Summary 

Most discussion of payment accuracy in the Food Stamp Program focuses on the overall level and cost of 

payment errors. Rarely does the discussion focus on the impact of payment errors on individual 

households affected. This analysis – based on 2003 food stamp quality control data – leads to two broad 

conclusions. First, virtually all households receiving food stamps are eligible. Thus, the problem of 

erroneous payments is not so much one of determining eligibility, but rather one of attempting to finely 

target benefits to the complicated and changing circumstances of low-income households. Second, most 

overpayments to eligible households are small relative to household income and official poverty 

standards. As a result, most food stamp households are poor, and they remain poor even when overpaid. 

Background 

The Food Stamp Program is the foundation of 

America’s national nutrition safety net and the 

first line of the nation’s defense against hunger. 

In fiscal year 2003, the program served 21.3 

million people in an average month, providing 

$21.4 billion in benefits to support food 

purchases of low-income households.1

 The 

Food and Nutrition Service and its State and 

local partners are responsible for ensuring that 

these funds are issued properly in accordance 

with program rules. 

The program has achieved steady improvements 

in payment accuracy for five years in a row. In 

fiscal year 2003, the combined payment error 

rate – the sum of overpayments and 

underpayments – was 6.63 percent, the lowest in 

the history of the program. Despite this 

substantial improvement, the cost of erroneous 

payments remains high, primarily because the 

Program is so large. The cost of overpayments, 

though small as a percentage of all payments 

(5.04 percent), amounted to $1.1 billion in 2003. 

Similarly, the cost of underpayments – the value 

of benefits that should have been paid to eligible 

participants but were not – is small as a 

 

1

 Food stamp participation and benefits have 

continued to grow since 2003. The program is 

expected to serve an average of 26.4 million 

participants and provide total benefits worth $29.7 

billion in fiscal year 2005. 

percentage of payments (1.59 percent), but still 

substantial ($340 million). The net cost to the 

government of erroneous payments – the cost of 

overpayments less the cost of underpayments – 

in 2003 was over $700 million. 

Most discussion of payment accuracy and 

erroneous payments in the Food Stamp Program 

focuses on these indicators of overall level and 

cost of payment errors. There is much less 

discussion of the impact of payment errors on 

the individual households affected. The basic 

question is whether the relatively high cost of 

erroneous payments is the result of a few large 

errors or the result of many small errors. If the 

latter is true, it is also useful to place those errors 

in the context of the household’s overall 

financial circumstances. 

An earlier analysis prepared for the Food and 

Nutrition Service examined these questions 

using 1998 food stamp quality control data 

(Trippe and Palermo 2000). There have been 

several major program changes since then, and a 

procedural change in the definition of error.2

 

This analysis revisits the question of the impact 

 

2

 In 1998, an error was coded if the quality control 

reviewer determined that the household was eligible 

and the correct benefit differed from the issued 

benefit by more than $5; in 2003 errors were coded 

only if the difference was more than $25. Use of the 

higher threshold reduces the number of households 

with a recorded payment error, but raises the average 

amount of the error, compared to the lower threshold. 

IMPACT OF FOOD STAMP PAYMENT ERRORS ON 

HOUSEHOLD PURCHASING POWER

Office of Analysis, Nutrition and Evaluation March 2005 
Page 2 

of payment errors on participating households 

using quality control data collected for fiscal 

year 2003. 

Method 

This analysis uses data collected from a sample 

of households selected for review as part of the 

Food Stamp Program Quality Control (QC) 

System. The QC system is designed to 

determine if households are eligible to 

participate and receive the correct benefit 

amount. For cases determined to be in error, the 

QC review identifies the type (overpayment or 

underpayment) and amount of the error. The 

analysis reported here is based on a national 

sample of 50,125 cases, weighted to represent 

the U.S. population of participating food stamp 

households (excluding disaster assistance). 

The main goal of the analysis is to examine the 

extent and size of food stamp payment errors 

and their impact on benefits and total household 

income. The analysis uses the concept of 

purchasing power – the combined value of 

household gross income and food stamp benefits 

– to describe the impact of errors on benefits and 

total household income. In general, the 

approach taken compares a household’s 

purchasing power relative to the official poverty 

line for its family size, once with the value of the 

food stamp benefit issued and again with the 

value corrected by subtracting out an 

overpayment or adding in an underpayment. 

The difference in purchasing power as a fraction 

of the poverty line between the actual and the 

corrected values provides an indicator of the 

importance of the erroneous payment for the 

households’ overall financial situation. 

Findings 

• Virtually all households receiving food 

stamps are eligible for some benefit. As 

shown in Table 1, less than 2 percent of all 

participating households were not eligible 

for any food stamp benefit in fiscal year 

2003. Among these ineligible households, 

half had gross income below 130 percent of 

the poverty line. About 6 percent of all 

households were eligible but received too 

much, and less than 4 percent were eligible 

but received too little. 

• Overpayments to eligible households 

represent about one-third of the average 

benefit issued to these households. As 

shown in Table 1, the average overpayment 

issued to an eligible household was $97, or 

37 percent of the issued benefit. Overpayments to ineligible households were 

larger, averaging $150 in 2003. The average 

underpayment ($78) was about 40 percent of 

the average payment. As shown in Table 2, 

about 30 percent of the overpayments and 

40 percent of the underpayments were in the 

range of $26 to $50.

• Overpayment errors had little effect on 

overall household purchasing power. 

Overpayments to eligible households 

increased purchasing power relative to the 

poverty standard by less than 5 percentage 

points for 30 percent of those overpaid, and 

by less than 10 percentage points for nearly 

72 percent (see Table 3). On average, 

overpayments to eligible households raised 

the combined value of gross income and 

food stamps from 94 percent to 102 percent 

of the poverty line (see Table 4). Thus, 

most food stamp participants were poor, and 

they remained poor even when overpaid. 

• Similarly, underpayment errors had little 

effect on overall household purchasing 

power. Underpayments to eligible 

households decreased purchasing power 

relative to the poverty standard by less than 

5 percentage points for 40 percent of those 

overpaid, and by less than 10 percentage 

points for over 84 percent (see Table 5). On 

average, underpayments to eligible 

households lowered the combined value of 

gross income and food stamps from 80 

percent to 74 percent of the poverty line (see 

Table 6). 

Although the number of ineligible households 

was small, overpayments to these households 

had a larger impact on their purchasing power. 

For 56 percent of the ineligible households, the 

value of the food stamp benefit raised their 
Page 3 

income by more than 10 percentage points 

relative to the poverty line (see Table 3). 

Payments to ineligible households raised the 

combined value of gross income and food 

stamps from 118 percent to 132 percent of the 

poverty line (see Table 4). 

Acknowledgements 

This report was prepared by Katherine Fink, 

Office of Analysis, Nutrition and Evaluation, 

based on data tabulations prepared by Carole 

Trippe and Catherine Palermo, Mathematica 

Policy Research. 

References 

Trippe, Carole and Daisy Ewell. Size and 

Impact of Food Stamp Payment Errors Based 

on the FY 2003 FSPQC Unedited Database. 

Prepared by Mathematica Policy Research for 

the Food and Nutrition Service, USDA, 

Alexandria, VA, January 2005. 

Trippe, Carole, and Catherine Palermo. Food 

Stamp Payment Errors: How Big Are They, 

What Is Their Impact, and What Do We Know 

About Household with These Errors? 

Prepared by Mathematica Policy Research for 

the Food and Nutrition Service, USDA, 

Alexandria VA, May 2000. 

References can be found on-line at 

http://www.fns.usda.gov/oane. 

The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of 

race, color, national origin, gender, religion, age, disability, political beliefs, sexual orientation, or marital or family 

status. (Not all prohibited bases apply to all programs.) 

Persons with disabilities who require alternative means for communication of program information (Braille, large 

print, audiotape, etc.) should contact USDA’s TARGET Center at (202) 720-2600 (voice and TDD). 

To file a complaint of discrimination, write USDA, Director, Office of Civil Rights, Room 326-W, Whitten Building, 

14th and Independence Avenue, S.W., Washington, DC 20250-9410 or call (202) 720-5964 (voice and TDD). USDA 

is an equal opportunity provider and employer. 
Page 4 

TABLE 1 

 

EXTENT OF ISSUANCE ERROR AMONG FSP HOUSEHOLDS, FISCAL YEAR 2003 

 FSP Households with Issuance Errors 

 Received Overpayments Received 

Underpayments 

 FSP 

Households 

with No 

Errors 

Eligible Ineligible Total Total 

Households4

 

FSP Households 

Total Weighted Count 8,064,594 572,458 153,292 336,258 9,148,146 

Percentage of Total FSP 

Households 88.2 6.3 1.7 3.7 100.0 

Average FSP Benefit 

As Issued $184 $259 $150 $196 $189 

Corrected $184 $162 0 $274 $183 

Average Payment Error2 

Amount $0 $97 $150 $78 $12 

Percentage of Issued FSP 

Benefits 0.0 37.3 100.0 39.8 6.3 

Percentage of corrected FSP 

Benefit 0.0 59.4 0.0 28.5 6.5 

Total Payment Error3 

Amount (000s) $0 $55,252 $23,010 $26,200 $108,965 

Percentage of Total Payment 

Error 0.0 50.7 21.1 24.0 100.0 

Total Unweighted Count 44,107 3,212 982 1,824 50,233 

 

SOURCE: FY 2003 FSPQC Unedited Database 

 1

 Excludes 108 (unweighted) eligible households that do not qualify for a positive benefit. 2

 The average payment error for total households represents the absolute value of the error (underpaid and overpaid), and includes households

 with no errors. 3

 Due to rounding, the total weighted count times the average payment error does not exactly match the total payment error shown in the table.

4

 Row totals do not equal sum of columns. 
Page 5 

TABLE 2 

 

DISTRIBUTION OF FSP HOUSEHOLDS BY AMOUNT OF PAYMENT ERROR, FISCAL YEAR 2003 

(Percentages) 

 

FSP Households with Issuance Errors 

Received Overpayments Received 

Underpayments 

Amount of Payment Error 

Eligible1

 Ineligible Total Total 

Total 

Households 2

 

Dollar Amount 

Less than $6 0.0 0.4 0.1 0.0 88.4 

$6-$25 0.0 12.8 2.7 0.0 0.2 

$26-$50 29.9 8.5 25.4 38.7 3.4 

$51-$100 35.3 16.9 31.4 36.3 3.8 

$101-$200 25.3 35.0 27.4 21.6 3.0 

$201+ 9.5 26.4 13.1 3.3 1.2 

Total Households 100.0 100.0 100.0 100.0 100.0 

Total Weighted Count 572,458 153,292 725,750 336,258 9,126,602 

 

SOURCE: FY 2003 FSPQC Unedited Database 

 1

 Households that are eligible and qualify for a positive benefit.

2

 Excludes 108 (unweighted) eligible households that do not qualify for a positive benefit.
Page 6 

TABLE 3 

 

IMPACT OF OVERPAYMENT ERRORS ON PURCHASING POWER OF FSP HOUSEHOLDS, FISCAL YEAR 2003 

 

Households with Overpayment 

Errors (Percentages) 

Average Amount of Overpayment Errors 

Increase in Purchasing (Dollars) 

Power as a Percentage of 

the Poverty Level1

Eligible2

 Ineligible Total 

Eligible 

Households2

Ineligible 

Households 

Total 

Households 

 

< 5 points change 29.6 21.0 27.8 $42 $25 $39 

5-10 point change 42.0 22.9 37.9 $81 $89 $82 

>10 point change 28.4 56.1 34.2 $177 $221 $192 

Total Households 100 100 100 $97 $150 $108 

 

Total Weighted Count 572,458 153,292 725,750 NA NA NA 

SOURCE: FY 2003 FSPQC Unedited Database 

 

1

Purchasing power is defined as the combined value of household gross income and FSP benefit. 

2

 Households that are eligible and qualify for a positive benefit. 

 

TABLE 4 

 

PURCHASING POWER AND POVERTY STATUS OF FSP HOUSEHOLDS WITH OVERPAYMENTS, 

FISCAL YEAR 2003 

 

FSP Households with Overpayments 

(Percentages) 

Purchasing Power as a Gross Income Plus Correct Benefit Gross Income Plus Issued Benefit 

Percentage of Poverty 

Eligible 

Households2

Ineligible 

Households 

Total 

Households 

Eligible 

Households2

Ineligible 

Households 

Total 

Households 

 

< 50% 4.9 25.7 9.3 3.2 23.5 7.5 

50-100% 58.0 13.0 48.5 49.0 12.5 41.3 

101-130% 28.3 11.4 24.7 32.3 11.5 27.9 

131%+ 8.8 49.9 17.4 15.5 52.5 23.3 

Overall Average 

Percentage of Poverty 93.9 118.3 99.0 102.2 132.2 108.5 

 

Total Weighted Count 572,458 153,292 725,750 572,458 153,292 725,750 

SOURCE: FY 2003 FSPQC Unedited Database

 

1

Purchasing power is defined as the combined value of household gross income and FSP benefit.

2

 Households that are eligible and qualify for a positive benefit.
Page 7 

 TABLE 5 

 

IMPACT OF UNDERPAYMENT ERRORS ON PURCHASING POWER OF 

FSP HOUSEHOLDS, FISCAL YEAR 2003 

 

Decrease in Purchasing Power as a 

Percentage of the Poverty Level1

Households with 

Underpayment Errors 

(Percentages) 

Average Amount 

of Underpayment 

Errors (Dollars) 

 

< 5 points change 40.4 $42 

5-10 point change 43.8 $83 

>10 point change 15.9 $156 

Total Households 100 $78 

 

 Total Weighted Count 336,258 NA 

SOURCE: FY 2003 FSPQC Unedited Database 

 1

Purchasing power is defined as the combined value of household gross income and FSP benefit.

 

 TABLE 6 

 

 POVERTY STATUS OF FSP HOUSEHOLDS WITH UNDERPAYMENTS, 

 FISCAL YEAR 2003 

 

 FSP Households with Underpayments 

(Percentages) 

Purchasing Power as a Percentage of 

Poverty 

Gross Income Plus Correct 

Benefit 

Gross Income Plus 

Issued Benefit 

 

< 50% 14.5 20.0 

50-100% 63.9 63.6 

101-130% 18.0 14.0 

130%+ 3.6 2.4 

Overall Average Percentage of Poverty 80.3 73.9 

Total Weighted Count 336,258 336,258 

 

SOURCE: FY 2003 FSPQC Unedited Database 

 1

Purchasing power is defined as the combined value of household gross income and FSP benefit.