Mrs. CLAYTON. So institutions wouldn't let you know but——
Ms. O'CONNELL. Occasionally, they do and we do get the information from Health Care Financing Administration that they get from hospitals or nursing homes on death.
Mrs. CLAYTON. I think the data-matching makes just abundantly good sense, and I'm just trying to find out how we, indeed, not only cut down on food stamp fraud—and I think we should, and I gather the chairman's bill is designed to do that. Right, Mr. Chairman?
Or if you don't do it, you have a penalty. Is that what that's designed to do?
Mr. GOODLATTE. That's right.
Mrs. CLAYTON. So to cut down the actual fraud, the recommendation to GAO has said that to make sure in case—the enforcement instrument, I gather, is your bill; right?
Mr. GOODLATTE. Yes, the withholding of certain funds.
Mrs. CLAYTON. From whom?
Mr. GOODLATTE. From the States that don't comply.
Mrs. CLAYTON. The States that don't comply. Is that the same one we're using now with the prison? Is that working, do you know? I'll ask the Under Secretary, is that working with prison?
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Ms. WATKINS. I'll ask Ms. O'Neil to address that for you, Mrs. Clayton.
Ms. O'NEIL. We've been working closely with Social Security to try to get the database available to States on the prison matches. In the interim, we've encouraged the States to use their own databases. So at this point we don't have the full experience and full implementation of prisoner match. That legislation asked us to try to implement as much as possible during a year period, which actually today is the end of that year, but gave authority to States that wanted to use the Social Security database to have a year extension. And most States, for that portion of the data that is not directly available to them within the State that required the data from Social Security, had asked for an extension.
Mrs. CLAYTON. Yes, I'm perhaps the only one who doesn't understand that the prison population is not necessarily on the Social Security database, but correlate that for me. Aren't there some prisoners who wouldn't be on her database? Everybody has a Social Security number. Is that what it is?
Ms. O'NEIL. Yes, one of the issues is that States have information for the institutions within the State, but in terms of people that may be located or incarcerated outside the State, they depend on Social Security to provide that data.
Mrs. CLAYTON. I see. So the Social Security Administration could tell you persons who are incarcerated outside the State, but you would go to the prison system to tell if this person incarcerated within the State?
Ms. O'NEIL. Yes, within the State, though it is difficult sometimes because they're dealing with local sheriffs as well as Federal prisons, State prisons. So some of them may have more complete information than others.
Mrs. CLAYTON. Well, I think whatever we need to do, we ought to do it but I just wanted to make sure that what we think we put in place to achieve that, that we have a chance to reassess to see if it's doing what we want it to do. So I would be appreciative for getting further information to see if the structure needs to be looked at more carefully. Thank you, Mr. Chairman.
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Mr. GOODLATTE. Thank you, Mrs. Clayton, and I might add, I'm advised by staff that we will be offering an amendment when we mark-up the bill to beef up those provisions related to no requirements, that funds be withheld if States don't comply with a cross-check provisions.
This time I'm pleased to recognize the gentleman from Arkansas, Mr. Berry.
Mr. BERRY. Thank you, Mr. Chairman, and I appreciate you holding these hearings. I welcome my former colleagues. I can tell you, after listening to this discussion, I'm even more confident than I was at the Department when many of these efforts began and I know how hard and aggressive the Department has been to pursue food stamp fraud and deal with it effectively. And I compliment you on your efforts so far and I am confident that that will continue, and we look forward to working with you to get the job done.
Mr. GOODLATTE. That was easy. [Laughter.]
We'll do a second round because I've got a few more questions. Mr. Robertson, is the USDA playing a role in promoting the use and sharing of information among Federal and State agencies? I think you've answered that somewhat already.
Mr. ROBERTSON. Yes, they are. I mean, they've talked this afternoon, about the role they're planning, for example, in implementing the strategy to assure that prisoners aren't included on food stamp rolls, among other things.
Mr. GOODLATTE. You testified that 57 percent of overpayments were recipient errors. Would you give some examples of intentional versus unintentional errors?
Mr. ROBERTSON. We've got plenty of examples, and I'll turn that over to the man that knows them best of all, Keith Olson.
Mr. GOODLATTE. Mr. Olson, welcome.
Mr. OLSON. Thank you, Mr. Chairman. I'll give you a couple of examples of intentional errors and then examples of unintentional errors, if I may.
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Intentional errors are generally when someone misrepresents the information at the time of application, or fails to notify the agency or the State administrators, subsequent to the application of a change in their status. These could be the household size, the assets of the household, the income of the household, or the expenses of the household such as shelter expense.
An example would be, Mr. Chairman, of deliberate errors. In December 1994, an applicant applied for food stamps. They were recertified annually in November 1995, November 1996, and November 1997; so three times they were recertified. This individual assumed the identity belonging to an individual that passed away in August 1991. So, in effect, we overpaid that individual about 36 months in food stamps, 24 that we included in our report and 12 which we didn't because they were prior to the period we were checking.
Another example would be an applicant applied in August 1995. They reported the death of an individual in January 1996, but the actual death of the individual occurred in March 1995, approximately 5 months before the application. Again, this is 6 months of overpayments and it was a deliberate fraud case. It appeared to be done by fraud.
An unintentional error can occur, both on the recipient's behalf and on the case worker's behalf. One example I have should provide an indication of both those. During a recertification in May 1994, the food stamp applicant reported the death of her son. The son passed away in November 1993. However, she was about 5 months late in reporting this death, but sometimes this is understandable. Some people don't have a reporting to the agency on top of their mind when they lose their loved one. But it still went on 5 months before the report was made, so that may be an unintentional error on behalf of the recipient. However, the food stamp son was not removed from the rolls until May 1995, which was a year after the report. So that was an error on the case worker for not taking action on it. That sort of gives you kind of the errors that we uncovered.
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Mr. GOODLATTE. We have about 5 minutes. You've been saved by the buzzer.
Mr. Olson, let me ask you, can you estimate the percentage impact on this error rate that this bill might have?
Mr. OLSON. We can't estimate the error rate on the bill itself, Mr. Chairman. We did not do a statistically-valid sample of all the States. We only did four States to do our analysis to indicate there is a large number of individuals receiving food stamps because they had deceased individuals included in their households, or had as listed in their households.
However, we do believe it would have an impact on one, being disincentive to people who try to do this in the future because they're aware that we have the program to identify it, and as word travels from one to the other they would be less inclined to include people who have deceased. So we think it would have a significant impact.
Mr. GOODLATTE. Ms. Watkins, or maybe Ms. O'Neil can answer this, I don't know. Can you tell me how often a food stamp recipient meets with a State welfare agent?
Ms. WATKINS. I sure can't, Mr. Chairman, but Ms. O'Neil might be able to.
Ms. O'NEIL. It does vary and each individual certification worker has to meet face-to-face with someone when they initially apply and their eligibility is determined. After that it's up to the case worker to look at the circumstances and assign a certification period that may not exceed 12 months. If you have earned income, we've been encouraging States to certify people for no longer than 3 months. If you are on SSI or Social Security and you're the only household member, it would normally be a year.
Mr. GOODLATTE. So, in other words, if they follow those directives and certify them for only 3 months or 6 months, do they then have to have another face-to-face meeting?
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Ms. O'NEIL. Yes, they do, sir.
Mr. GOODLATTE. How does the agency track when a member of a recipient household moves out of an approved household and applies for his or her own benefits?
Ms. WATKINS. The agency does not. Now the States would put information in place and procedures in place in order to do the tracking for that.
Mr. GOODLATTE. OK, that may be food stamp fraud part 3 if we find that there are a lot of people who are creating separate households but are still being counted as previous households?
Ms. WATKINS. And that certainly is something that they are supposed to report; as income changes, household sizes change, that information is supposed to be reported. And of course, again, we can track that through Social Security numbers.
Mr. GOODLATTE. Would their database include both the individual who applied for the food stamps, but also every other member of the household who's being counted?
Ms. WATKINS. The database would.
Mr. GOODLATTE. And so that could be run as a match to make sure that there weren't two households counting the same individual recipient?
Ms. WATKINS. Yes. Some States have pretty sophisticated databases in place, and we just encourage them to use as many databases as available for matching all of the information, whether it's Social Security or whatever else they have in that State.
And one of the other questions that was raised earlier as to what the Department is doing to ensure that States are using every available resource to ensure program integrity, both the Secretary and I have sent separate letters to all of the Governors to ensure and encourage them to do to everything humanly possible to take on the responsibility of ensuring that we reduce errors in the Food Stamp Program, and protect program integrity.
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Mr. GOODLATTE. Let me finish with one last question. Do you have an estimate of the cost of the computer-matching that would be required by legislation similar to mine and Senator Lugar's?
Ms. WATKINS. We have not done an estimate. In fact, we've had lots of discussion about what this would entail. Obviously, you're talking about an extensive amount of programming costs for the States, as well as how they could use this information and whether or not they have systems in place for all of these databases.
Mr. GOODLATTE. We don't have that ourselves either yet, although the Congressional Budget Office did estimate for the Prisoner Food Stamp Match legislation that we passed last year, that would cost about $1 million and that other data processing costs are approximately 2 cents per case, which would seem to me to make it well worth making that check if we're uncovering in this case perhaps as much as $20 million worth of waste or fraud each year.
Ms. WATKINS. And we certainly do need to do a cost-benefit analysis, and I'm sure that would be something that we would work with you and the committee to establish a cost-benefit analysis of this. Because whatever we can do to ensure program integrity, we need to do so.
Mr. GOODLATTE. Mrs. Clayton.
Mrs. CLAYTON. I just want to followup a question and ask if any GAO audit you found those systems already and if you had any indication of what the capacity—that was the implication of my earlier question.
Mr. ROBERTSON. Yes, I'd like to respond to that. Obviously, this question of cost, of how much it's going to cost to implement depends, on the system that you implement, and if you're talking about basically using the Social Security Administration's Death Master File.
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What we were told is that they have a system, the State Verification Exchange System, that can be modified relatively easily, to provide the type of information that's needed to make this system work. In other words, to have States input their queries to SSA, SSA makes the matches and then responds. Again, it depends, the cost depends on what system you're using.
Mr. GOODLATTE. At this point, we don't see the need to come back after these votes. So we'll adjourn and I would say that we may, either Mrs. Clayton or myself or other members of the committee, submit questions to you in writing if we feel there is need for a further elaboration. And the Chair would seek a unanimous consent to allow the record of today's hearing to remain open for 10 days to receive additional material and supplemental written responses from witnesses to any question posed by a member of the panel. Without objection it is so ordered.
And this hearing of the Department Operations, Nutrition, and Foreign Agriculture Subcommittee is adjourned.
[Whereupon, at 3:00 p.m., the subcommittee adjourned subject to the call of the Chair.]
[Material submitted for inclusion in the record follows:]
Statement of Robert E. Robertson
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. In fiscal year 1997, over $19 billion in food stamps were provided to about 23 million recipients,For this testimony, food stamps refers to the benefits provided in the form of coupons or through electronic benefit transfer. 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.
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We have reported on the improper inclusion of prisoners and deceased individuals in food stamp householdsFood 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). (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.
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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.
BACKGROUND
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 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.
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SCOPE OF FRAUD AND ABUSE
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.
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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,The Extent of Trafficking in the Food Stamp Program, U.S. Department of Agriculture, Food and Nutrition Service, Aug. 19, 1995. 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.
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OVERPAYMENT LEVELS HAVE DECLINED, BUT ADDITIONAL ACTIONS TO FURTHER REDUCE FRAUD AND ABUSE WOULD BE WORTHWHILE
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.
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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 INFORMATION ON INELIGIBLE PARTICIPANTS
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.
Thank you again for the opportunity to appear before you today. We would be pleased to answer any questions you may have.
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Statement of Shirley Watkins
Good morning, Mr. Chairman and members of the committee. I am Shirley Watkins, Under Secretary for Food, Nutrition and Consumer Services at the U.S. Department of Agriculture. With me this afternoon is Marylin O'Connell, Associate Commissioner, Office of Program Benefits Policy at the Social Security Administration.
A crucial part of the President's and Secretary Glickman's commitment to delivering nutrition assistance to needy Americans is ensuring the integrity of the food stamp program, protecting it from those who would misuse or abuse it. The food stamp program is our Nation's most important nutrition program, and protecting its integrity is one of our highest priorities. We do not and will not tolerate fraud and abuse in the food stamp program.
I welcome the opportunity to appear before you to thank you for your unwavering bipartisan support for the food stamp program during times of great change in our Nation's approach to assistance programs, and for your commitment to working with the Department to identify ways to strengthen program management and keep public confidence high in this vital program.
Two years ago, Congress passed, and the President signed, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. This landmark legislation, and several subsequent laws, helped USDA, in partnership with the States, move aggressively to:
tighten eligibility screening and dramatically increase penalties against recipients who misuse the program;
pursue aggressively the recovery of improperly issued benefits;
tighten eligibility and increase penalties for retailers committing fraud; and
expand rapidly electronic benefit transfer (EBT) systems.
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Today, I would like to share with you some highlights of the Department's Food Stamp Program anti-fraud efforts, as well as talk about the work we are doing to implement legislation sponsored by this Subcommittee and other changes suggested in recent reports issued by the General Accounting Office.
Preventing food stamp benefits from being improperly issued is the Department's first line of defense against the abuse and misuse of food stamps.
FNS works closely with the States to reduce overpayments and payments to ineligible households, and I am pleased to report that, nationally, we have seen a dramatic improvement in payment accuracy since 1993. Error rates fell by about half a percent each year in 1994, 1995, and 1996. The fiscal year 1996 error rate was the lowest ever achieved. Although error rates increased in 1997, rates are well below earlier levels, and total savings since FY 1993 from reduced overpayment errors total nearly $860 million.
We use several methods to prevent recipients who would abuse the food stamp program from getting an opportunity to do so. Unreported income is a leading cause of ineligible households receiving benefits or eligible households receiving more benefits than they should. Another unreported change that can cause a household to receive more benefits than it should comes about from the failure of the household to report when a household member moves out, is incarcerated, or dies.
Critical to the success of the Department's activities to combat fraud is our interaction and exchange of information with States. To date, the State exchange program has made it possible for State and local managers to travel to other States to view first-hand those States' anti-fraud programs. It has also helped to fund sessions within a State to train eligibility workers on fraud prevention techniques.
When households inadvertently or deliberately provide inaccurate information, the Food and Nutrition Service encourages States to do computer matches with Social Security, with State wage data bases, and with other sources such as the Department of Motor Vehicles. The information gathered when States match food stamp rolls against SSA data, wages, State new hire registries, and motor vehicle data facilitates the identification of those individuals ineligible to receive food stamp benefits and overpayments. In addition, it facilitates the recovery of overpayments and the establishment of penalties against those who have deliberately committed fraud.
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Last March, GAO released a report detailing the issuance of food stamps to deceased individuals, concluding that we could improve the integrity of the food stamp program if States used a comprehensive database such as the Social Security Administration (SSA) death master file.
In April, the President directed the Departments of Labor, Veterans Affairs, Justice, Education and Agriculture to use the Social Security Administration's expertise and high-tech tools to enhance their own efforts to weed out any inmate who is receiving Veterans' benefits, food stamps, or any other form of Federal benefit denied by law.
On April 24, 1998, FNS sent all State Human Services Commissioners a copy of the GAO report, along with a letter encouraging them to use the databases available to them and to keep us informed of their death match activities. States responded to us that they strongly supported access to the SSA death master file.
We support efforts to facilitate the sharing of death information between the Social Security Administration and State food stamp agencies. We believe that a mandated match by State food stamp agencies using SSA death or other State vital statistics data is consistent with and will strengthen the Food Stamp Program's existing matching requirements.
In addition, in response to legislation sponsored by this Subcommittee and a recent GAO study, States, with our encouragement, are now moving to match nationwide information on prison inmates with food stamp caseloads.
GAO's reports have identified cost-effective ways States can utilize automated data to improve the integrity of the food stamp program.
In spite of Federal and State efforts to prevent mistakes in the issuance of food stamp benefits, this does happen, and when it does, the food stamp program aggressively pursues claims and penalties against households. Uncollected claims represent a substantial loss of money to the Federal Government, a result that undermines public support. Establishing claims and collecting them requires a substantial commitment on States' part.
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For many years, States have had difficulty recovering claims from recipients who refused to respond to written requests to pay. As a result, primarily of the Federal Tax Refund Offset Program, recipient repayments have greatly increased in recent years. States collected $186 million in recipient claims in fiscal year 1997—nearly double the pre-offset collections of 1991. Of the $186 million collected, fraud claims represented $60 million; claims for inadvertent household errors represented $104 million; and claims for State agency mistakes $22 million. Of the total, $60 million represent either Federal offsets or voluntary payments triggered by the threat of these offsets.
Thus far in 1998, we have collected $69 million through Federal tax offset, Federal salary offset and voluntary payments. When the Department of Treasury completes implementation of the Debt Collection Improvement Act of 1996, we will also be able to collect recipient claims from other Federal payments.
We have increased recipient fraud disqualifications; they are up twelve percent from 94,124 in fiscal year 1996 to almost 106,000 in fiscal year 1997.
The 1996 welfare reform legislation, which passed two years ago this month, provided the Department with much sought after authority to strengthen enforcement of program integrity and eliminate fraud by strengthening penalties not only against recipients, but against retailers as well. Thanks to the 1996 welfare reform law, the Department now has authority to suspend retailers immediately for the most egregious program offenses—trafficking in food stamp and EBT benefits.
Retailer oversight is a Federal responsibility, and begins with FNS screening retailers seeking approval to accept food stamps or EBT cards at their stores. Although retailers are essential partners in the food stamp program, store authorization to participate is a privilege, not a right. To participate, a store owner applies directly to one of our field offices, providing that office with information on the store's sales and food stock, the owners' social security numbers and business tax returns, and other business information.
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To the extent possible and where resources are available, FNS field staff conduct store visits prior to authorizing a store, in order to make sure the store is, in fact, a real food store, not a liquor store or a dry cleaners, or an empty storefront devoted to illegal activities. Currently, there are 186,700 authorized retailers participating in the food stamp program nationwide. Last year, we hired contract staff to perform pre- and post- authorization visits to stores to gather information for us on the nature of the business actually being conducted by the store. This year, our staff and contractors will conduct approximately 35,000 pre- and post- authorization store visits to significantly improve overall retailer integrity. Still, in spite of our screening efforts, some authorized stores have owners or employees willing to sell ineligible items or engage in trafficking.
FNS has a staff of 48 compliance branch investigators dedicated to uncovering abuse by authorized retailers. During the last five years, FNS has investigated over 23,000 stores nationwide suspected of violations, and found evidence of violations in 45 percent of the investigations. In over 7,000 of the cases, evidence gathered was enough to disqualify the stores or demand a civil money penalty in lieu of a disqualification. Agency investigators uncovered trafficking—as opposed to sales of ineligible items—in over 4,000 of these stores.
FNS' compliance branch has also been actively pursuing civil prosecution through the U.S. Department of Justice under the Civil False Claims Act against stores found trafficking in food stamps, which we estimated in 1993 as $815 million annually. Since this initiative began in 1992, there have been 580 negotiated settlements or judgments on FNS compliance branch cases, with settlements and judgments totaling over $5.9 million.
Issuing food assistance benefits electronically has also changed and improved the way we protect these benefits from fraud and abuse, by reducing street trafficking and by creating an electronic paper-trail linking those who cheat the program with the crime. Maryland, New Jersey, New Mexico, South Carolina and Texas have all used EBT data to identify recipient trafficking.
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Last year, FNS successfully deployed an automated EBT anti-fraud system called ALERT. The ALERT system records EBT transactions electronically so we have a record of the store, the date, the time, the purchase amount, the recipient's card number and the point of sale terminal. ALERT's computerized system examines and analyzes this data, quickly identifying suspicious patterns and speeding our ability to investigate, process and remove cheating stores from the program.
Two years ago, FNS began aggressive efforts to sanction stores based on the pattern of individual EBT transactions, resulting in over 125 stores being disqualified from the program. We look to this figure to grow as the use of ALERT becomes more widespread.
Electronic benefit delivery is key to delivering food stamp benefits efficiently, affordably and securely to recipients in a way that both improves the quality of service and reduces the stigma associated with paper coupons In 1992, barely one percent of all food stamp households nationwide were receiving their food stamp benefits electronically. Today, we estimate 47 percent of all households are using an EBT card to access their benefits.
The number of States converting to EBT has grown dramatically too. Thirty-six States have now implemented food stamp EBT systems, in all or parts of their States. Today, 48 percent of all benefits are issued electronically and, by the end of this year, that figure will rise to 50 percent. All States will be issuing food stamp benefits electronically by the year 2002.
The Vice President has undertaken an initiative to encourage the use of EBT for multiple program delivery. States are combining food stamp program, temporary assistance for needy families, and other benefits on a single EBT card that adds the integrity benefits of EBT to other programs.
In closing, I want to thank you, Chairman Goodlatte, and members of this Committee, for your interest, commitment and cooperation in working with the Department to protect the integrity of the food stamp program. Your support for this crucial program has been greatly appreciated.
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Mr. Chairman, this concludes my prepared remarks. I would be happy to answer any questions you have at this time.
Statement of American Public Human Services Association
Thank you very much for the opportunity to provide written comments on two Food Stamp Program bills being considered by the subcommittee. APHSA represents the state public human service administrators and has an intense interest in the impact and feasibility of proposed legislation.
H. R. 4366, Food Stamp Verification Act of 1998 This bill is similar to S. 1733, introduced in the Senate last March. States support cost-effective and practical efforts to prevent abuse of the Food Stamp Program. The proposals in this bill, which would require the Social Security Administration to notify state agencies of deceased individuals names that match food stamp records, have the potential to establish such a system.
One primary recommendation we have for the bill concerns the capacity of state automation systems to handle additional computer matches in the critical months ahead, during which both states and the Federal Government are doing their best to prepare for the Year 2000. As you well know, this challenge alone is straining the ability of many governments, and additional automation demands could hardly come at a worse time. We urge you, therefore, to add language that will allow a waiver of the bill's effective date until July 1, 2000, upon the written request of the state agency.
We offer a second recommendation based on experience with similar required data matching systems, including the prisoner verification mandate enacted last year. This is to add language that directs the Secretary of Agriculture to establish a priority ranking of hits that come back to the state agency. You may be aware that USDA is under pressure already to have states accelerate the disposition of fraud cases. But one of the primary reasons some states have a backlog of unresolved cases is that many fraud reports involve relatively small
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amounts, and the staff cost of pursuing these can easily exceed any funds recovered. The bill should therefore make clear that hits must exceed a certain threshold value before being considered a priority for resolution.
Emergency Food Assistance Enhancement Act of 1998 This bill would roll back the Food Stamp Employment & Training (E&T) Program funds added by the 1997 Balanced Budget Act (P.L. 105–33), and remove some of the E&T spending restrictions that were enacted by that legislation.
We strongly support the proposed bill's removal of spending restrictions that now force us to spend 80 percent of all E&T funding on single childless adults, the ABAWD group. As APHSA has clearly documented, ABAWDs now constitute a very small portion of the food stamp caseload in nearly every state. The result is that states cannot access most of their E&T allocations; the ABAWDs for whom it is intended are no longer in the food stamp caseload, yet other food stamp recipients are being denied badly-needed assistance in moving from welfare to work.
We note that the proposed bill would return E&T allocations to their pre-Balanced Budget Act levels. We urge that these amounts be increased if at all possible. With the strong and successful emphasis states now have on moving low-income families into the workforce, unrestricted E&T funding will be more useful and effective than ever before.
Finally, while the proposed bill removes Balanced Budget Act language that restricts 80 percent of the funding to ABAWDs, it leaves intact other language in the Act that should be removed as well. Subparagraph (B) under section 16(h)(1), Allocation Formula, should be removed since the funding is no longer tied to a count of the ABAWD caseload. Subparagraph (F) under section 16(h)(1), Maintenance of Effort, should be removed since there would no longer be any additional amounts of E&T funds to which that subparagraph applies.
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