Supplemental Nutrition Assistance Program: Observations on Employment and Training Programs and Efforts to Address Program Integrity Issues

SNAP is the largest federally funded nutrition assistance program. In fiscal year 2017, it provided about $63 billion in benefits. USDA and the states jointly administer SNAP and partner to address issues that affect program integrity, including improper payments and fraud. GAO has previously reported on various aspects of SNAP, including state SNAP E&T programs, improper payment rates, recipient fraud, and retailer trafficking.

This testimony discusses GAO's prior and ongoing work on (1) SNAP E&T programs, including program participants, design, and USDA oversight, and (2) USDA's efforts to address SNAP program integrity, including improper payments, as well as recipient and retailer fraud. As part of its ongoing work on SNAP E&T programs, GAO analyzed E&T expenditures and participation data from fiscal years 2007 through 2016, the most recent data available; reviewed relevant research from USDA; and interviewed USDA and selected state and local officials. The prior work discussed in this testimony is based on four GAO products on E&T programs (GAO-03-388), improper payments (GAO-16-708T), recipient fraud (GAO-14-641), and retailer trafficking (GAO-07-53). Information on the scope and methodology of our prior work is available in each product.

Overseen by the U.S. Department of Agriculture (USDA) and administered by states, Supplemental Nutrition Assistance Program (SNAP) Employment and Training (E&T) programs served about 0.5 percent of the approximately 43.5 million SNAP recipients in an average month of fiscal year 2016, according to the most recent USDA data available. These programs are generally designed to help SNAP recipients increase their ability to obtain regular employment through services such as job search and training. Some recipients may be required to participate. According to USDA, about 14 percent of SNAP recipients were subject to work requirements in an average month of fiscal year 2016, while others, such as children and the elderly, were generally exempt from these requirements. States have flexibility in how they design their E&T programs. Over the last several years, states have 1) increasingly moved away from programs that mandate participation, 2) focused on serving able-bodied adults without dependents whose benefits are generally time-limited unless they comply with work requirements, and 3) partnered with state and local organizations to deliver services. USDA has taken steps to increase support and oversight of SNAP E&T since 2014, including collecting new data on participant outcomes from states. GAO has ongoing work reviewing SNAP E&T programs, including USDA oversight.

USDA and the states partner to address issues that affect program integrity, including improper payments and fraud, and USDA has taken some steps to address challenges in these areas, but issues remain.

Improper Payments. In 2016, GAO reviewed SNAP improper payment rates and found that states' adoption of program flexibilities and changes in federal SNAP policy in the previous decade, as well as improper payment rate calculation methods, likely affected these rates. Although USDA reported improper payment estimates for SNAP in previous years, USDA did not report an estimate for benefits paid in fiscal years 2015 or 2016 due to data quality issues in some states. USDA has since been working with the states to improve improper payment estimates for the fiscal year 2017 review.

Recipient Fraud. In 2014, GAO made recommendations to USDA to address challenges states faced in combatting recipient fraud. For example, GAO found that USDA's guidance on the use of transaction data to uncover potential trafficking lacked specificity and recommended USDA develop additional guidance. Since then, USDA has provided technical assistance to some states, including on the use of data analytics. GAO has ongoing work reviewing states' use of data analytics to identify SNAP recipient fraud.

Retailer Trafficking. In 2006, GAO identified several ways in which SNAP was vulnerable to retailer trafficking—a practice involving the exchange of benefits for cash or non-food items. For example, USDA had not conducted analyses to identify high-risk retailers and target its resources. Since then, USDA has established risk levels for retailers based on various factors. GAO has ongoing work assessing how USDA prevents, detects, and responds to retailer trafficking and reviewing the usefulness of USDA's estimates of the extent of SNAP retailer trafficking.

GAO is not making new recommendations. USDA generally concurred with GAO's prior recommendations.

Thank you for inviting me here today to discuss our work on the U.S.  Department of Agriculture’s (USDA) Supplemental Nutrition Assistance  Program (SNAP)—the largest federally-funded  nutrition assistance  program. Jointly administered by USDA’s Food and Nutrition Service  (FNS) and the states, SNAP helps low-income households obtain a better  diet by providing them with benefits to purchase food from authorized  retailers. In fiscal year 2017, SNAP provided approximately $63 billion in  benefits to about 42 million individuals in over 20 million households.

To receive SNAP benefits, individuals must apply in their state of  residence and meet the program’s eligibility requirements, such as  income limits. To be eligible for benefits, SNAP recipients must also  generally comply with the program’s work requirements, such as  registering for work and participating in certain work programs if required  by the state agency. For example, SNAP recipients may be required by  the state to participate in state-operated SNAP Employment and Training  (E&T) programs. First federally required in the 1980s, SNAP E&T  programs are intended to help individuals in SNAP households acquire  skills, training, employment, or experience that will increase their ability to  obtain regular employment.

The federal government pays the full cost of SNAP benefits and shares  the costs and responsibility of administering the program and ensuring  program integrity with the states. Most SNAP benefits are used for the  intended purpose, according to FNS. However, improper payments— payments to individuals that were made in an incorrect amount of should  not have been made at all—may result from unintentional errors by SNAP  recipients or staff administering the program or may result from intentional  errors or misuse of benefits, practices which are considered fraud. For  example, individuals may misrepresent their household’s circumstances  to state agencies in order to obtain benefits. Further, some recipients sell  their benefits for cash, often at a loss, to a retailer—a practice known as trafficking. FNS is responsible for authorizing and monitoring retailers  from which recipients may purchase food, and states are responsible for  determining applicant eligibility and investigating possible program  violations by recipients. As we have reported in our prior work, both FNS  and states face challenges in addressing recipient and retailer fraud.

In response to requests from the Chairman and other members of this  Committee, we currently have work underway on SNAP E&T programs,  as well as on SNAP recipient and retailer fraud. Today I will provide  information from our ongoing and prior work, focusing on (1) SNAP E&T  programs, including program participants, design, and FNS oversight, and  (2) FNS’s efforts to address program integrity, including improper  payments and SNAP recipient and retailer fraud.

To address the areas discussed in this testimony statement, we drew on  our ongoing work on SNAP E&T programs, recipient fraud, retailer  trafficking, as well as our prior work on improper payments. Specifically,  for our discussion of SNAP E&T programs, we analyzed data on SNAP  E&T expenditures and participation collected by FNS from the states for  fiscal year 2007 through fiscal year 2016, the most recent data available.  In addition, we analyzed published FNS Quality Control data on SNAP  recipients and work registrants for fiscal year 2008 through fiscal year  2016. To assess the reliability of the data included in this statement, we  interviewed FNS and state officials knowledgeable about the data, and  determined the data are sufficiently reliable for the purposes of this  statement. We also reviewed relevant federal laws and regulations;  reviewed guidance and research from FNS; interviewed FNS officials, as  well as select state and local SNAP E&T staff from five states; and  reviewed our prior work on SNAP E&T programs. For our discussion of  FNS’s efforts to address improper payments and SNAP recipient and  retailer fraud, we drew on our 2016 review of SNAP improper payment  rates and reviewed relevant USDA reports. We also drew on our 2014  analysis of SNAP replacement card and transaction data, in which we  conducted tests of FNS-recommended automated tools and interviewed  program stakeholders, including federal and select state officials. We  also obtained relevant documentation from FNS in April 2018 on steps  the agency has taken to address our 2014 recommendations. We also  drew on our 2006 work on retailer trafficking, in which we reviewed FNS  reports on trafficking estimates; visited FNS field offices; analyzed FNS  retailer data; and interviewed federal officials, among others. We also  assessed FNS reports on trafficking estimates covering calendar years  2006 through 2014 (the most recent data available), reviewed FNS  policies and reports, and interviewed FNS officials. More complete  information on the scope and methodology of our prior work is available in  each published report. Our current work on SNAP E&T programs,  recipient fraud, and retailer trafficking is still ongoing.

The work upon which this statement is based was conducted in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

USDA’s Food and Nutrition Service (FNS) is responsible for promulgating  SNAP program regulations, ensuring that state officials administer the  program in compliance with program rules, and authorizing and  monitoring retailers from which recipients may purchase food. States are  responsible for determining applicant eligibility, calculating the amount of  their benefits, issuing benefits on Electronic Benefit Transfer (EBT)  cards—which can be used like debit cards to purchase food from  authorized retailers—and investigating possible program violations by  recipients.

SNAP recipients are subject to various work requirements. Generally, all  SNAP recipients ages 16 through 59, unless exempted by law or  regulation, must comply with work requirements, including registering for  work, reporting to an employer if referred by a state agency, accepting a  bona fide offer of a suitable job, not voluntarily quitting a job or reducing  work hours below 30 hours a week, and participating in a SNAP E&T  program or a workfare program—in which recipients perform work on  behalf of the state—if assigned by the state agency. SNAP recipients are  generally exempt from complying with these work requirements if they are  physically or mentally unfit, responsible for caring for a dependent child  under age 6 or an incapacitated person, employed for 30 or more hours  per week or receive weekly earnings which equal the minimum hourly  rate set under federal law multiplied by 30, or are a bona fide student  enrolled half-time or more in any recognized school training program, or  institution of higher education, amongst other exemptions. SNAP  recipients subject to the work requirements—known as work registrants— may lose their eligibility  for benefits if they fail to comply with these  requirements without good cause.

One segment of the work registrant population, SNAP recipients ages 18  through 49 who are “able-bodied,” not responsible for a dependent child,  and do not meet other exemptions—able-bodied adults without  dependents (ABAWDs)—are generally subject to additional work  requirements. In addition to meeting the general work requirements,  ABAWDs must work or participate in a work program 20 hours or more  per week, or participate in workfare, in which ABAWDs perform work to  earn the value of their SNAP benefits. Participation in SNAP E&T, which  is a type of work program, is one way for ABAWDs to meet the 20 hour  per week ABAWD work requirement, but other work programs are  acceptable as well. Unless ABAWDs meet these work requirements or  are determined to be exempt, they are limited to 3 months of SNAP  benefits in a 36-month period.

At the request of states, FNS may waive the ABAWD time limit for  ABAWDs located in certain areas of a state or an entire state under  certain circumstances. A waiver may be granted if the area has an  unemployment rate of over 10 percent or there are an insufficient number  of jobs to provide employment for these individuals. If the time limit is  waived, ABAWDs are not required to meet the ABAWD work requirement  in order to receive SNAP for more than 3 months in a 36-month period yet  they must still comply with the general work requirements.

Federal requirements for state SNAP E&T programs were first enacted in  1985 and provide state SNAP agencies with flexibility  in how they design  their SNAP E&T programs, including who to serve and what services to  offer. The state has the option to offer SNAP E&T services on a voluntary  basis to some or all SNAP recipients, an approach commonly referred to  as a voluntary program. Alternatively,  the state can require some or all  SNAP work registrants to participate in the SNAP E&T program as a  condition of eligibility,  an approach commonly referred to as a mandatory  program. Further, states determine which service components to provide  participants through their SNAP E&T programs, although they must  provide at least one from a federally determined list. This list includes job  search programs, job search training programs, workfare, programs  designed to improve employability through work experience or training,  education programs to improve basic skills and employability, job  retention services, and programs to improve self-sufficiency through self- employment. Total federal expenditures on SNAP E&T programs were  more than $337 million in fiscal year 2016. States are eligible to receive  three types of federal funding available for state SNAP E&T programs:  100 percent funds—formula grants for program administration, 50  percent federal reimbursement funds, and ABAWD pledge funds—grants  to states that pledge to serve all of their at-risk ABAWDs.

The Office of Management and Budget has designated SNAP as a high- priority program due to the estimated dollar amount in improper  payments—any payments that should not have been made or were made  in an incorrect amount (including overpayments and underpayments)  under statutory, contractual, administrative, or other legally applicable  requirements. According to USDA’s fiscal year 2015 agency financial  report, $2.6 billion, or 3.66 percent, of all SNAP benefits paid in fiscal year  2014 were improper, the most recent year for which data are available.  SNAP improper payments are caused by variances in any of the key  factors involved in determining SNAP eligibility  and benefit amounts, and,  according to USDA, household income was the most common primary  cause of dollar errors. States review the accuracy of SNAP payments to  recipients on an ongoing basis, and FNS assesses the accuracy of state  reviews and determines a national improper payment rate annually.

FNS and states share responsibility for addressing SNAP fraud, which  can occur through the eligibility  process and when benefits are being  used. Specifically, recipients may commit eligibility fraud when they  misrepresent their household size, income, or expenses in order to  fraudulently obtain SNAP benefits. Another type of fraud—trafficking— occurs when recipients exchange benefits with authorized retailers or  other individuals for cash or non-food items (e.g. rent or transportation). In a typical retailer trafficking situation, for example, a retailer may charge  $100 to a recipient’s EBT card and give the recipient $50 in cash instead  of $100 in food. The federal government reimburses the retailer $100,  which results in a fraudulent $50 profit to the retailer.

State agencies are directly responsible for preventing, detecting,  investigating, and prosecuting recipient fraud, including eligibility  fraud  and trafficking by SNAP recipients, under the oversight and guidance of  FNS. States play a key role in preventing fraud when determining  eligibility  for SNAP. State agencies collect applicant information, such as  household income and employment, and verify it through data matches  with other information sources. After benefits are issued, the agencies  may monitor EBT transaction data to identify spending patterns that may  indicate trafficking. If an individual or household intentionally  violates  SNAP rules, such as by trafficking or making false or misleading  statements in order to obtain benefits, states conduct administrative  disqualification hearings or, in some cases, refer the case for criminal  prosecution.

FNS is responsible for authorizing and overseeing retailers who  participate in the program—totaling more than 263,000 in fiscal year  2017—including investigating potential retailer trafficking. In order to  participate in SNAP, a retailer applies to FNS and demonstrates that they  meet program requirements, such as those on the amount and types of  food that authorized stores must carry. FNS verifies a retailer’s  compliance with these requirements and generally authorizes retailers for  5 years. FNS then monitors retailers’ continued compliance with program  requirements and administratively disqualifies, or assesses money  penalties on, those who are found to have trafficked benefits. To this end,  FNS officials collect and monitor EBT transaction data to detect irregular  patterns of transactions that may indicate trafficking and also conduct  undercover investigations. If found to be trafficking, retailers are generally  permanently disqualified from SNAP or incur a monetary penalty in lieu of  permanent disqualification.

A Small Percentage of SNAP Recipients Participate in SNAP E&T Programs, Which Have Experienced Changes in Characteristics and FNS Oversight

According to FNS data, about 14 percent of SNAP recipients, or about 6.1  million, were work registrants who were subject to work requirements,  and about 0.5 percent of SNAP recipients, or about 200,000, participated  in state SNAP E&T programs, in an average month of fiscal year 2016.  (See fig. 1.) According to FNS, most SNAP recipients are exempt from  work requirements. For example, according to FNS, almost two-thirds of  SNAP recipients were children, elderly, or adults with a disability in an  average month of fiscal year 2016—groups that are generally exempt.  Further, adults who are already working at least 30 hours a week are also  exempt from SNAP work requirements, and according to FNS data, more  than 31 percent of non-elderly adult SNAP recipients were employed in  an average month of fiscal year 2016. SNAP work registrants who are  not participating in SNAP E&T programs may be participating in other  activities to meet work requirements or eligible for other exemptions.  FNS officials told us that the state data reported to FNS on SNAP E&T  participants are the best and most recent data available on this group, yet  they also have limitations, which we will continue to explore in our  ongoing work.

In recent years, the number and percentage of SNAP recipients and work  registrants participating in SNAP E&T programs appears to have  decreased, according to FNS data. From fiscal year 2008 through fiscal  year 2016, the average monthly number of SNAP E&T participants  decreased from about 256,000 to about 207,000, or by 19 percent,  according to state data on SNAP E&T participants reported to FNS. (See  fig. 2.) However, over the same time period, the average monthly number  of SNAP recipients appears to have increased from about 27.8 million to  about 43.5 million, and work registrants appears to have increased from  about 3 million to about 6.1 million, according to FNS data. As a result,  the percentage of total SNAP recipients participating in SNAP E&T  programs decreased from about 0.9 to about 0.5 percent, and the  percentage of SNAP work registrants participating in these programs  decreased from approximately 8.1 percent to 3.4 percent, from fiscal year  2008 through fiscal year 2016.

Available  information suggests the characteristics of SNAP E&T  participants are generally similar to those of SNAP work registrants who  do not participate in these programs. A recent FNS study, which surveyed  SNAP E&T participants and SNAP work registrants who had not  participated in SNAP E&T, found that members of the two groups had  similar demographic characteristics, including age and gender, and  received similar monthly SNAP benefit amounts. Further, at the time they were surveyed, about one third of each group were employed, and  their average wage rates were similar, at about $10 per hour.

State SNAP E&T Programs Have Changed in Several Ways

State SNAP agencies have broad flexibility in how they design their  SNAP E&T programs, and the characteristics of these programs have  changed in several ways over the last decade. For example, states have  increasingly moved from mandatory to voluntary programs, focused on  serving ABAWDs, and partnered with state and local organizations to  deliver services.

States Have Increasingly Moved from Mandatory to Voluntary Programs

According to FNS data, states have increasingly moved from mandatory  to voluntary SNAP E&T programs in recent years. In fiscal year 2010,  17 states operated voluntary programs; however, by fiscal year 2017, 35  states operated voluntary programs, according to FNS data. (See fig. 3.)  FNS officials told us that they have been actively encouraging states to  provide more robust employment and training services, such as  vocational training or work experience, through voluntary programs. They  said that they believe these types of robust services are more effective in  moving participants toward self-sufficiency, but that funding may not be  sufficient to provide these to the large numbers of participants served in  mandatory programs. In addition, FNS officials told us that voluntary  programs are less administratively burdensome than mandatory  programs, as they allow states to focus on serving motivated participants  rather than sanctioning non-compliant individuals.

According to FNS officials, when states move to a voluntary program,  they generally experience a decline in SNAP E&T participation—a trend  consistent with our analysis of FNS data—which may have contributed to  the decline in overall SNAP E&T participation. Of the 22 states or  territories that changed from a mandatory to a voluntary program from  fiscal year 2010 through fiscal year 2016, according to FNS data, 13  experienced a decrease in SNAP E&T participation—ranging from a 21  percent decrease to a 93 percent decrease. Overall, voluntary programs  are generally smaller than mandatory programs, according to our analysis  of FNS data. In fiscal year 2016, for example, the 32 states or territories  operating voluntary programs together served less than half of the total  number of SNAP E&T participants served by the 21 states or territories  operating mandatory programs, although these two groups of states had  similar numbers of new work registrants. Furthermore, states operating  voluntary programs served an average of nearly 7,000 SNAP E&T  participants per state, while states operating mandatory programs served  an average of 23,000 SNAP E&T participants per state.

Focus on ABAWDs Has Increased as Waivers Have Expired

Evidence suggests that states have increased their focus on serving  ABAWDs—a sub-population of SNAP recipients subject to benefit time  limits and additional work requirements—through SNAP E&T, as related  waivers have expired in recent years, according to FNS data. During and  after the 2007-2009 recession, the majority of states operated under  statewide waivers of the ABAWD time limit due to economic conditions.  However, as the economy recovered, most statewide waivers expired,  and the ABAWD time limit was reinstated. For example, according to FNS  data, in fiscal year 2011, 45 states or territories had a statewide waiver  and 7 states had a partial waiver—one applying to certain localities. By  fiscal year 2017, the number of states or territories with a statewide  waiver had decreased to 9, while 27 states had partial waivers. FNS  officials and state SNAP agency officials we spoke with in some states  told us that, as the waivers have ended, state SNAP E&T programs have  become increasingly focused on serving ABAWDs.

Although state data on SNAP E&T programs reported to FNS suggest a  greater percentage of ABAWDs have been participating in these  programs in recent years, according to FNS officials, these data have  limited usefulness in assessing state trends in serving ABAWDs for  several reasons. For example, in recent years, FNS officials learned that  there was widespread confusion among states regarding the need to  track ABAWDs when waivers were in place, and that as a result, some  states had not been tracking ABAWDs or properly documenting SNAP  recipients’ ABAWD status. This is consistent with what some of the  selected states we spoke with reported. As part of our ongoing work, we  are continuing to explore the availability  and reliability of data on  ABAWDs.

States Increasingly Developed Partnerships to Deliver SNAP E&T Services

State SNAP agencies have increasingly partnered with other state and  local organizations, such as workforce agencies, community-based social  service providers, and community colleges, to provide services to SNAP  E&T participants in recent years, according to FNS and states we  selected for our review. In fiscal year 2018, nearly all states partnered  with at least one other organization to deliver SNAP E&T services, with  the majority partnering with more than one, according to an analysis by  FNS.

In recent years, FNS has urged states to make use of the broad network  of American Job Centers. The American Job Centers, also known as one- stop centers, are funded through the Department of Labor’s Employment  and Training Administration and designed to provide a range of  employment-related services, such as training referrals, career  counseling, job listings, and similar employment-related services, to job  seekers under one roof. Our prior work has highlighted the value of  coordination between federally funded employment and training programs  to ensure the efficient and effective use of resources. Despite  encouraging such partnerships, FNS officials said that American Job  Centers typically provide lighter touch services to SNAP E&T participants,  such as job search and job search training, and they therefore may not be  well suited for SNAP E&T participants who have multiple barriers to  employment. In our 2003 work on SNAP E&T, we found that while  workforce system programs offered some of the activities needed by  SNAP E&T participants, officials from 12 of the 15 states we contacted  said that most participants were not ready for these activities, in part,  because they lacked basic skills, such as reading and computer literacy,  that would allow them to successfully participate.

An alternative service delivery strategy that FNS has promoted is the  development of third party partnerships with community-based social  service providers, community colleges, and other entities to help states  enhance their SNAP E&T programs. According to FNS, in this model,  third party organizations use non-federal funding to provide allowable  SNAP E&T services and supports, which are then eligible for 50 percent  federal reimbursement funds through the state’s SNAP E&T program.  According to FNS officials, third party partnerships enable states to  leverage additional resources, grow their SNAP E&T programs, and  reach more SNAP participants. In addition, FNS officials said that these  partnerships allow states to improve their program outcomes by tapping  into providers currently serving communities that include SNAP  recipients. Federal 50 percent reimbursement funds expended increased  from nearly $182 million to more than $223 million, or by 23 percent, from  fiscal year 2007 to fiscal year 2016.

FNS Has Taken Steps to Increase Support and Oversight of SNAP E&T

FNS has taken steps to increase federal support of states’ SNAP E&T  programs by increasing the number of federal staff responsible for SNAP  E&T and providing additional technical assistance to states. Specifically,  FNS officials said that in 2014, they created the Office of Employment  and Training to provide support and oversight for the SNAP E&T program  and expanded SNAP E&T staff in FNS headquarters from one to five  fulltime employees. FNS has also taken steps to increase technical  assistance to states. For example, they have developed tools, including  the SNAP E&T Operations Handbook, intended to help states implement  and grow their program, and by adding a dedicated SNAP E&T official in  each of FNS’s seven regional offices. According to FNS, regional officials  have targeted technical assistance to states on, for example, developing  third-party partnerships, and they have emphasized evidence-based  approaches to administering the program, such as providing skills-based  training for in-demand occupations.

FNS officials rely on various information sources to oversee states’ SNAP  E&T programs, including participant outcome data reported by states for  the first time in January 2018. For example, FNS officials conduct  management evaluation reviews of states, annually review states’ SNAP  E&T plans for compliance, and collect data from states on program  participation and expenditures. In addition, as of January 2018, FNS has  begun receiving new data on SNAP E&T program participants and  outcomes from states. These data include employment outcomes, such  as the number of SNAP E&T participants in unsubsidized employment  after participation in the program, and participant characteristics, such as  the number of participants entering the program with a high school  degree or equivalent. FNS officials said that although states generally  submitted the new data on time, states experienced challenges that likely  affected the accuracy of the data. For example, some states needed to  manually collect data on participant characteristics due to the limited  capacity of their data systems. Further, according to FNS officials, some  states did not correctly interpret certain reporting definitions or time  periods. To address these challenges, FNS officials have been providing  technical assistance to states to help them refine their participant and  outcome data reports. Officials told us that they expect the states to  submit revised reports by May 2018; we will examine these data and  related issues in our ongoing work.

FNS Has Taken Steps to Address SNAP Program Integrity Issues, but Concerns Remain

FNS and the states partner to address issues that affect program  integrity, including improper payments and fraud, and FNS has taken  some steps to address challenges in these areas, but concerns remain.  For example, regarding SNAP recipient and retailer fraud, FNS has taken  some steps to address challenges identified in our 2006 and 2014 reports  related to fraud committed by SNAP recipients and authorized retailers,  but more remains to be done. We currently have ongoing work to assess  the steps FNS and states have taken to address our recommendations  related to recipient and retailer fraud and other program vulnerabilities.

In 2016, we reviewed SNAP improper payment rates and found that  states’ adoption of program flexibilities and changes in federal SNAP  policy in the previous decade, as well as improper payment rate  calculation methods, likely affected these rates. For example, when  states adopted available SNAP policy flexibilities that simplified or  lessened participant reporting requirements, these changes reduced the  opportunity for error and led to a decline in the improper payment rate,  according to a USDA study. In addition, we found that the methodology  SNAP used to calculate its improper payment rate was generally similar  to the methodologies used for other large federal programs for low- income individuals, including Medicaid, Earned Income Tax Credit, and  Supplemental Security Income. However, we also found that some of the  procedural and methodological differences in the rate calculation among  these programs likely affected the resulting improper payment rates, such  as how cases with insufficient information or certain kinds of errors were  factored into the improper payment rate.

In 2014, USDA identified SNAP improper payment data quality issues in  some states and has since been working with the states to improve  improper payment estimates. Although USDA reported national SNAP  improper payment estimates for benefits paid through fiscal year 2014,  USDA did not report a national SNAP improper payment estimate for  benefits paid in fiscal years 2015 or 2016. In response to a report from  USDA’s Office of Inspector General that identified concerns in the  application of SNAP’s quality control process, which is used to identify  improper payments, USDA began a review of state quality control  systems in all states in 2014. According to USDA, due to the data  quality issues uncovered in 42 of 53 states during the reviews, the  improper payment rates for those states could not be validated, and the  department was unable to calculate a national improper payment rate for  benefits paid in fiscal year 2015. To address the data quality concerns,  USDA updated guidance, provided training to relevant state and federal  staff, and worked with states to update their procedures to ensure  consistency with federal guidelines. According to USDA, the department  also required individual states to develop corrective action plans to  address issues identified and monitored progress to ensure states took  identified actions. On June 30, 2017, USDA notified the states that the  department would not release a national SNAP improper payment rate for  benefits paid in fiscal year 2016 and remained focused on conducting the  fiscal year 2017 review.

FNS has increased its oversight of state anti-fraud activities in recent  years by developing new guidance and providing training and technical  assistance to states on detecting fraud by SNAP recipients and reporting  on anti-fraud activities to FNS. In 2014, we reported on 11 selected  states’ efforts to combat SNAP recipient fraud and made several  recommendations to FNS to address the challenges states faced.  We  found that FNS and states faced challenges in the following areas:

Guidance on use of data tools to detect fraud: States faced  challenges using FNS-recommended data tools to detect fraud, and  FNS is in the process of developing improved guidance to address  this concern. Specifically, FNS’s guidance on the use of EBT  transaction data to uncover potential patterns of benefit trafficking  lacked the specificity states needed to uncover such activity, and we  recommended FNS develop additional guidance. Since then, FNS  contracted with a private consulting firm to provide 10 states with  technical assistance in recipient fraud prevention and detection, which  included exploring the use of data analytics to analyze and interpret  eligibility  and transaction data to identify patterns or trends and create  models that incorporate predictive analytics. FNS officials also  recently told us that the agency is developing a SNAP Fraud  Framework to provide guidance to states on improving fraud  prevention and detection. FNS officials anticipated releasing the  framework in mid- 2018.

Tools for monitoring e-commerce websites: We also found FNS- recommended tools for automatically monitoring potential SNAP  trafficking on e-commerce websites to be of limited use and less  effective than manual searches, and FNS has developed but not  finalized guidance on using such tools. We recommended that FNS  reassess the effectiveness of its current guidance and tools for states  to monitor e-commerce and social media websites. In August 2017,  FNS officials told us that they had developed revised guidance for  states on using social media in detection of SNAP trafficking.  According to FNS, the guidance will be incorporated into the SNAP  Fraud Framework.

Staff levels: During the time of our 2014 work, most of our 11  selected states reported difficulties conducting fraud investigations  due to reduced or stagnant staff levels while numbers of SNAP  recipients had greatly increased, but FNS decided not to make  changes to address this issue. Specifically, 8 of the 11 states we  reviewed reported inadequate staffing due to attrition, turnover, or lack  of funding. Some states suggested changing the financial incentive  structure to promote fraud investigations because agencies were not  rewarded for cost-effective, anti-fraud efforts that could prevent  ineligible people from receiving benefits. Specifically, when fraud by a  SNAP recipient is discovered, a state may generally retain 35 percent  of any recovered overpayments. However, there are no recovered  funds when a state detects potential fraud by an applicant and denies  the application. To help address states’ concerns about resources  needed to conduct investigations, we recommended in our 2014  report that FNS explore ways that federal financial incentives could be  used to better support cost-effective anti-fraud strategies. FNS  reported that it took some steps to explore alternative financial  incentives, through a review of responses to a Request for Information  in the Federal Register. However, FNS decided not to pursue bonus  awards for anti-fraud and program integrity activities. Given that FNS  has not made changes in this area, state SNAP fraud agencies may  continue to report resource concerns in addressing fraud.

Reporting guidance: We also found that FNS did not have  consistent and reliable data on states’ activities because of unclear  reporting guidance, and FNS has since revised its data collection form  and provided training on the changes. To improve FNS’s ability to  monitor states and obtain information about more efficient and  effective ways to combat recipient fraud, we recommended in 2014  that FNS take steps, such as providing guidance and training, to  enhance the consistency of what states report on their anti-fraud  activities. In response, FNS revised the form used to collect recipient  integrity information and changed the reporting frequency from annual  to quarterly, effective fiscal year 2017. FNS officials also reported  providing training to approximately 400 state agency and FNS  regional office personnel on the updates to the form and related  instructions.

In our ongoing work, we are further reviewing states’ use of data analytics  to identify SNAP recipient fraud, including that which may be occurring  during out-of-state transactions. Because transactions that may appear  suspicious—such as those made out-of-state—may in fact be legitimate,  states may use data analytic techniques to include additional factors that  may help them better target their efforts to identify potential fraud.  However, states may have different levels of capacity for using data  analytics to detect fraud. We are examining how 7 selected states are  using data analytics and identifying the advantages and challenges states  have experienced in doing so. We are also assessing FNS’s efforts to  assist states in implementing GAO’s leading practices for data analytics  outlined in GAO’s Framework for Managing Fraud Risks in Federal  Programs outlined in GAO’s Framework for Managing Fraud Risks in  Federal Programs. In addition, we are conducting our own analysis of  EBT out-of-state SNAP transaction data. We expect to report on our  findings later this year.

FNS has taken some steps to prevent, detect, and respond to retailers  who traffic SNAP benefits since our last report on the issue in 2006, but  trafficking continues to be a problem. For example, in February 2018, a  federal jury convicted a grocery store operator in Baltimore on charges of  wire fraud in connection with a scheme to traffic more than $1.6 million in  SNAP benefits for food sales that never occurred. The grocery store  operator paid cash for SNAP benefits, typically paying the recipient half  the value of the benefits and keeping the other half for himself. In our  2006 report, we found that SNAP was vulnerable to retailer trafficking in  several areas, including:

Requirements for food that retailers must stock to participate in  SNAP: In 2006, we found that FNS had minimal requirements for the  amounts of food that retailers must stock, which could allow retailers  more likely to traffic into the program, although the agency has since  taken steps to increase these requirements. In our 2006 report, FNS  officials said that they authorized stores with limited food stock to  provide access to food in low-income areas where large grocery  stores were scarce. At that time, retailers were generally required to  stock a minimum of 12 food items (at least 3 varieties of 4 staple food  categories, such as fruits and vegetables), but FNS rules did not  specify how many items of each variety would constitute sufficient  stock. FNS officials told us that a retailer that only carries small  quantities of food, such as a few cans of one kind of vegetable, may  intend to traffic. In 2016, FNS promulgated a final rule increasing food  stock requirements. FNS officials told us that these new rules are  designed to encourage stores to provide more healthy food options for  recipients and discourage trafficking. According to FNS, retailers are  now generally required to stock at least 36 food items (a certain  variety and quantity of staple foods in each of the 4 staple food  categories).

Focus on high-risk retailers: We also found in 2006 that FNS had  not conducted analyses to identify characteristics of retailers at high  risk of trafficking and to target its resources—a shortcoming FNS has  since taken some steps to address. For example, we reported that  some stores may be at risk of trafficking because one or more  previous owners had been found trafficking at the same location.  However, FNS did not have a system in place to ensure that these  retailers were quickly targeted for heightened attention. In addition,  once a store was authorized to participate in the program, FNS staff  typically would not inspect the store again until it applied for  reauthorization 5 years later. We recommended that FNS identify  the stores most likely to traffic and provide earlier, more targeted  oversight to those stores. In 2009, FNS began establishing risk levels  for each authorized retailer, identifying high-risk stores as those with a  prior permanent disqualification at that location or a nearby location.  In 2013, FNS required all high-risk retailers to go through  reauthorization and to provide additional documentation regarding  store ownership. That same year, FNS also consolidated its retailer  management functions, including those for authorizing stores and  analyzing EBT transaction data, into a single national structure known  as the Retailer Operations Division. FNS officials told us that this  structure enables the agency to identify and deploy their investigative  resources to the areas of highest risk nationally, rather than within a  given region.

Penalties to deter retailer trafficking: We also found in our 2006  report that FNS’s penalties for retailer trafficking may be insufficient to  deter traffickers, and since then, FNS has proposed—but not  finalized—rules to increase them. FNS imposes administrative  penalties for retailer trafficking—generally a permanent  disqualification from the program or a monetary penalty. FNS relies  on the USDA Office of Inspector General (OIG) and other law  enforcement entities to conduct investigations that can lead to criminal  prosecutions. In our 2006 report, we recommended that FNS  develop a strategy to increase penalties for trafficking. The Food,  Conservation, and Energy Act of 2008 (known as the 2008 Farm Bill)  gave USDA authority to impose higher monetary penalties, and the  authority to impose both a monetary penalty and program  disqualification on retailers found to have violated relevant law or  regulations (which includes those found to have trafficked). In 2012,  FNS proposed regulatory changes to implement these authorities.  However, FNS has not finalized these rules, and as of fall 2017, the  rules were considered “inactive.”

In our ongoing work, we are continuing to assess FNS’s efforts to  prevent, detect, and respond to retailer trafficking, as well as examining  what is known about the extent of retailer trafficking nationwide. As part of  this work, we are continuing to review FNS’s response to our prior  recommendations, as well as related recommendations made by USDA’s  OIG. We are also studying FNS’s periodic estimates of the rate of  retailer trafficking, expressed as the dollar value and percentage of all  SNAP benefits that were trafficked and the percentage of retailers  involved. These data suggest an increase in the estimated rate of retailer  trafficking since our 2006 report. However, we and others, including a  group of experts convened by FNS, have identified some limitations with  the retailer trafficking estimates. For example, the trafficking rate is  calculated based on a sample of retailers that FNS considers most likely  to traffic. Although FNS adjusts the data to better represent the broader  population of authorized retailers, it is uncertain whether the resulting  estimates accurately reflect the extent of trafficking nationwide. We are  reviewing these limitations and FNS’s efforts to address them in our  ongoing work.

Chairman Jordan, Chairman Palmer, Ranking Member Krishnamoorthi,  Ranking Member Raskin, and Members of the Subcommittees, this  completes my prepared statement. I would be pleased to respond to any  questions that you may have at this time.

If you or your staff have any questions about this testimony, please  contact Kathryn Larin, Director, Education, Workforce, and Income  Security Issues at (202) 512-7215 or LarinK@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this statement. GAO staff who made key contributions  to this testimony include Rachael Chamberlin, Celina Davidson, Swati  Deo, Rachel Frisk, Alexander Galuten, Danielle Giese, Kristen Jones,  Morgan Jones, Lara Laufer, Monica Savoy, and Kelly Snow.

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