Testimony

Before the Subcommittee on Department Operations,

Oversight, Nutrition, and Forestry, Committee on

Agriculture, House of Representatives

United States General Accounting Office

GAO

For Release on Delivery

Expected at 2:00 p.m. EDT

Wednesday, June 27, 2001 FOOD STAMP PROGRAM

Program Integrity and

Participation Challenges

Statement of Robert E. Robertson, Director

Education, Workforce, and Income Security Issues

GAO-01-881T
Page 1 GAO-01-881T

Mr. Chairman and Members of the Subcommittee:

Thank you for inviting me here today to discuss our observations on the

administration of the Food Stamp Program. As you know, the U.S.

Department of Agriculture’s (USDA) Food Stamp Program helps lowincome individuals and families obtain a more nutritious diet by

supplementing their income with food stamp benefits. USDA’s Food and

Nutrition Service (FNS) and the states jointly implement the Food Stamp

Program, which is to be reauthorized in fiscal year 2002. The Food Stamp

Program provided about $15 billion in benefits to over 17 million lowincome individuals in the United States during fiscal year 2000.

The information I am presenting today is based on our past work related

to two fundamental challenges that the Food Stamp Program faces now

and will continue to face in future years: (1) ensuring the integrity of the

program, and (2) minimizing program barriers that might impede eligible

individuals from participating in the program.

In summary, both FNS and the states have taken steps to ensure the

integrity of the Food Stamp Program. For example, under FNS’ quality

control system, FNS uses sanctions and incentives to encourage states to

reduce their benefit payment error rates. It has also promoted the

exchange of information among states about potentially successful

initiatives for improving payment accuracy. For their part, states have

implemented various quality control measures including using electronic

data matching to identify ineligible participants and providing special

training for food stamp workers who determine whether applicants are

eligible and the amount of benefits that they receive. The combined

overpayment and underpayment error rate for the Food Stamp Program

was about 9 percent of payments made in fiscal year 2000. The greatest

potential for further reducing these errors may rest with actions aimed at

simplifying the extremely complex rules for determining eligibility and

calculating benefits. Simplifying the Food Stamp Program may also

encourage more eligible individuals to participate in the program. FNS

estimates that only about 59 percent of eligible people participated in the

program in 1998, down from 71 percent in 1994. Furthermore, children’s

participation in the Food Stamp Program has dropped more sharply than

the number of children living in poverty, indicating a growing gap between

need and assistance. Many reasons may exist for the decline in overall

food stamp participation. For example, in 1999, we reported that state and

local initiatives designed to reduce Temporary Assistance for Needy

Families (TANF) caseloads contributed to the decline in the food stamp

rolls. We made several recommendations to FNS on actions it should take
Page 2 GAO-01-881T

related to these initiatives, and in turn, FNS has taken steps intended to

ensure that eligible people receive food stamp benefits.

The Food Stamp Program provides low-income households with paper

coupons or electronic benefits that can be redeemed for food in about

156,000 stores across the nation. In fiscal year 2001, the Congress

appropriated $20.1 billion for the Food Stamp Program. FNS establishes

regulations for implementing the Food Stamp Program, reviews states’

operating plans to ensure compliance with the regulations, and funds food

stamp benefits and about half of the states’ administrative costs. The

states administer the program by determining whether households meet

the program’s income and asset requirements, calculating monthly

benefits for qualified households, and issuing benefits to participants.

Household eligibility and benefit amounts are based on nationwide federal

criteria, including household size and income, assets, housing costs, and

work requirements.1

FNS monitors states’ performance by assessing how accurately they

determine food stamp eligibility and calculate benefits. Under FNS’ quality

control system, the states calculate their payment errors by annually

drawing a statistical sample of at least 300 to 1,200 active cases, depending

on the average monthly caseload. The states review case information and

make home visits to determine whether households were eligible for

benefits and received the correct benefit payment. FNS regional offices

validate the results by reviewing a subset of each state’s sample to

determine its accuracy, and make adjustments to the state’s overpayment

and underpayment errors as necessary.2

Until the mid-1990s, most recipients used benefits provided in the form of

coupons to purchase allowable food. According to FNS, as of March 2001,

41 states, the District of Columbia, and Puerto Rico have operational food

stamp EBT systems. Thirty-nine of these systems are operating statewide.

All states are to implement EBT systems by October 1, 2002, unless USDA

waives the requirement. By providing benefits electronically, the federal

 1

According to FNS, a household’s gross income cannot exceed $1,848 per month for a

family of four, and its net income—gross income minus allowable deductions—cannot

exceed $1,421.

2

To determine each state’s combined payment error rate, FNS adds overpayments and

underpayments, then divides that sum by the total food stamp benefits paid by the state.

Background
Page 3 GAO-01-881T

government saves time and money because the process of providing the

coupons is eliminated. Furthermore, an EBT system creates an electronic

record of each food stamp transaction, making it easier to identify and

document instances of fraud and abuse in the program.

Recent legislative initiatives to reform welfare have also affected Food

Stamp Program operations. Specifically, the Personal Responsibility and

Work Opportunity Reconciliation Act of 1996 (PRWORA), which was

passed in 1996 to reform the nation’s welfare system, also modified

aspects of the Food Stamp Program.3

 To reform welfare, PRWORA

replaced the Aid to Families with Dependent Children entitlement

program with the TANF program and gave the states responsibility for

administering TANF through block grant funding. In implementing welfare

reform, the states have, for example, used PRWORA’s flexibility to (1)

require that applicants look for jobs before their TANF applications are

processed; (2) offer one-time, lump-sum payments (known as diversion

payments) to potential applicants rather than enroll them in the TANF

program; and (3) disqualify individuals from participation in the Food

Stamp Program if they have committed TANF violations, thereby reducing

the household’s total food stamp benefit.4

 Almost all of the states use a

single application for the food stamp and welfare programs to reduce

administrative costs, even though the eligibility rules for these two

programs are different.

Though welfare reform retained the Food Stamp Program as an

entitlement for qualifying participants, it tightened eligibility requirements

and eased administrative requirements. It disqualified able-bodied adults

without dependents who, during the preceding 36-month period, received

food stamp benefits for at least 3 months but worked less than 20 hours

per week.5

 Similarly, the act required that the states, by August 1997,

remove from their rolls most permanent resident aliens who were

previously eligible to receive food stamps.6

 In addition, PRWORA replaced

 3

P.L. 104-193, Aug. 22, 1996.

4

See Welfare Reform: States Are Restructuring Programs to Reduce Welfare Dependence

(GAO/HEHS-98-109, June 18, 1998).

5

States may ask FNS to waive the work requirement for groups of individuals who live in an

area where the unemployment rate is over 10 percent or there are not enough jobs.

6

As of Nov. 1, 1998, the Agricultural Research, Extension, and Education Reform Act of

1998 (P.L. 105-185) restored eligibility for the Food Stamp Program to permanent resident

aliens who (1) were living in the United States when PRWORA was enacted in Aug. 1996

and were over 65, or (2) are under age 18.
Page 4 GAO-01-881T

several specific administrative requirements with more general standards

that give states more flexibility in operating their food stamp programs.

Over the years, we have reported on program integrity concerns in the

Food Stamp Program.7

 Fraud, waste, and abuse in the program generally

occur in the form of either improper payments to food stamp recipients or

trafficking in food stamp benefits.8

 The states and FNS have taken steps to

reduce inaccurate payments to food stamp recipients and reduce

trafficking in food stamp benefits. However, all of the state officials we

contacted for a recent study believe that the most effective way to reduce

payment errors and program costs is to simplify food stamp rules, such as

those pertaining to program eligibility.

Inaccurate payments can be in the form of overpayments or

underpayments to food stamp recipients. Overpayments occur when

ineligible persons are provided food stamps, as well as when eligible

persons are provided more than they are entitled to receive. Overpayments

can be caused by inadvertent or intentional errors made by recipients and

caseworkers. According to FNS’ quality control system, the states

overpaid food stamp recipients about $976 million in fiscal year 2000 and

underpaid recipients about $360 million. Together, overpayment and

underpayment errors amounted to about 9 percent of food stamp benefits.

About 54 percent of these errors occurred when state food stamp workers

made mistakes, such as misapplying complex food stamp rules in

calculating benefits. The remaining 46 percent of the errors occurred

because participants, either inadvertently or deliberately, did not provide

accurate information to state food stamp offices. While the states and FNS

have taken steps to address payment errors, state officials told us that they

believe simplifying food stamp rules will have the greatest impact on

reducing payment errors and program cost.

 7

See Food Assistance: Reducing Food Stamp Benefit Overpayments and Trafficking

(GAO/RCED-95-198, June 23, 1995); Food Stamp Program: Storeowners Seldom Pay

Financial Penalties Owed for Program Violations (GAO/RCED-99-91, May 11, 1999); and

Food Stamp Program: Better Use of Electronic Data Could Result in Disqualifying More

Recipients Who Traffic Benefits (GAO/RCED-00-61, Mar. 7, 2000.)

8

 Trafficking of food stamp benefits is the exchange of food stamps for cash or certain

nonfood items. It occurs when a storeowner gives a recipient a discounted cash payment

(often 50 cents on the dollar) for food stamp benefits and then redeems the benefits at full

face value from the government.

Inaccurate Benefits

and Trafficking of

Food Stamp Benefits

Affect Program

Integrity

Steps Have Been Taken to

Address Inaccurate

Payments, but Program

Simplification May Be

Needed
Page 5 GAO-01-881T

In a recent report we identified states’ efforts to minimize food stamp

payment errors and examined what FNS has done or could do to

encourage and assist the states in reducing such errors.9 We found that all

28 states we contacted had taken action in recent years to reduce payment

errors.10 While these states took various actions to reduce payment error

rates, most states took the following five actions:

• verified the accuracy of benefit payments calculated by state food stamp

workers through supervisory and other types of case file reviews,

• provided specialized training for state food stamp workers,

• analyzed quality control data to identify causes of common payment errors

and develop corrective actions,

• matched food stamp rolls with other federal and state computer databases

to identify ineligible participants or verify income and asset information

provided by food stamp recipients, and

• used computer software programs to assist caseworkers in determining

benefit amounts.

Some states also increased the frequency with which certain types of food

stamp households must provide documentation in order to maintain their

eligibility for food stamp benefits—a process called recertification. For

example, even though FNS regulations require that food stamp households

be recertified only annually, almost half of the states we contacted require

households with earned income to be recertified quarterly because their

incomes tend to fluctuate, increasing the likelihood of payment errors.

More frequent certification enables caseworkers to verify the accuracy of

household income and make appropriate adjustments to household

benefits, possibly avoiding a payment error. However, more frequent

certification can also inhibit program participation for eligible participants

because it creates additional reporting burdens for food stamp recipients.

 9

See Food Stamp Program: States Seek to Reduce Payment Errors and Program

Complexity (GAO-01-272, Jan. 19, 2001).

10These states, which included 14 with payment error rates below the national average and

14 above the average, delivered about 74 percent of all food stamp benefits in fiscal year

1999.

States and FNS Have Taken

Action to Reduce Payment

Errors
Page 6 GAO-01-881T

FNS has taken several steps to encourage states to minimize their payment

error rates, including providing financial incentives to states that have

error rates substantially below the national average and imposing financial

sanctions on states that exceed the national average. When error rates are

too high, states are required to either pay a penalty fee or provide

additional state funds—beyond their normal share of administrative

costs—to be reinvested in error-reduction efforts, such as additional

training in calculating benefits. In fiscal year 2000, FNS imposed $46

million in financial sanctions on 18 states whose error rates were above

the national average of 9 percent. In that same year, FNS provided $55

million in enhanced funding to 11 states whose payment error rates were

less than or equal to 5.9 percent—well below the national average.

FNS also has reduced the opportunity for payment errors by allowing the

states to reduce food stamp reporting requirements for certain recipients.

For example, FNS expanded the availability of waivers related to reporting

requirements, such as the waiver that raises the earned income changes

that households must report.11 FNS was concerned that the increase in

employment among food stamp households would result in larger and

more frequent income fluctuations, which would increase the risk of

payment errors. FNS also was concerned that the states’ reporting

requirements were particularly burdensome for the working poor and

may, in effect, act as an obstacle to their participation in the program

because eligible households may not view food stamp benefits as worth

the time and effort it takes to obtain them. As a result of these concerns,

FNS established regulations in November 2000 that gave states the option

to require food stamp households with earned income to report changes

semiannually, unless a change would result in a household’s gross monthly

income exceeding 130 percent of the monthly poverty income guideline.

Finally, FNS has promoted initiatives to improve payment accuracy

through the exchange of “best practices” information among states. Since

1996, FNS has compiled catalogs of states’ payment accuracy practices

that provide information designed to help other states develop and

implement similar initiatives.

 11Other waivers include one that limits the changes that households must report to three

key events: (1) gaining or losing a job, (2) moving from part-time to full-time employment

or vice versa, and (3) experiencing a change in wage rate or salary. Another waiver

eliminates the need for households with earned income to report any changes during a 3-

month period, provided the household provides required documentation at the end of the

period.
Page 7 GAO-01-881T

While imposing financial sanctions, offering incentives, and granting

waivers related to food stamp reporting requirements can help states

reduce payment errors, the 28 state officials we spoke with believed that

simplifying the complex food stamp requirements for determining

eligibility and calculating benefits offered the greatest potential for

additional reductions in payment errors. In supporting simplification, the

state officials generally cited caseworkers’ difficulty in correctly applying

food stamp rules to determine eligibility and calculate benefits.

Specifically, the state officials cited the need to simplify requirements for

(1) determining a household’s deduction for excess shelter costs and (2)

calculating a household’s earned and unearned income. The states also

cited the need to simplify food stamp rules for determining the valuation

of vehicles. The Food Stamp Act of 1977 was recently revised to allow the

states to use the same vehicle valuation rules that they use for TANF, if

these rules would result in fewer assets attributed to the household.12

Food stamp officials in 20 of the 28 states we contacted said simplifying

the rules for determining a household’s allowable shelter deduction would

be one of the best ways to reduce payment errors.13 The Food Stamp

Program generally provides for a shelter deduction when a household’s

monthly shelter costs exceed 50 percent of income after other deductions

have been allowed. Allowable deductions include rent or mortgage

payments, property taxes, homeowner’s insurance, and utility expenses.

Food stamp officials in 18 states told us that simplifying the rules for

earned income would be one of the best options for reducing payment

errors because earned income is both the most common and the costliest

source of payment errors. Generally, the process of determining earned

income is prone to errors because caseworkers must use current earnings

as a predictor of future earnings and the working poor do not have

consistent employment and earnings. Similarly, officials in six states told

us that simplifying the rules for unearned income would help reduce

payment errors. In particular, state officials cited the difficulty

caseworkers have in estimating child support payments that will be

 12See The Agriculture, Rural Development, Food and Drug Administration, and Related

Agencies Appropriations Act for fiscal year 2001 (P.L. 106-387).

13While USDA’s appropriations act for fiscal year 2001 increased the amount of the shelter

deduction for food stamp households, it did not change the way that the deduction is

calculated.

State Officials Believe

Simplifying Food Stamp Rules

May Be Most Effective in

Reducing Errors and Program

Costs
Page 8 GAO-01-881T

received during the certification period because payments are often

intermittent and unpredictable. Because households are responsible for

reporting changes in unearned income of $25 or more, unreported changes

and child support payments often result in a payment error.

In our view, simplifying the program’s rules and regulations offers an

opportunity to, among other things, reduce payment error rates and

promote program participation by eligible recipients. We have

recommended that FNS develop and analyze options to simplify

requirements for determining program eligibility and benefits and, if

warranted, submit legislative proposals to simplify the program. As part of

its preparations for the program’s upcoming reauthorization, FNS has

begun to examine alternatives for improving the Food Stamp Program,

including options to simplify requirements for determining benefits.

While payment errors affect whether food stamp recipients receive

appropriate food stamp benefits, trafficking results in the improper use of

benefits. In March 2000, FNS estimated that stores trafficked in about $660

million a year in food stamp benefits, or about 3-1/2 cents of every dollar

of food stamp benefits issued.14 In the past, we have reported on federal

efforts to identify storeowners who engage in trafficking, the amount of

penalties assessed and collected against these storeowners, and states’

efforts to identify and disqualify recipients who engage in trafficking.15 We

discovered the following:

• FNS does not sufficiently use electronic databases to identify storeowners

who engage in trafficking. While FNS and USDA’s Office of Inspector

General use a variety of sources, including EBT databases, to identify

suspect traffickers, we have noted in various reports that electronic data

could be used more effectively to identify additional storeowners and

recipients engaged in trafficking. In addition, we found that most states

with statewide EBT systems were not independently analyzing EBT data

 14In May 2001, FNS began working with USDA’s Economic Research Service to provide

input for a study that will develop data collection methods, using electronic data, and a

framework for annually measuring and reporting on the extent of trafficking in the United

States.

15See Food Stamp Program: Information on Trafficking Food Stamp Benefits

(GAO/RCED-98-77, Mar. 26, 1998); GAO/RCED-99-91, May 11, 1999; and GAO/RCED-00-61,

Mar. 7, 2000.

Better Use of Electronic

Data Needed to Reduce

Trafficking
Page 9 GAO-01-881T

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

• While FNS almost always assessed penalties against storeowners when its

investigations showed they had violated the program’s requirements,

storeowners generally did not pay the assessed financial penalties.

According to agency officials, the small percentage of fines they are able

to collect reflect the difficulties involved in collecting this type of debt,

such as problems in locating debtors and their refusal to pay. However, we

found that weaknesses in the agency’s debt collection procedures and

practices also contributed to low collections.

We made several recommendations to FNS on ways it could improve the

integrity of the program by more effectively using EBT data, including

providing guidelines to states on reviewing electronic data. FNS has begun

to take steps to implement our recommendations. In addition, along with

USDA’s Office of Inspector General, we recognize the importance of

improving state use of EBT data and we are working with USDA to

determine best practices for using these data to identify food stamp

recipients and storeowners who may be defrauding or abusing the

program.

Participation in the Food Stamp Program has dropped by about 33 percent

during the past 4-1/2 years. The monthly average number of participants

declined from 25.5 million in fiscal year 1996 to about 17.1 million in the

first half of fiscal year 2001. Although factors such as the strong U.S.

economy and tighter eligibility requirements have been cited as primary

reasons for the dramatic decline in food stamp participation in recent

years, there remains a large gap between the number of people eligible to

receive benefits and the number participating in the program. Some of this

gap may be explained by other factors, such as past initiatives designed to

reduce TANF caseloads, confusion about eligibility requirements after the

passage of PRWORA, and administrative burdens placed on food stamp

participants that might discourage participation.

The Strong Economy

and Other Factors

Have Reduced the

Number of People

Eligible for Food

Stamps, Yet Many

Who Are Eligible Are

Not Participating
Page 10 GAO-01-881T

In 1999 we reported that the strong U.S. economy was one of the primary

factors contributing to the decline in food stamp participation.16 Since

more people were employed and earning more money, the number of

people who met the program’s income eligibility standard decreased. In

addition, the length of time some people spent on the food stamp rolls was

reduced because they found new jobs more quickly. Finally, when the

economy is strong, the percentage of eligible people participating in the

program may be indirectly lowered. This is because, as households’

income levels rise and food stamp benefits fall proportionally, households

may decide not to apply or seek recertification for these benefits,

especially when they approach the minimum benefit level of $10 per

month.

We also reported that tighter food stamp eligibility requirements have also

contributed to the decline in food stamp participation. Specifically, the

passage of PRWORA tightened eligibility requirements for able-bodied

adults without dependents, making fewer people eligible for food stamps.

During fiscal year 1997, participation in the Food Stamp Program by these

two groups fell by about 714,000 people, accounting for about 25 percent

of the decline in food stamp participation that year.

While some of the decline in participation can be explained by factors that

reduce the overall number of people eligible to receive benefits, an

increasing percentage of people eligible for food stamp benefits are not

participating in the program. Specifically, FNS estimates that only about 59

percent of eligible people in the United States received food stamp

benefits in September 1998—a 12 percentage-point drop from the

estimated 71 percent of eligible people participating in September 1994. In

addition, there is evidence to suggest that a growing gap exists between

the number of children living in poverty—an important indicator of

children’s need for food assistance—and the number of children receiving

food stamp assistance. Between 1995 and 1999, the number of children

receiving food stamp benefits declined by 33 percent, while the number of

children living in poverty declined by only 17 percent. Further, during this

 16Food Stamp Program: Various Factors Have Led to Declining Participation

(GAO/RCED-99-185, July 2, 1999).

A Strong Economy and

Tighter Eligibility

Requirements Have

Reduced the Number of

People Eligible for Food

Stamps

Other Factors May Explain

Why Many Individuals

Eligible for Food Stamps

Are Not Participating
Page 11 GAO-01-881T

same period of time, the number of children served free lunches in USDA’s

National School Lunch Program increased by about 4 percent.17

Table 1: Comparison of the Number of Children Receiving Food Stamps With the

Number of Children Living in Poverty, 1989-99

Number in thousands

Year

Children who received

food stampsa

Children living

in povertyb

1989 9,442 12,590

1990 10,139 13,431

1991 11,960 14,341

1992 13,364 15,294

1993 14,211 15,727

1994 14,407 15,289

1995 13,879 14,665

1996 13,212 14,463

1997 11,868 14,113

1998 10,546 13,467

1999 9,354 12,109

a

Totals are estimates by fiscal year.

b

Totals are estimates by calendar year.

Source: FNS for food stamp data; the U.S. Bureau of the Census, within the U.S. Department of

Commerce, for poverty data.

In 1999, we reported that state and local initiatives designed to reduce the

TANF caseloads contributed to the decline in their food stamp rolls.18 In

several states and localities, FNS identified barriers to food stamp

participation and policies that improperly removed eligible households

with children from the food stamp rolls as a sanction for a TANF violation.

This occurred, in part, because FNS had still not established regulations

that implemented PRWORA’s revisions to the Food Stamp Act and the

guidance it had already issued was considered nonbinding. In addition, we

found that only three of FNS’ seven regional offices regularly conducted

annual reviews of each state in their jurisdiction, even though FNS’

regulations require such reviews. FNS regional offices had not examined

 17To be eligible for a free lunch, a child must come from a household whose income is at or

below 130 percent of the federal poverty guideline.

18GAO/RCED-99-185, July 2, 1999.
Page 12 GAO-01-881T

program access in nine states and the District of Columbia from October

1996 through June 1999. These reviews have previously identified

obstacles, such as gaining access to benefits, which might inhibit

individuals from participating in the program.

To ensure that eligible people receive food stamp benefits, we

recommended that FNS establish regulations requiring that the states (1)

inform each applicant for assistance of the right to apply for food stamps

during the first meeting and (2) limit sanctions on the food stamp benefits

to only the individual—not the household—who does not comply with a

welfare requirement. FNS established regulations in November 2000 and

January 2001 that implemented both parts of our recommendation. We

also recommended that FNS give higher priority to aggressively targeting

obstacles related to participants’ access to food stamp benefits in

reviewing states’ food stamp operations. Since our report was issued, FNS

has conducted participant access reviews in each of the 50 states;

Washington, D.C.; and the Virgin Islands.

A 1999 report noted that most nonparticipating households estimated to

be eligible for food stamp participation—including those who had

previously participated in the program—did not apply because they did

not think they were eligible.19 The food stamp directors of four FNS

regional offices agreed that implementation of TANF has been an

important factor in the decline in participation in their regions. According

to these directors, many people do not apply for food stamps because they

assume that if they are ineligible for TANF, they are also ineligible for food

stamps. We recommended that FNS publicize eligibility requirements for

the Food Stamp Program and distinguish them from the eligibility

requirements for TANF.20 Soon after that recommendation was made, FNS

launched a public awareness campaign to better publicize food stamp

eligibility requirements in hopes of improving participation.

In addition, recent research has indicated that some eligible households

may not participate in the Food Stamp Program because of the perceived

 19Michael Ponza, James C. Ohls, Lorenzo Moreno, and others, Customer Service in the Food

Stamp Program (Washington, D.C.: Mathematica Policy Research, Inc., July 1999).

20GAO/RCED-99-185, July 2, 1999.
Page 13 GAO-01-881T

difficulty of doing so.21 Specifically, those who were aware they were

eligible for food stamps but chose not to participate most often cited

reasons related to the administrative burden of applying, such as the time

and costs involved. One survey found that, on average, applicants spent

nearly 5 hours and made at least two trips to the local food stamp office to

apply for food stamps. If states are increasing the frequency with which

certain types of households must be recertified to reduce the likelihood of

payment errors, program participation may be inhibited because of the

additional reporting burdens for food stamp recipients.

FNS and the states have taken actions to reduce fraud, waste, and abuse in

the Food Stamp Program. Our past work has found that FNS and the states

need to make better use of electronic data to track individuals and

storeowners who may be trafficking in food stamp benefits. We also found

that financial sanctions and enhanced funding have been at least partially

successful in focusing states’ attention on minimizing payment errors.

However, this “carrot and stick” approach can accomplish only so much.

Food stamp regulations for determining eligibility and benefits are

extremely complex and their application is inherently error-prone and

costly to administer. Furthermore, this approach, carried to extremes, can

create incentives for states to take actions that may inhibit achievement of

one of the agency’s basic missions—providing food assistance to those

who are in need. For example, increasing the frequency with which

recipients must report income changes could decrease errors, but it could

also have the unintended effect of discouraging participation by the

eligible working poor. This would run counter not only to FNS’ basic

mission but also to an overall objective of welfare reform—helping people

move successfully from public assistance into the workforce.

Simplifying the Food Stamp Program’s rules and regulations offers an

opportunity to reduce payment error rates and promote program

participation by eligible recipients. FNS has begun to look at options for

simplifying requirements for determining benefits. However, in view of the

upcoming reauthorization, it is critical that FNS follow through with this

process and develop options that strike an appropriate balance between

the sometimes competing objectives of ensuring program integrity and

 21Mathematica Policy Research, Inc., July 1999; and Shelia Rafferty Zedlewski with Amelia

Gruber, Former Welfare Families Continue to Leave the Food Stamp Program (Washington,

D.C.: Urban Institute, March 2001).

Concluding

Observations
Page 14 GAO-01-881T

encouraging eligible individuals to participate. To be successful, this

process must include a continuing dialogue with all appropriate

stakeholders, including congressional members and state officials, and

must ensure that actions are taken to streamline the program while at the

same time improving program integrity.

Mr. Chairman, this concludes my prepared statement. I will be happy to

answer any questions that you or other members of the Subcommittee

may have.

For future contacts regarding this testimony, I can be contacted at (202)

512-7215. Key contributors to this testimony were Dianne Blank, Elizabeth

Morrison, Debra Prescott, and Suzanne Lofhjelm.

(130054)

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• Web site: http://www.gao.gov/fraudnet/fraudnet.htm

• E-mail: fraudnet@gao.gov

• 1-800-424-5454 (automated answering system)

Ordering Information

To Report Fraud,

Waste, and Abuse in

Federal Programs