U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

74–377 PDF 2012

FOOD STAMP FRAUD AS A BUSINESS MODEL: 

USDA’S STRUGGLE TO POLICE STORE OWNERS 

HEARING 

BEFORE THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

MARCH 8, 2012 

Serial No. 112–141 

Printed for the use of the Committee on Oversight and Government Reform 

( 

Available via the World Wide Web: http://www.fdsys.gov 

http://www.house.gov/reform 

(II) 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

DARRELL E. ISSA, California, Chairman 

DAN BURTON, Indiana 

JOHN L. MICA, Florida 

TODD RUSSELL PLATTS, Pennsylvania 

MICHAEL R. TURNER, Ohio 

PATRICK T. MCHENRY, North Carolina 

JIM JORDAN, Ohio 

JASON CHAFFETZ, Utah 

CONNIE MACK, Florida 

TIM WALBERG, Michigan 

JAMES LANKFORD, Oklahoma 

JUSTIN AMASH, Michigan 

ANN MARIE BUERKLE, New York 

PAUL A. GOSAR, Arizona 

RAU ́ L R. LABRADOR, Idaho 

PATRICK MEEHAN, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

JOE WALSH, Illinois 

TREY GOWDY, South Carolina 

DENNIS A. ROSS, Florida 

FRANK C. GUINTA, New Hampshire 

BLAKE FARENTHOLD, Texas 

MIKE KELLY, Pennsylvania 

ELIJAH E. CUMMINGS, Maryland, Ranking 

Minority Member 

EDOLPHUS TOWNS, New York 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

DENNIS J. KUCINICH, Ohio 

JOHN F. TIERNEY, Massachusetts 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

MIKE QUIGLEY, Illinois 

DANNY K. DAVIS, Illinois 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

JOHN A. YARMUTH, Kentucky 

CHRISTOPHER S. MURPHY, Connecticut 

JACKIE SPEIER, California 

LAWRENCE J. BRADY, Staff Director 

JOHN D. CUADERES, Deputy Staff Director 

ROBERT BORDEN, General Counsel 

LINDA A. GOOD, Chief Clerk 

DAVID RAPALLO, Minority Staff Director 

(III) 

C O N T E N T S 

Page 

Hearing held on March 8, 2012 .............................................................................. 1 

WITNESSES 

The Honorable Kevin Concannon, Under Secretary for Food, Nutrition and 

Consumer Services, U.S. Department of Agriculture 

Oral Statement .......................................................................................... 5 

Written Statement .................................................................................... 7 

The Honorable Phyllis K. Fong, Inspector General, U.S. Department of Agriculture 

Oral Statement .......................................................................................... 15 

Written Statement .................................................................................... 17 

Ms. Jennifer Hatcher, Senior Vice President, Government and Public Affairs, 

Food Marketing Institute 

Oral Statement .......................................................................................... 25 

Written Statement .................................................................................... 27 

The Honorable Kenya Mann Faulkner, Inspector General, Pennsylvania Office of Inspector General 

Oral Statement .......................................................................................... 35 

Written Statement .................................................................................... 37 

APPENDIX 

The Honorable Elijah E. Cummings, A Member of Congress from the State 

of Maryland: Opening Statement ....................................................................... 65 

The Honorable Gerald E. Connolly, A Member of Congress from the State 

of Virginia: Written Statement ........................................................................... 67 

News article,‘‘Scripps Investigation Unveils Food Stamp Fraud’’ ....................... 69 

News article, ‘‘Concannon: USDA Cracking Down on SNAP Fraud’’ .................. 72 

(1) 

FOOD STAMP FRAUD AS A BUSINESS MODEL: 

USDA’S STRUGGLE TO POLICE STORE OWNERS 

THURSDAY, MARCH 8, 2012 

HOUSE OF REPRESENTATIVES

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, 

Washington, D.C. 

The committee met, pursuant to call, at 9:30 a.m., in Room 2154, 

Rayburn House Office Building, Hon. Darrell E. Issa [chairman of 

the committee] presiding. 

Present: Representatives Issa, Platts, Walberg, Meehan, 

DesJarlais, Gowdy, Farenthold, Cummings, Towns, Tierney, 

Connolly, Braley, and Speier. 

Staff Present: Michael R. Bebeau, Majority Assistant Clerk; Robert Borden, Majority General Counsel; Molly Boyl, Majority Parliamentarian; Lawrence J. Brady, Majority Staff Director; Ashley H. 

Callen, Majority Counsel; John Cuaderes, Majority Deputy Staff 

Director; Gwen D’Luzansky, Majority Assistant Clerk; Jessica L. 

Donlon, Majority Counsel; Adam P. Fromm, Majority Director of 

Member Liaison and Floor Operations; Linda Good, Majority Chief 

Clerk; Frederick Hill, Majority Director of Communications; Christopher Hixon, Majority Deputy Chief Counsel, Mark D. Marin, Majority Senior Professional Staff Member; Noelle Turbitt, Majority 

Staff Assistant; Rebecca Watkins, Majority Legislative Policy Director; Beverly Britton Fraser, Minority Counsel; Kevin Corbin, Minority Deputy Clerk; Ashley Etienne, Minority Director of Communications; Jennifer Hoffman, Minority Press Secretary; Carla 

Hultberg, Minority Chief Clerk; Brian Quinn, Minority Counsel; 

Steven Rangel, Minority Senior Counsel; Dave Rapallo, Minority 

Staff Director; and Davida Walsh, Minority Counsel. 

Chairman ISSA. The Committee will come to order. 

The Oversight Committee exists to secure two fundamental principles: first, Americans have a right to know that the money Washington takes from them is well spent and, second, Americans deserve an efficient, effective government that works for them. Our 

duty on the Oversight and Government Reform Committee is to 

protect these rights. Our solemn responsibility is to hold government accountable to taxpayers, because taxpayers have a right to 

know what they get from their government. We will work tirelessly 

in partnership with citizen watchdogs to deliver the facts to the 

American people and bring genuine reform to the Federal bureaucracy. 

2 

I will now recognize myself for an opening statement and, pursuant to the mission statement, would ask that the video be played, 

since it reflects the watchdog in question. 

[Video shown.] 

Chairman ISSA. America deserves better. 

Just yesterday, one of our witnesses penned an op-ed that depicted the improvement in this SNAP program, proudly stating 

how much better it was. It is not for us today to question whether 

or not the program has improved; the question is in a day in which, 

in a moment’s notice, in a few keystrokes, I can look at a storefront 

anywhere in America, find out who, what, where owns that, or, in 

this case, that Scripps Howard could do a few public record 

searches available to the Department of Agriculture and find out 

what they were doing wrong from open source. We need to do better. 

The hearing today is about children. The hearing today is about 

families. Ultimately, the food stamp program is about providing 

nutrition to people in need. Forty-two million people rely on the 

food stamp program. A few misuse the program. Our hearing today 

is not about the individuals who, out of desperation for drugs, alcohol, or just spending money, misuse food stamps; it is about America’s responsibility, this Administration and this Congress’s responsibility to make sure that the money or the benefit of the money 

gets to the people who are supposed to get it. It is not to buy alcohol, cigarettes, or drugs. 

A relatively few storefronts around America represent a considerable amount of fraud. Understand that a small amount of stores 

does not mean there is a small amount of fraud. People who want 

to use or misuse, I should say, the resources provided to them by 

the taxpayer in the way of food stamps seek out stores who will 

cheat. It is not an accident that you find out that somewhere in the 

neighborhood an entity will trade you $100 in food stamps for $50 

in cash so you can go score. That score is bad enough, but let’s understand somewhere there is a family that relied on food that instead got nothing. 

These companies and these individuals behind these companies 

need to be punished on a consistent basis. If in fact they are suspended, it needs to be for a period of time with an understanding 

of whether or not they are ever going to be able to sell again. If 

they are permanently excluded, then in fact permanent needs to 

mean permanent. 

More importantly, in this day and age of the ability to research, 

if you only have 100 people to track this huge amount of potential 

waste, one can make the other 99 more effective. The scandal we 

are looking at today is important because we know that 100 people 

working for the Secretary in fact found people who were stealing 

from the taxpayers and stealing from families who need that food 

and need that benefit. One of those 100 assigned to do what whistleblowers have done for us in fact could have prevented many of 

these stores from being back in business. It is that simple. 

We will hear today, as we often do, if we only had more resources. This Committee has no more resources to provide. In fact, 

you are going to have to do more for less. That is more oversight, 

3 

more accountability with less money available for that, and more 

need by people on the food stamp program. 

Ultimately, we are going to hear testimony on both sides saying 

we are doing a better job, and we are going to hear people saying 

you are not doing well enough. Both can be true. America, in fact, 

expects both to be true. Continuous improvement, but in fact never 

satisfied that we have done enough. 

With that, I recognize the Ranking Member for his opening statement. 

Mr. CUMMINGS. Thank you very much, Mr. Chairman. I welcome 

today’s opportunity to conduct oversight of the SNAP program, 

which has one of the most vital missions of any government program, and that is to prevent abject hunger in homes all across 

America. I am so glad that you said that this hearing, amongst 

other things, is about children. 

Mr. Chairman, thank you for agreeing to invite the Minority’s 

witness, Ms. Jennifer Hatcher of the Food Marketing Institute. 

Since this hearing is about store owners, I thought it was appropriate to invite them. Ms. Hatcher’s organization represents 26,000 

supermarkets and food stores across the Country that implement 

the SNAP program on a daily basis. 

I also want to thank you for allowing our Minority witness to appear on the first panel with everyone else. You did not have to do 

that, but you did, and we are indeed grateful. 

Let me start by emphasizing a very critical point. Nearly half of 

the beneficiaries of the SNAP program are poor, hungry children. 

SNAP currently serves 46 million Americans with incomes at or 

below 130 percent of the poverty level. According to USDA, 47 percent are under 18 years old. SNAP also serves millions of people 

who are elderly or have disabilities. 

SNAP has never been more critical than it is today. The 2008 financial crisis drove more Americans into poverty than any other 

time since we started tracking this data. The collapse of Wall 

Street and the evisceration of trillions of dollars in household savings forced millions of Americans to turn to this critical safety net, 

and it has been there for them. 

While the need for the SNAP program is at an all-time high, 

fraud within the program is at an all-time low. SNAP is one of the 

most efficiently run Federal programs, with one of the lowest fraud 

rates of any government benefits program. Fraud has declined from 

approximately 4 cents of every dollar expended in 1993 to only 1 

cent of every dollar expended today. 

But I agree that that is not good enough. The Majority appears 

to be basing today’s hearing on recent press stories about certain 

store owners who have been disqualified from the program but allegedly regain entry in some way. Although this would be problematic if true, we have not seen evidence to support allegations that 

there is a pervasive weakness in the program or the magnitude of 

fraud in the program may be much greater than initially reported. 

In fact, today we will hear just the opposite, that this press account has significant problems. The USDA has acted quickly to address the bad actors and the SNAP program continues to be an extremely well run program. Given the strong track record, I am conVerDate Aug 31 2005 12:13 Jun 21, 2012 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 C:\DOCS\74377.TXT APRIL
4 

cerned that the true purpose of this hearing may be to discredit the 

entire program in order to justify draconian cuts. 

Last year, every Republican member of this Committee voted to 

convert SNAP program into a block grant program and slash its 

funding by $127 billion over the next 10 years, a massive reduction 

of almost 20 percent. 

Again, I go back to what you said a little bit earlier, Mr. Chairman, in part, this is about children. 

This proposal was part of the plan proposed by Budget Committee Chairman Paul Ryan and adopted by the House Republicans 

last April. According to the Center on Budget, Policies and Priorities, this proposal will force up to 8 million men, women, and children to be cut from the program or will severely reduce the amount 

of food they can buy. Where are these children supposed to go if 

they are hungry? 

I believe there is a compassion deficit here in Washington. Obviously, a dollar squandered in this program is a dollar that does not 

go to poorfamilies that desperately need food. But efforts to impose 

draconian cuts to this program will cause even greater harm to the 

very people who need the most help. 

So while I strongly support efforts to make the program more effective and efficient, and I strongly support the fact that we must 

root out fraud, I will do everything in my power to oppose efforts 

to use these isolated examples to discredit and gut the entire program. 

I look forward to a productive discussion today on ways to improve one of the most successful Federal programs to prevent poverty and hunger throughout these United States and with that, Mr. 

Chairman, I yield back. 

Chairman ISSA. I thank the gentleman. 

Members will have seven days to submit opening statements for 

the record. 

We now recognize our first panel. Mr. Kevin Concannon is the 

Under Secretary for Food, Nutrition and Consumer Services at 

USDA. Prior to this service at the Department of Agriculture, he 

served as director of three different State government departments 

of health and human services, Maine, Oregon, and Iowa. Welcome. 

Ms. Phyllis Fong is the USDA Inspector General and has served 

the Department for 10 years. She is also concurrently serving as 

the first Chairperson of the Council of Inspectors General on Integrity, Efficiency, and, in fact, in that role you may be aware that 

this Committee would like to pass on to that Council greater authority, including potentially subpoena authority. That remains one 

of our long-term goals if we can convince the Senate of the importance of investing in inspectors general. 

Ms. Jennifer Hatcher is the Senior Vice President of Government 

and Public Affairs for the Food Marketing Institute. Prior to joining FMI, she served Chairman Spencer Bachus as his chief of staff. 

Lastly, Ms. Faulkner is Inspector General of the Commonwealth 

of Pennsylvania. Prior to becoming Inspector General, Ms. Faulkner was a law partner at the Philadelphia office of Ballard Spahr 

LLP. She has had a lengthy career in public service as an Assistant 

U.S. Attorney, Deputy Attorney General of Pennsylvania, and 

Philadelphia public defender. That is a lot to pack in a short time. 

5 

If you would all rise. Pursuant to our Committee rules, all witnesses are to be sworn. Please raise your right hand. 

Do you solemnly swear or affirm that the testimony you are 

about to give will be the truth, the whole truth, and nothing but 

the truth? 

[Witnesses respond in the affirmative.] 

Chairman ISSA. Let the record reflect all witnesses answered in 

the affirmative. 

This Committee historically tends to have a soft gavel. As I informed the witnesses ahead of time, we have a vote on a district 

work period, last working day. I know my people; they will not return. So in order to not have you wait an hour for a relatively 

small period afterwards, if we have not concluded by the time of 

the vote, we will end at that point. 

As a result, I will hold everyone on your side very close to the 

five minutes. I will hold my own people close to the five minutes 

not just for questions, but for your answers. So I ask all the members on the dais to please include time in your five minutes for 

both questions and a reasonable period for witnesses to answer. 

With that, Mr. Secretary, you are recognized for five minutes. 

WITNESS STATEMENTS 

STATEMENT OF THE HONORABLE KEVIN CONCANNON 

Mr. CONCANNON. Thank you for the opportunity to join you 

today, and let me thank Inspector General Fong, who is a strong 

and independent oversight agent at the USDA. 

The mission of the Supplemental Nutrition Assistance Program, 

or SNAP, is to help low income people get the food they need while 

they get back on their feet, and it has never been more important 

in the lives of Americans than now. So strong administration and 

oversight, including accurate payments and proper use of benefits, 

are just as critical. 

The focus of today’s hearing is about USDA’s oversight and management of the retailers that are authorized to redeem SNAP benefits across the United States. Particular emphasis is being given to 

recent news stories, the result of several months of intensive investigative journalism by a team of reporters at Scripps Howard news 

service that focused on retailers that had previously been disqualified from SNAP for trafficking. Trafficking is the sale or purchase 

of SNAP benefits for cash, an illegal activity punishable by disqualification, fines, and criminal prosecution. 

While we recognize the importance of the issues raised by 

Scripps, I want to set the record straight about several facts. As 

with other leads we receive from the public, we took the information Scripps brought to our attention very seriously. We immediately began our own investigation into the stores that were referred to us. Our results suggest that the issues may not be as 

widespread as reported by Scripps, as many of the cases they 

raised have not proven to have integrity problems. Of the 36 owners Scripps referred to FNS as suspicious, our investigation found 

that over three-quarters had no connection to the disqualified 

owner or were not authorized at SNAP stores. The remaining quarVerDate Aug 31 2005 12:13 Jun 21, 2012 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 C:\DOCS\74377.TXT APRIL
6 

ter have been either disqualified, charged, or withdrawn from 

SNAP. One is under criminal investigation by the OIG. 

That said, we still believe broader action was needed. We increased security measures to keep out previously disqualified owners, including more robust review of applicants’ public records and 

shorter time period authorizations for stores and locations with 

previous disqualifications. 

Prior to these reports, FNS has been upgrading its electronic 

transaction data mining technology to better detect suspicious 

SNAP redemptions and we are preparing to post information regarding the owners of permanently disqualified stores to GSA’s excluded party list system, a Federal list to protect other Federal 

agencies. We are also developing rules that will increase penalties 

for trafficking stores. 

Combating fraud has long been a USDA priority over the last 15 

years, and I believe the charts are rotating up here. You will see 

one of those charts reflects various initiatives we have taken over 

the years. We are not yet satisfied and USDA continues to work 

closely with our partners to fight trafficking. In fiscal year 2011, 

FNS reviewed over 15,000 stores, conducted nearly 5,000 undercover investigations, and sanctioned or punished 2,000 retailers. 

While USDA has direct responsibility for overseeing SNAP retailers, our integrity work includes every aspect of SNAP administration. By overseeing and working closely with our partners, including State and local governments, USDA strives to ensure that 

scarce taxpayer resources are managed with integrity and accountability. 

First, over the past decade we have made major improvements 

in SNAP payment accuracy. Over 98 percent of SNAP clients are 

indeed eligible and accuracy in 2010 reached 96 percent, a historic 

high. 2010 errors were less than billions than they would have 

been under the 2000 year rate. 

Second, USDA also oversees and provides guidance to States to 

find and hold accountable recipients who commit fraud. USDA recently issued new policy to clarify that even the intent to sell benefits, for example, by offering a SNAP card on a social media site 

like Craig’s List, can lead to disqualification. 

Last year I wrote to all of the Nation’s governors, individually, 

asking them to make SNAP integrity a priority. We have also engaged the retail community in this effort. I have personally met 

with State commissioners around the Country to enlist their support, including a greater focus on recipient trafficking and increased partnership with law enforcement. 

To conclude, fraud is neither new nor static. While a vast majority of retailers and clients follow the rules, a few bad actors will 

always seek to exploit SNAP. But the program is too important for 

taxpayer investment, too great to tolerate fraud. As in 

cybersecurity, we must be vigilant and continuously update systems to find and thwart new fraud schemes. USDA will continue 

to crack down on violators. We welcome our partners’ constructive 

engagement in this effort. 

Thank you very much. 

[Prepared statement of Mr. Concannon follows:] 

7 


Insert offset folio 3 here 74377.003
8 


Insert offset folio 4 here 74377.004
9 


Insert offset folio 5 here 74377.005
10 


Insert offset folio 6 here 74377.006
11 


Insert offset folio 7 here 74377.007
12 


Insert offset folio 8 here 74377.008
13 


Insert offset folio 9 here 74377.009
14 


Insert offset folio 10 here 74377.010
15 

Chairman ISSA. Thank you. 

Ms. Fong? 

STATEMENT OF THE HONORABLE PHYLLIS K. FONG 

Ms. FONG. Thank you, Mr. Chairman, Ranking Member 

Cummings, and members of the Committee. At the outset, I want 

to express my appreciation to you, Mr. Chairman, and to many of 

the distinguished members of this Committee for your support of 

the Federal IG community over the past several years. You have 

a noteworthy record of bipartisan support for IG contributions and 

you have demonstrated time and again through legislation, hearings, and speeches your interest in our work. So on behalf of the 

entire community, I want to thank all of you for your support. 

Today you have invited me to testify about USDA IG’s work to 

protect the integrity of the SNAP program. To put this in context, 

the IG office at USDA is responsible for providing oversight to all 

USDA programs, which currently number over 300. Of course, 

SNAP is the largest program in our portfolio, with over $70 billion, 

and it has drawn much of our attention over the past few years. 

In the last two years alone we have devoted almost half of our 

investigative resources to addressing SNAP fraud, with measurable 

results. We currently have over 900 cases open. Over 600 of these 

cases involve retailers in some way. My written statement provides 

some examples of our most significant cases involving disqualified 

retailers. 

But I want to emphasize, more than the cases that we do, that 

the core problems in this program are not new, namely, there will 

always be people willing to commit fraud and to traffic in SNAP 

benefits, even though the specific schemes themselves may take 

different forms. So we, as an IG office, have been working on these 

issues with FNS, our partners, and with State and local agencies 

for many years to address these issues, and I can assure you that 

we have cases right now going on in every region of the Country 

and our agents are continually adjusting their work to deal with 

new schemes as they arise. 

While it is important to investigate, prosecute, and bring to justice wrongdoers, these actions alone will not fix the problem. It is 

critical that we also focus our efforts on looking at how retailers 

bypass the system that we have put in place to control access and 

to try and figure out what can be done to improve the program for 

the future. 

To this end, we have issued several audits over the past few 

years with recommendations for corrective actions. We have been 

working with FNS and our partners at USDA to address these 

issues. In particular, we recommend that retailer applicants need 

to have clean backgrounds, with no history of criminal or illegal activity. There needs to be a way to do that. We also believe that 

USDA should make better use of suspension and debarment appropriately to ensure that disqualified retailers do not participate in 

government programs in the future. 

So, to conclude, we strongly believe that retailer integrity is a 

critical component of ensuring an effective SNAP program that delivers nutritious food to people who need it. In our experience, unscrupulous retailers are at the heart of most of the trafficking 

16 

schemes that we have seen. So we look forward to continuing our 

work with FNS, with our State and local partners to address this 

fraud where it occurs and improve the integrity of this very important program. 

Thank you for your interest, and we look forward to addressing 

your questions. 

[Prepared statement of Ms. Fong follows:] 

17 


Insert offset folio 11 here 74377.011
18 


Insert offset folio 12 here 74377.012
19 


Insert offset folio 13 here 74377.013
20 


Insert offset folio 14 here 74377.014
21 


Insert offset folio 15 here 74377.015
22 


Insert offset folio 16 here 74377.016
23 


Insert offset folio 17 here 74377.017
24 


Insert offset folio 18 here 74377.018
25 

Chairman ISSA. Thank you. 

Ms. Hatcher? 

STATEMENT OF JENNIFER HATCHER 

Ms. HATCHER. Good morning, Mr. Chairman and members of the 

Committee. On behalf of the Food Marketing Institute and the 

families served by the 25,000 stores operated by our members, I 

want to thank you for the opportunity to testify today. My name 

is Jennifer Hatcher and I am Senior Vice President for Government 

and Public Affairs at FMI. For the past 13 years, through the transition from paper food stamps to electronic benefits transferred, 

and now the new program named SNAP, I have worked on these 

issues. 

SNAP EBT is a positive example of a public-private partnership 

that works, and that adds efficiency and reduces fraud for all 

stakeholders in the program. Supermarket retailers are proud of 

our partnership with USDA and the State agencies to deliver safe, 

healthy, and affordable foods to customers in need of assistance. 

Unfortunately, the number of customers in need is higher today 

than it has ever been. In large part due to the conversion to electronic delivery of benefits rather than paper food stamps, a significant portion of the fraud has been removed from the system. 

Many supermarkets remember vividly situations where paper 

food stamps were being sold by criminals in front of the store. 

Paper stamps provided anonymity for the perpetrators of these illegal transactions. EBT ties any fraudulent activity to a particular 

transaction, customer, and store location. This has taken the criminal element out of our store parking lots. 

Electronic delivery has also provided State agencies with a better 

mechanism to compare transaction activity and look for duplication 

across State lines, particularly with States that share a common 

border. Some States have employed mathematicians to electronically identify potentially fraudulent patterns of sales. 

EBT has also improved efficiency and cut down on the potential 

for human clerical error. SNAP EBT transactions are protected by 

a user’s personal identification number, PIN, so that they are much 

more secure than paper or even credit cards. 

FMI members take the responsibility as authorized food stores 

for the delivery of these benefits very seriously. Being an authorized SNAP retailer is part of their identity and their reputations 

in their communities, which is very important for them to protect. 

After reviewing the Scripps report and the associated list of disqualified retailers, we found no FMI members on the list, and 

agree that those who impugn the integrity of the program should 

be removed. 

Fighting fraud before it happens is critical, and I thought I 

would share some of the steps our supermarket members take to 

prevent fraudulent activity in their stores. 

First, and most important, is training. FMI member companies 

conduct onsite and offsite training for both their associates and 

their managers in the rules and regulations that govern SNAP 

transactions. There is a 76-page manual on the website that we 

consult on a daily basis for all of the rules and regulations governing the program. There is also a 25-page guide for retailers and 

26 

a 17-minute training video in multiple languages that can be utilized for these purposes. Several of our members have also set up 

their own internal audits to ensure they are in compliance and that 

each of their transactions is in compliance. 

The vast majority of our members utilize computer systems that 

allow them to program via UPC code eligible and ineligible food 

items, and then lock the point of sale purchase system should 

someone attempt to purchase an ineligible item with SNAP benefits. 

FMI also publishes and sends to our members on a regular basis 

the names and contact information of the USDA FNS regional offices and the State administrators for SNAP EBT. Both FMI and 

our members make the USDA fraud hotline number available to 

their associates and managers through each of these training materials. 

There is one more issue that I feel I need to raise in the context 

of this hearing, and that is the extreme concentration of benefits 

issuance at the first month in a number of States. There are a 

number of issues that spreading the issuance of SNAP benefits 

across the entirety of the month, instead of just on the first day, 

could help accomplish, and we think a reduction in fraud may be 

an additional positive result of this change. 

Thank you for inviting FMI to share our thoughts on identifying 

and reducing fraud in the SNAP program. Our industry is committed to ensuring a pleasant and efficient shopping experience for 

all our customers and we welcome the opportunity to work with the 

Committee and the Department to move towards additional efficiencies in the SNAP program. Thank you. 

[Prepared statement of Ms. Hatcher follows:] 

27 


Insert offset folio 19 here 74377.019
28 


Insert offset folio 20 here 74377.020
29 


Insert offset folio 21 here 74377.021
30 


Insert offset folio 22 here 74377.022
31 


Insert offset folio 23 here 74377.023
32 


Insert offset folio 24 here 74377.024
33 


Insert offset folio 25 here 74377.025
34 


Insert offset folio 26 here 74377.026
35 

Chairman ISSA. Thank you. 

Ms. Faulkner? 

STATEMENT OF THE HONORABLE KENYA MANN FAULKNER 

Ms. FAULKNER. Thank you. Good morning, Chairman Issa and 

Honorable Members of the Committee on Oversight and Government Reform. I would like to thank you for the opportunity to address this Committee on the Pennsylvania Office of Inspector General’s proactive and progressive steps it takes to deter and combat 

fraud in the Supplemental Nutrition Assistance Program, or, as we 

refer to it, SNAP. 

Let me first say that Pennsylvania Governor Tom Corbett believes it is important for Pennsylvania to provide health and 

human services such as SNAP to its truly deserving citizens. Individuals who engage in fraud take away those limited resources 

from the neediest of Pennsylvanians. 

As Inspector General, it is the mission of my office to uncover 

fraud, waste, and abuse within SNAP to hold those individuals who 

have committed fraud within the program accountable for their actions, and to recover overpaid tax dollars. The Office of Inspector 

General conducts its mission to combat SNAP fraud by operating 

several fraud investigative programs within its Bureau of Fraud 

Prevention and Prosecution. These programs are the Field Investigation, Fraud Investigation, and SNAP Trafficking programs. 

These programs are operated in coordination with the Pennsylvania Department of Public Welfare, which we refer to as DPW, 

which administers the Supplemental SNAP Assistance Program. 

The Office of Inspector General’s approach to combating fraud 

begins with the application for SNAP benefits. Through our field 

investigation program, when DPW refers an application or re-application for SNAP benefits and suspects fraud or receives inconsistent or incomplete information, it refers the application to my office, the Office of Inspector General. The OIG investigates all applicant circumstances and provides DPW with its findings. Based on 

these findings DPW may deny benefits or approve benefits at a reduced amount. This same referral process exists for active recipients of SNAP benefits where DPW becomes aware of circumstances 

in a recipient’s ongoing case. 

This proactive approach to combating SNAP fraud before benefits 

are authorized or investigating ongoing cases to ensure that only 

those entitled to benefits are actually receiving them is a critical 

function of my office. 

As a best business practice, there is greater efficiency in denying 

or reducing incorrectly authorized benefits versus attempting to 

collect overpayment benefits. In fiscal year 2010–2011, the OIG 

conducted approximately 22,308 field investigations where SNAP 

benefits were involved. The cost the taxpayers avoided based on the 

OIG’s investigations where SNAP benefits were either denied, 

closed, or reduced was a little over $19 million. 

Not all fraud, however, can be prevented by the OIG’s Field Investigation program. When DPW becomes aware of circumstances 

which affect a recipient’s past benefits, it will calculate an overpayment of SNAP benefits and refer that overpayment to my office, 

the OIG, for investigation. 

36 

The OIG and its Fraud Investigation program conducts investigations on overpaid SNAP benefits and determines if the overpayment was due to the recipient’s willful intent to defraud the program. Investigations where the OIG is able to substantiate that 

fraud occurred either criminally prosecuted or adjudicated through 

an administrative hearing. Court or administrative findings of intentional program violations include orders to fully repay restitution to the Commonwealth or carry a program disqualification for 

the defendants. 

The OIG follows Federal regulations in the progressive disqualification penalties for intentional program violations, with the first 

violation carrying a 12-month disqualification period. In the fiscal 

year 2010–2011 for SNAP overpayment claims, the OIG conducted 

approximately 3,335 investigations which involved SNAP benefits. 

The OIG filed 613 criminal complaints for a total restitution of a 

little over $1.4 million. 

The OIG disqualified 822 defendants as a result of its criminal 

charges, which resulted in a little over $1.6 million in cost savings 

from preventing further program participation. The OIG filed 180 

administrative hearings with a total restitution amount of 

$322,463. The OIG disqualified 172 defendants as a result of its 

civil proceedings, which resulted in approximately $496,000 in cost 

savings from preventing further program participation, which includes figures from SNAP trafficking program. 

In addition to efforts to combat SNAP fraud at the application 

stage or through prosecuting overpayments, the OIG focuses on 

fraud which is occurring through recipients who sell or exchange 

their SNAP benefits to negotiate them into cash services, credit, or 

anything other than food, which is defined as SNAP trafficking in 

my agency. The practice of SNAP trafficking is actively pursued in 

Pennsylvania and has been done so for many years in Pennsylvania to maintain the integrity of SNAP benefit distribution by ensuring the credibility of the vendors and the recipients. The OIG 

operates a small but dedicated unit to operate its SNAP Trafficking 

program and works integrally with the USDA and the Nutrition 

Service, the USDA Office of Inspector General, as well, and local 

district attorneys to identify store owners and recipients who engage in SNAP trafficking. 

This active participation between the USDA and OIG is a chief 

reason why Pennsylvania has success in targeting SNAP trafficking. The USDA is responsible for disqualifying individual store 

and store owners, and filing criminal charges against them for engaging in SNAP trafficking. But, as you know, it takes the active 

participation of recipients of SNAP benefits for SNAP trafficking to 

occur. The OIG’s responsibility in its partnership with USDA is to 

actively pursue the recipients who trafficking their benefits and 

hold them accountable for their actions, including criminal prosecution, obtaining repayment of illegal transacted benefits, and disqualification from the program. 

[Prepared statement of Ms. Faulkner follows:] 

37 


Insert offset folio 27 here 74377.027
38 


Insert offset folio 28 here 74377.028
39 


Insert offset folio 29 here 74377.029
40 


Insert offset folio 30 here 74377.030
41 


Insert offset folio 31 here 74377.031
42 


Insert offset folio 32 here 74377.032
43 


Insert offset folio 33 here 74377.033
44 


Insert offset folio 34 here 74377.034
45 


Insert offset folio 35 here 74377.035
46 

Chairman ISSA. Thank you. 

I will now recognize myself for five minutes. 

Ms. Faulkner, a lot of what you were talking about, of course, are 

people who receive the benefit and abuse it. That represents a 

large part of the State’s role, is to make sure that the food, we still 

use the term stamps, but that SNAP program funds get to the ultimate recipient, which is usually family members, is that correct? 

Ms. FAULKNER. That is correct. 

Chairman ISSA. Now, in your enforcement, the fact that these are 

basically credit cards that are digitally monitored and that you can 

track, that has dramatically made your job more accurate, hasn’t 

it, than the old days of paper? 

Ms. FAULKNER. Yes, it has. 

Chairman ISSA. Well, that begs the question, I think, well, Ms. 

Hatcher, I have been at the grocery store when I have seen the exclusion of unauthorized materials, where every grocery store I have 

gone to has the software where they simply say, yes, that is fine 

you have just credited $35, but you still owe us $6.50 for the cigarettes, or whatever. That is great. Do 100 percent of your members 

have that? And if not, why not? 

Ms. HATCHER. A hundred percent of our members that have electronic point-of-sale systems would have some ability to download 

that, and we are increasing that number. I would have to get back 

with you on the exact number, percentage of stores, but it is over 

90 percent for sure. 

Chairman ISSA. That is excellent. 

Well, Mr. Concannon, every grocery store I go to these days is 

electronic. Not every liquor store I go to is electronic. One of the 

basic questions is, if you cannot reduce fraud to an acceptable level, 

to make your IG happy, if you will, is it that important that every 

liquor store, and I use the term liquor store very specifically, because sometimes people want to call themselves convenience stores. 

But we all know, as the ratio gets close to your minimum food to 

cigarettes and alcohol, your fraud level goes up. No question at all; 

it is well understood. Is that one of the areas in which the test 

must be higher and the tolerance for any slippage must be lower? 

Mr. CONCANNON. I appreciate the question, Mr. Chair, and to the 

point you make, stores, by Federal requirement in the Farm bill, 

must provide a certain number of foods in the food group, and it 

is what we refer to as the depth of stock requirements. I am very 

interested, I know Secretary Vilsack is as well, in increasing the 

obligation on stores that have more foods than those minimums 

that currently meet it for stores that maybe their real interest is 

in selling tobacco or selling alcohol to folks. They can’t buy that 

with their SNAP card, but it is encouraging people to come into 

those locations. 

Chairman ISSA. I appreciate that. 

Now, both your op-ed, which I would ask unanimous consent be 

placed in the record, without objection, and your statement quite 

frankly give a fairly rosy picture, and in the case of your comments 

on Scripps Howard it was a little bit like the Ranking Member’s 

thanking us for the hearing and then saying we want to starve the 

children implications in everything Republicans do in the budget. 

47 

Scripps Howard exposed, at least in some cases, fraud you were not 

aware of, is that correct? 

Mr. CONCANNON. Yes, they did, in a very small number of cases. 

And I want to correct the record because the Scripps Howard piece 

mistakenly made the notion—— 

Chairman ISSA. No, I appreciate that, and you said that in your 

op-ed, you’ve said it in your opening statement. 

Mr. CONCANNON.—stores are taken out of the program, not the 

physical location—— 

Chairman ISSA. Right. My time is limited. 

Mr. CONCANNON. Okay. 

Chairman ISSA. And you were invited here not to be mistreated, 

but you were invited here because we are concerned and we really 

don’t want to have our whistleblower bashed, even if there was 1 

percent accuracy; and there appears to be far more than 1 percent 

accuracy. 

Here is the question I have for you, and it is the only question 

I am going to make today, and I think Ms. Fong will particularly 

appreciate it. The rest of government uses permanent exclusion 

and debarment fairly aggressively. It is not an easy task, but it 

guarantees that those who have cheated the American people as 

vendors are not just removed for a period of time from your program, but in fact are removed from eligibility government-wide. 

Why do you not use it broadly, and will you begin using debarment, or do you believe you don’t have the authority to? 

Mr. CONCANNON. There are many compelling reasons why we do 

not currently use it. We are able to take stores, we have taken 

stores out this very week for simply trafficking or for misleading 

us in their application, falsification. We don’t have to hold hearings. During the pendency of that, we give stores 10 days to respond to us. We take them out. If we use debarment, we have to 

go through a whole extended hearing process. 

Now, as well, when we take these stores out, most of the stores 

we are talking about are small stores; they rarely interact with 

other parts of government. They don’t have pharmacies, they are 

not stores that government doesn’t buy liquor from liquor stores, to 

use the earlier reference point. It is far more efficient for us to do 

this. 

Now, I will say this. We have completed requirements with the 

General Services Administration to allow our agency to now start 

filing excluded parties listing, which means once that company is 

on that list, they can’t do business with any part of the Federal 

Government. This is a more efficient way to do it, and in the meantime we can take bad actors out. 

Chairman ISSA. Ms. Fong, my time has expired, but it looks like 

you have at least a partial answer beyond that. 

Ms. FONG. Thank you. We feel very strongly that USDA, as a 

whole, needs to do a better job with suspension and debarment. We 

believe that there may be some room here to work with FNS to 

really get the best possible system in place, and I think excluded 

parties program disqualification and suspension and debarment are 

all necessary remedies to be looked at, and we feel strongly about 

that. 

Chairman ISSA. Thank you. 

48 

The Ranking Member is recognized for five minutes. 

Mr. CUMMINGS. Thank you very much, Mr. Chairman. 

Let me make it very clear that if there is one dime of money that 

is not going where it is supposed to go, there is nobody I think in 

this room, and particularly not on this side of the aisle or the 

other, that would stand for that. I want an even higher standard 

than the 1 percent. I want zero. At the same time, though, I want 

to make sure that we have balance in this whole process when we 

have taken $127 billion out of a program. We want to make sure 

that the people who need the program are taking advantage of and 

have an opportunity to get the funds that they need. 

Now, Secretary Concannon, I want to thank you for your testimony, and again going back to what I just said, House Republicans 

have cut $127 billion out of this program. That means that they 

would eliminate food assistance to some 8 million people, according 

to the Center on Budget and Policies. Mr. Concannon, according to 

your agency’s data, nearly half of the SNAP beneficiaries are under 

the age of 18, is that right? 

Mr. CONCANNON. Correct, sir. 

Mr. CUMMINGS. And I want to go back for a moment because 

there is something that the Chairman didn’t give you a chance to 

answer, but I think I know what you were trying to get to. Sometimes you have a store that is disbarred. This goes with the owner, 

is that right? 

Mr. CONCANNON. That is correct, sir. 

Mr. CUMMINGS. So it is sort of like, when I was practicing law, 

if somebody, say, for example, had a liquor license and they were 

a bad actor, they then sold it or whatever, then the new person 

comes in and that’s a new situation, is that right? 

Mr. CONCANNON. Correct. 

Mr. CUMMINGS. So some of the Scripps article was about folks 

who had been taken out, but then the store was owned by somebody else, and then that came under a whole new situation, is that 

right? 

Mr. CONCANNON. Correct. Some of those articles that were referenced to me suggested that, again, the location and the owner 

were one and the same when they came back in. We have 231,000 

locations in the United States authorized for this. The majority of 

them are small stores, and that is invariably where these problems 

occur, in small stores. And of that 231,000 over the years, we have 

taken out permanently some 8,300 stores over a 10-year period. 

And in about just over 1,200 locations of that 8300 different owners 

came and are operating the program. 

So it is not the same as saying that same person came back, but 

in fairness to Scripps Howard, they found a small number in that 

36 that I showed here earlier that had slipped back into the program by falsifying their applications, and we have strengthened, on 

the basis of working just in the past two months, strengthened the 

requirements for a variety of vetted pieces of information that will 

assure usw that there is no connection whatsoever to a prior 

owner. 

Mr. CUMMINGS. Now, let me give you some interesting information. My good friend, Senator DeMint down in South Carolina, introduced legislation to cut SNAP benefits provided under the ReVerDate Aug 31 2005 12:13 Jun 21, 2012 Jkt 000000 PO 00000 Frm 00052 Fmt 6633 Sfmt 6633 C:\DOCS\74377.TXT APRIL
49 

covery Act. The Pennsylvania Governor, Tom Corbett, announced a 

plan to disqualify anyone under the age of 60 who has more than 

$2,000 in savings and assets, which would prevent families from 

working towards self-sufficiency. The mayor of Philadelphia called 

this proposal ‘‘one of the most mean-spirited and asinine proposals 

to come out of Harrisburg in decades.’’ Other States have pursued 

similar proposals. In Georgia a bill was introduced to require beneficiaries to obtain mandatory ‘‘personal growth’’ activities. 

Now, Mr. Concannon, do you know what these personal growth 

activities are and do you know how they would be implemented on 

a national level or the State level? 

Mr. CONCANNON. I am unfamiliar with that. I have seen references to that in the media, but I am unfamiliar with the specifics 

of the bill. 

Mr. CUMMINGS. Now, we all know that there will be instances of 

fraud and we all agree that we need to be vigilant to prevent fraud 

before it happens and prosecute it in all of these cases. But according to your data fraud rates in this program have been going down, 

not up, is that right? 

Mr. CONCANNON. That is correct. 

Mr. CUMMINGS. Do you concur with that, Ms. Fong, they have 

been going down? 

Ms. FONG. We are aware of FNS’s studies that say that. We have 

not personally assessed those studies, and we plan to do some work 

on that. 

Mr. CUMMINGS. Okay. 

Now, Mr. Concannon, they have dropped to an all-time low 

record of less than 1 percent, is that right? 

Mr. CONCANNON. Correct, sir. 

Mr. CUMMINGS. All right. 

I know the Chairman got about a minute and a half longer, 

but—— 

Chairman ISSA. [Remarks made off microphone.] 

Mr. CUMMINGS. Would you just answer that? 

Mr. CONCANNON. We have been working very closely with States 

across the Country both to reduce what is called the improper payment level, meaning individuals get more than they should or less 

than they should. That is less than 4 percent, what was traditionally an 8 percent number. 

In the case of trafficking, as was mentioned earlier I think by the 

Chair, in the era of paper coupons was much more widespread. The 

electronic benefit card has considerably brought that down. That 

and other work with States. One percent was the last study we did. 

We are going to do another study later this year to update that on 

trafficking. But it is 1 percent. It is one of the best records among 

Federal programs. 

Mr. CUMMINGS. But that is not good enough for you, is it? 

Mr. CONCANNON. It is not. I am not satisfied with that, even. 

Mr. CUMMINGS. Very well. Thank you. 

Chairman ISSA. The gentleman from Tennessee, Mr. DesJarlais, 

is recognized for five minutes. 

Mr. DESJARLAIS. Thank you, Mr. Chairman, and thank you all 

for being here today. I think that this is one thing that we can 

agree on on both sides of the aisle. We don’t want to see hungry 

50 

children. We don’t want to see hungry people. We live in a Country 

that is fortunate enough to be able to share and help these people, 

and it is unfortunate that here in Congress it is so common for 

Democrats and Republicans to make accusations against one another when really we agree that, on all these programs that are designed to help people, we want to do the very best we can to make 

sure that those in need are the ones getting the help. 

So if we can tone down the political rhetoric and look at how we 

can do the very best we can to make sure that not a single calorie 

is taken away from those in need, then we can get a lot further 

than arguing and making accusations. I know that is the case in 

Medicare, it is the case in Medicaid, it is Social Security disability. 

So often one side accuses the other of trying to go over the top, but 

oftentimes that is for political reasons. And these aren’t Democrat 

issues or Republican issues; these are people issues. So again I appreciate you being here today. 

Ms. Fong, if we are going to try to do the very best, whether it 

is 1 percent, 5 percent, a half a percent, we need to find out what 

the problems are and how to solve them, so can you tell me what 

is the most typical kind of fraud that you see in the food stamp 

program? 

Ms. FONG. Well, we have a number of schemes that we see. Most 

of them focus on trafficking, which is a situation where a recipient 

goes to a retailer and tries to cash in the card for money, in which 

case both parties come away feeling that they have gotten a good 

bargain. There are numbers of ways that this happens. We have 

seen different schemes over the years where retailers and recipients get very creative about shopping the card, as it were. 

Mr. DESJARLAIS. Okay. Do people who illegally traffic food 

stamps, do they tend to be people that also try to commit fraud in 

other government assistance programs like Section 8 housing or 

Medicaid? 

Ms. FONG. I don’t believe we have any data on that, although I 

will say that we do, on occasion, joint investigations with other government agencies such as HHS, which manages the MedicaidMedicare program, and sometimes there will be recipients who are 

involved in all of those programs. 

Mr. DESJARLAIS. How much money could a store owner who traffics in food stamps likely make illegally? 

Ms. FONG. Well, I think you would want to look at it on sort of 

a per benefit basis. It can range. There are some very small retailers who, in the context of their business, will make thousands of 

dollars. There may be other larger retailers or smaller ones who 

engage in multiple transactions who can benefit by hundreds of 

thousands of dollars or even millions. And some of our investigative 

results will show restitution sentences that can range from hundreds of thousands to millions. 

Mr. DESJARLAIS. Okay. Just so we kind of know if there are citizen watchdogs and people out there that are looking for this type 

problem, can you give us an example of the most elaborate scam 

involving store owners that your office has investigated? 

Ms. FONG. Well, I think we certainly have a number of cases 

going on. Most recently we have seen situations where there have 

been runners employed who will take cards from recipients and 

51 

take them to many different retailers and swipe those cards to get 

benefits, and there will be maybe a group of retailers who work together to do this. So there are some very complicated schemes 

there. 

Mr. DESJARLAIS. Ms. Faulkner, you probably also have seen this 

type of thing. Could you share maybe what one of the most egregious fraud cases that you are aware of? And then when that happens, do you frequently see children deprived when their guardians 

engage in SNAP fraud? 

Ms. FAULKNER. I think any time there is fraud, children are involved, especially when it relates to the SNAP program. But what 

I would like to share with you is one of the more sophisticated 

trends, and I think Inspector General Fong touched upon it. In a 

program such as SNAP, a recipient will go to a restaurant or a bar, 

and this is not a place where they would accept EBT cards, but 

they would go there and the restaurant or bar would go to a grocery store and buy, say, $200 worth of groceries for the bar or restaurant, and then they would give the recipient half, 75 percent, 

something off of the EBT card. And really it cuts out, you never 

really see the bar or restaurant transaction; what you see is the 

recipient using to buy $200 worth of groceries at this particular 

grocery store. 

That is a little hard to track, and being stricter on the retailers 

will help this problem because you cut out that restaurant that is 

being used to get the money. So we see that in Pennsylvania sometimes. 

Mr. DESJARLAIS. Well, I see time has expired, but thank you all 

for what you to do make sure that those people in need get the food 

that they need. 

I yield back. 

Mr. GOWDY. [Presiding] The Chair thanks the gentleman from 

Tennessee and recognizes the gentlelady from California, Ms. 

Speier. 

Ms. SPEIER. Thank you, Mr. Chairman. 

I want to compliment the Chair of this Committee in recognizing 

the important function we have to look at government programs 

and evaluate the fraud. 

Having said that, I want to compliment everyone on the panel. 

I think you have a 98 percent grade, and a 98 percent grade is 

something we should be applauding. A 1 percent fraud rate is just 

remarkable, and I am very impressed by what you are doing. 

Here is my question. Are we spending more with the budgets for 

fraud detection and the IG than we are generating in restitution 

or repayments? Yes, Inspector General Fong? 

Ms. FONG. I would be happy to comment on that. I will say that 

our budget in the IG’s office is around $85 million a year, and we 

bring in, on average, $14 or $15 for every dollar that is appropriated to us. 

Ms. SPEIER. Okay, so you are valuable in what you are doing. 

Here is my concern. There has been a recommendation, I think 

by the IG, that you review retailer applications for criminal 

records. Makes a lot of sense. Why aren’t you doing it? 

Mr. CONCANNON. Thank you very much. We have received that 

recommendation that we rely upon something called the NCIC, the 

52 

National Crime Information Center, data. I was a former State director and I used that system through the State police in the 

States that I was in. One has to be a law enforcement agency in 

order to access those data; we can’t do it as the FNS. The OIG, if 

it had the resources, it could possibly do so, but we are not allowed 

to. You have to be a law enforcement agency to get into that database. 

Ms. SPEIER. All right, I understand what you are saying, Under 

Secretary. 

So this is to General Fong, then. How would you suggest we review the criminal records, then? What do we need to do in order 

to accomplish that? And will it give us enough bang for the buck? 

If we invest in doing that, will we save a significant amount so that 

it would be worth our while to do it? 

Ms. FONG. That is a very complex question, and the Under Secretary is absolutely right, we have been back and forth on this 

issue as to the best way to get criminal background information. 

I think right now the application form has been revised to require 

certification under penalty of criminal prosecution, and I think that 

is a very good move. I think we can continue our discussions on 

this. Right now we do not have the authority as the IG’s office to 

run these kinds of NCIC checks for a program purpose, so we will 

need to do some further consultation. 

Ms. SPEIER. Well, we are able, I know, in California to do background checks for childcare providers, so I can’t believe that the 

Federal Government, as talented as it is, cannot find a way to create a means by which this background check can take place. So I 

would encourage the Committee to pursue this and find a way to 

achieve that. 

The other issue that I wanted to draw attention to was this issue 

of suspension and debarment. As I understand it, there were 615 

wholesalers and retailers convicted, but none of them have been 

suspended or debarred, and the rationale for not doing this is that 

it is costly. Well, democracy is costly. I don’t think we can use the 

argument that it is costly. If we have evidence of convictions and 

these retailers have violated the laws and we don’t debar them, 

then shame on us. 

Anyone want to respond to that? 

Mr. CONCANNON. If I can try to answer that. The preamble to the 

new departmental regulations on debarment excludes the SNAP 

and WIC program transactions because of statutory language that 

provides for comprehensive statutory disqualifications. In everyday 

English let me say that we rely upon our taking owners of stores 

and corporate groups out of the program, and as I mentioned earlier in my testimony, we have been negotiating with the General 

Services Administration to have these folks listed on a listing that 

they operate where people who are permanently barred from doing 

work with the government, they cannot. They will now be listed on 

this list that goes to all Federal agencies. 

So in our view we will achieve what debarment is intended to, 

but it will allow us to take them out without extended due process 

hearings that drag this out on and on, and allow people to stay in 

the program during that time. 

53 

Ms. SPEIER. All right, my time has expired. Thank you, Mr. 

Chairman. 

Mr. GOWDY. I thank the gentlelady from California. 

The Chair would now recognize the gentleman from Pennsylvania, former United States Attorney, Mr. Meehan. 

Mr. MEEHAN. Thank you, Mr. Chairman. You sit well in that 

seat. 

I am very appreciative of all of the panel for the work that you 

do, the significantly important work that you do, and I want to attach myself to the comments of Dr. DesJarlais earlier in our shared 

interest, first, and most importantly, in delivering these services 

appropriately to those most in need. So to the extent that we are 

able to effectively root out the fraud, more is available for those 

purposes. 

Ms. Faulkner, I noticed there was some testimony, I did want to 

correct the record to the best of my understanding. There was some 

testimony today about the Pennsylvania administration’s guidelines with regard to points at which there would be determinations 

of eligibility, and I know that there was an original proposal, but 

to the best of my understanding, there was also some collaboration 

on the part of the governor’s office and that they have made a significant change with regard to that guideline so that it is far more 

realistic in terms of—is that accurate? 

Ms. FAULKNER. Yes. What I would like to say is that everyone 

has been referring to the asset test. 

Mr. MEEHAN. Correct. 

Ms. FAULKNER. Which was always in place in Pennsylvania until 

2008. But the asset test is apples and oranges. We are talking 

about fraud and the asset test is something different. But, yes, the 

governor reinstated and increased the threshold to $9,000 and to 

$5,500. So it has been increased. It was always in place and, really, 

it is apples and oranges from fraud to what we are talking about 

here today. 

Mr. MEEHAN. I just wanted to make sure that that was clear. 

I want to express my deep appreciation. In a very short time you 

have really developed quite a reputation for the very good work 

that you are doing in that office. 

Ms. FAULKNER. Thank you. 

Mr. MEEHAN. And I am particularly interested in the work that 

relates to this concept that between 8 and 15 percent of the fraud 

is associated with trafficking. It would seem to me that this is a 

choke point that we would really be able to work on. Now, are 

there some things that you do that you see characteristics that 

take place when there is trafficking that help you to identify those 

that may be the most suspect? 

Ms. FAULKNER. What we have been doing in Pennsylvania is we 

have a dedicated unit. We have the Fraud, but we have OSC, 

which is really just a unit that focuses on SNAP. And what we find 

in Pennsylvania is that that has been growing, the fraud hasn’t 

been reducing. 

So we have worked with Federal and local DA’s offices to try to 

reduce what is going on with the retailers and the recipients, and 

what we find is that once the Federal Government determines who 

the stores are, we then come in and tell them who the recipients 

54 

are in order to close the loop, because the recipient is the one who 

really starts the ball rolling in this. 

Mr. MEEHAN. It would seem to suggest, if you are seeing an increase, then that is sort of contrary to some of the important 

progress that we have been able to make through the electronic 

process. But you have given testimony earlier that creative criminals can always find ways around a system, so are you looking for 

patterns and other kinds of things that help us get to those? I am 

really particularly interested in the retailers, because they are the 

ones that are facilitating the ability. 

Ms. FAULKNER. I am sorry to interrupt. One of the things we did 

notice with the retailers is that they would have whole dollar 

amounts; you would go to the store and see $100 used. And that 

was one of the things that they used to determine whether this 

could be some type of fraud. So we do follow that. People going to 

the same stores all the time. Those are just indicators; they are not 

always determinative. 

But we look at those things to see if trafficking is occurring 

there. And we have, like I said, a small unit in the office right now, 

a supervisor and three people working on this entirely. We are hoping to expand it more. That is what we see in Pennsylvania, that 

there is a need to investigate this more. I can’t talk about the Federal Government or other States, but in Pennsylvania we see a 

need to—— 

Mr. MEEHAN. Do States work with other States so that while you 

are looking at patterns within your own State, are you able to 

check with New Jersey or Delaware or Maryland in any way to determine whether you are matching your efforts to see if there are 

patterns that exist among some of the same individuals? 

Ms. FAULKNER. Well, I think the concern is—I did reach out to 

New Jersey. They handle their SNAPs differently. Every State is 

different. So while I have personally done some reaching out, I 

have not been able to connect in sort of determining whether there 

are patterns in States. 

Mr. MEEHAN. Well, thank you. As a former prosecutor, I am sort 

of quite surprised by the concept that we aren’t able to take the 

very simple information that is contained in the NCIC, one of the 

fundamental databases that we use oftentimes. I would really appreciate the work of you individuals to help us identify what we 

can do. I would be delighted to work with the gentlelady from California to assist you in those efforts. 

If we can facilitate the basis to do what seems like a very common sense thing, I would ask your assistance in following up in 

submitting to us whatever recommendations you have that would 

make it easier, and I once again applaud the work of each of you 

for the efforts that you do. Thank you. 

Mr. GOWDY. I thank the former distinguished U.S. attorney from 

Pennsylvania, Mr. Meehan, and now would recognize the gentleman from New York, Mr. Towns. 

Mr. TOWNS. Thank you very much, Mr. Chairman. 

Let me begin with you, Mr. Concannon. Can you explain to me 

what kind of quality control system the SNAP program uses to ensure that only people who are truly eligible for SNAP are actually 

receiving it? What do you have in place to detect it? 

55 

Mr. CONCANNON. Thank you very much. As was mentioned at 

the outset, I was the State Health and Human Services Director 

for 25 years in three States, and of all of the Federal and State 

benefit programs that are administered, the Food and Nutrition 

Service, long preceding my time here, puts a particular emphasis 

on what is referred to as the quality control error rate, meaning 

people need to be eligible for the program, so they have to demonstrate, in fact, their eligibility by virtue of pay stubs or other 

sources of information. 

We also have to make sure that when I present myself, I am who 

I say I am. And that QC program, that error rate has gone from 

historically up in the 8 to 9 percent range down to below 4 percent, 

and that has been achieved by encouraging States to use multiple 

databases. So, for example, in the States that I worked in, when 

somebody would come in and apply, Mr. Concannon would check 

against the Labor Department, we check against IRS, we can check 

against the child support program list for new hires every State 

has to maintain. 

Social Security has something called the Social Security list; the 

U.S. Department of Health and Human Services has another list, 

the acronym of which is PARIS; and now some 47 States rely on 

that database alone. Back in 2000, only 16 States used it. And the 

Office of Inspector General, among others, has urged us to make 

sure that States make use of these particular databases. So there 

are a variety of ways to assure, one, I am who I am and that when 

I report my income it is that which is truly income that is coming 

into my household. 

Mr. TOWNS. Let me ask you this. How does the SNAP error rate 

compare to other Federal programs? 

Mr. CONCANNON. I believe, I haven’t really tracked them lately, 

but I can tell you that I think it is one of the best among Federal, 

State benefit programs. And I know that at a State level, governors’ offices, I know this very directly, pay careful attention when 

the QC error rate is made known to each State. We do this individually. We punish the States that fall below a certain minimum 

around QC error rates and we reward States who do an outstanding job in that regard. 

Mr. TOWNS. Let me ask Ms. Fong, I think it was you that mentioned the amount of indictments. My question to you would be 

what is the conviction rate? You know, sometimes we read about 

indictments and that is all we hear, and sometimes people get all 

excited because there was an indictment, but there is no conviction. 

So what is your conviction rate? 

Ms. FONG. I would be happy to provide that for the record, but 

my recollection of the data is that we have a very high conviction 

rate. It is a significant percentage of our indictments. 

Mr. TOWNS. The reason I raise this question, I was sort of thinking in terms of the question that the gentlewoman from California 

raised in terms of your budget versus the amount of money that 

you bring in, because I was just wondering about that other piece, 

which is not a part of your budget, that would also be a certain 

amount; I’m not sure how much. So I was just sort of looking to 

see in terms of the profit involved here based on your budget, 

based on the amount that you are actually retrieving. 

56 

Ms. FONG. I am just retrieving some data here. Just to give you 

a general sense of it, in the last few years our monetary results in 

SNAP alone have been almost $30 million. And I think I should 

just make sure that I provide that for the record, but our conviction 

rate is close to 50 percent. 

Mr. TOWNS. Right. And the reason I ask this, you know, I don’t 

view this Committee as one of those ‘‘I gotcha’’ committees; I view 

it as a committee that is working to save the Government money 

and to make certain that people that are supposed to get service, 

that they get service, and that we have an obligation and responsibility on this side of the aisle to work with you to try to make certain that that happens. 

And I want you to know that is my reason for being on it for, 

like, 30 years. That is my purpose, and I hope my purpose never 

changes. 

Thank you very much, Mr. Chairman. 

Mr. CUMMINGS. Would the gentleman yield? 

Mr. TOWNS. I would be delighted to yield. 

Mr. CUMMINGS. Just real quick. 

Mr. Concannon, you said punish the States that have bad error 

rates. How do you punish them? 

Mr. CONCANNON. We have sanctioned States or punished them 

both by we can recover, we can penalize them financially. We send 

them letters, warning letters saying basically you are falling below 

a certain threshold. Now, our goal, obviously, is to get that error 

rate down so that we provide technical assistance and training, but 

we put them on notice, and over a period of five or so years I think 

we have sanctioned some 17 States. I will make sure I verify that, 

but that is what I recall. 

I know we take, it can be a financial penalty. We do pay attention to the performance of States because we know it affects the 

very consumers that members have been asking about here this 

morning. 

Mr. GOWDY. I thank the gentleman. 

When this Committee was looking at Medicare and Medicaid 

fraud, I distinctly remember the hearing because there was outrage, appropriate outrage that the entities that had engaged in the 

fraud were still doing business with the government. I think the 

gentleman to my right expressed very appropriate outrage. 

So my question, Ms. Fong, is the same as Mr. Cummings’ was 

then. When you have recidivists, repeat offenders, what do we need 

to change about the debarment process so that that is the default, 

instead of disqualification? Because disqualification is an insufficient penalty, to me, for recidivist offenders. 

Ms. FONG. I believe that the government suspension and debarment process is an effective process, and USDA has implemented 

regulations and, as a whole, the Department could do a better job 

of implementing that. I think that there are concerns, as the Under 

Secretary has expressed, about timeliness and length of time. 

I think we need to engage in those discussions because my understanding is that if you have somebody convicted of a criminal 

felony, that disqualification, while it may be effective vis-a-vis the 

food stamp program, it is not really as effective for other government programs. And if you have a criminal conviction, it should be 

57 

a pretty quick process, because the conviction, in and of itself, is 

sufficient evidence to proceed, so it should not take a long time to 

do this, maybe a month, two months. 

Mr. GOWDY. Well, let me say this. I distinctly remember spending four days in a courtroom prosecuting a lady for disturbing a 

school, and I spent three days in a courtroom prosecuting someone 

for throwing an iced tea cup at a DEA agent. So resources and time 

should not be the only barometer by which we decide whether a 

case should be prosecuted or not, or else we would never prosecute 

petty crimes. So whatever needs to be changed in the process, I 

hope you will give all of us that have expressed an interest in it 

a list so we can put a little more teeth into the punishments when 

people systemically defraud the Government. 

I want to move to the gentlelady from California and Mr. 

Meehan’s point about NCIC. You know, NCIC has arrests that 

don’t result in convictions; it has pardons, it has expungements; it 

has other information that law enforcement may have an interest 

in seeing, but they are not convictions. 

But the remedy is very easy, because schools do it and churches 

do it and after-school programs do it: just have one NCIC-trained 

operator on site and then redact the non-convictions. The notion 

that we can’t do background checks on people who want to do business with the Government, people do them all the time for schools, 

churches. Everyone does it. 

So redact the information. Go to a law enforcement agency that 

does track convictions; go to the clerk of court’s office. There is a 

way to get that information other than NCIC. And if there needs 

to be an exception to NCIC for government agencies that are looking at fraud, I can’t speak for the gentleman from Maryland, but 

I would be happy to do that, and I don’t think law enforcement 

would resist it one bit. 

Ms. Fong, you mentioned a 50 percent conviction rate. I would 

have been run out of office if I had a 50 percent conviction rate, 

and I don’t think Mr. Cummings would have been hired as often 

as he was hired if he had one. That strikes me as a low conviction 

rate. Is it because you are negotiating a civil punishment instead 

of a criminal punishment? Does the statute need to be changed? 

What needs to be done so we don’t swing and miss half the time? 

Ms. FONG. Let me take a look at that data, because I want to 

make sure that I get you the right percentage, and I will provide 

that for the record. And when we do that, we will also provide you 

with our insights on that. 

Mr. GOWDY. All right. And my final question for you is this: If 

I wrote the numbers down right, you said there are 900 cases, 600 

of which are against retailers. I think your energies and efforts 

should be directed towards retailers, but not to the total exclusion 

of individuals who are providing a market, if you will, for this kind 

of fraud. So what do your numbers look like on prosecuting individuals who either sell their cards for cash or otherwise engage in 

fraudulent activity? 

Ms. FONG. Let me just generally address the approach that we 

take on law enforcement. We focus our efforts on the retailers because when we go to the U.S. attorney’s offices for Federal prosecuVerDate Aug 31 2005 12:13 Jun 21, 2012 Jkt 000000 PO 00000 Frm 00061 Fmt 6633 Sfmt 6633 C:\DOCS\74377.TXT APRIL
58 

tions, they have certain thresholds for prosecution which involve 

dollar amounts, et cetera. 

So the dollar amounts tend to be on the retailer side, which are 

much higher. When it appears that there are recipients involved, 

as there usually are, we partner with the State prosecutors because 

those tend to be violations of State and local laws. So our most effective approaches are when we do joint work, where we take the 

retailers to the Federal prosecutors, the State prosecutors work on 

the individual recipients, and we can approach all of those as a 

global kind of approach. 

Mr. GOWDY. That sounds like a perfect marriage. And you are 

going to need witnesses against the retailers, and sometimes the 

recipients make very good witnesses. 

With that, the gentleman from Massachusetts, Mr. Tierney. 

Mr. TIERNEY. Thank you very much, Mr. Chairman. This is exactly the type of oversight that we need to be doing on programs. 

If we are going to have programs where everybody agrees that we 

need to reduce hunger and that we agree that fraud can’t be allowed, if we are going to have the public support behind it, then 

I think this is a good thing for this Committee to be doing on that 

basis. 

In my district, the 6th District of Massachusetts, we have a lot 

of tremendous groups working very, very hard to try to reduce hunger on that. The have seen a 40 percent increase in people accessing soup kitchens and pantries. With the economy the way it is, it 

has been very, very difficult for them. Massachusetts is the only 

State that I am aware of that actually has a line item for this type 

of issue under the Massachusetts Emergency Food Assistance Program, but they have sort of level budgeted. 

So all of my folks that are working real hard on this, when they 

see a proposal or a 20 percent cut in the SNAP program, it is 

panic, because they want to make sure that fraud isn’t an issue as 

well, but they want to make sure that they have the resources. 

When I hear the numbers of 4 percent down to as low as 1 percent 

on fraud, but 20 percent cut in the budget, I understand why they 

are looking that way. 

We have over 15,000 people in our district that benefit from 

these programs. I guess 35 percent of them have a household member over 60; 41-plus percent have a household member under 18. 

So we are talking seniors and children, so it is important that we 

get this right. 

Julie Fontaine, who does our Open Door program up there covers 

Amesbury to Beverly, they serve about 5,400 individuals, about 

2,200 families, basically. But then we have Haven for Hunger, 

Bootstraps. We have a lot of people working very hard on that. 

So we need to know that we are focusing and this is a situation 

on fraud that we need to do. 

But I do make the note, Mr. Chairman, this Committee has a 

broader portfolio. On the subcommittee on which I sit, we have 

been looking at contracts in Afghanistan, and I just know that on 

food service I have asked the subcommittee chairman to have a 

hearing on that. We just recently had a situation where the Defense Logistics Agency thought that they were overpaying the food 

59 

distributor in Afghanistan $787 billion and have asked for that 

money back. That is serious, serious money. 

So we need to do it on this program and I am impressed, Mr. 

Concannon, that you are continually working on this and your 

numbers are keeping it down, and we need to do it right across the 

board on that because we can’t allow it to happen. 

The focus here, what I am hearing, is you think you have it down 

well below 4 percent, maybe as low as 1 percent, is that correct? 

Mr. CONCANNON. Correct. 

Mr. TIERNEY. And you are trying to get all the new permutations 

of how people might do fraud. Do you have a new website? 

Mr. CONCANNON. We have a new website we started up a month 

ago and later this spring we will be promulgating regulations that 

increase the financial penalties. When a store is taken out of the 

program and it is sold to a new owner, I have been interested in 

increasing the financial penalties so people don’t just say, well, it 

was the cost of doing business; I will flip the store. So we continue 

to add layers. 

Mr. TIERNEY. You also had an issue with Facebook and Craig’s 

List and those issues. How did you attack that? 

Mr. CONCANNON. We did. We notified—and that is what the inspector general was talking about, new types of fraud. That is an 

example. We have had several examples that way recently and we 

have written to Craig’s List, some of the other social media sites, 

but we have also amended our regulations so even the simple intent, the expressed intent to sell your benefits constitute a violation. We consider that trafficking; you will be out of the program. 

Mr. TIERNEY. And you have tried to increase some of the fines 

for falsifying information, things of that nature? 

Mr. CONCANNON. We have indeed. We have strengthened, again, 

the requirements and look for a variety, require a variety of, for example, tax—these are particularly from stores to the earlier comments that were made—on looking for additional corroborating information beyond what we have traditionally sought, and especially 

so in locations where we have had prior issues. 

These kinds of issues of trafficking and fraud tend to congregate 

in the same location, so we want those spots get moved up on our 

high-risk profiles, but we also want to make sure that we are exhausting every available source of information to us. 

Mr. TIERNEY. And I think the acting chairman’s comments on the 

debarment issue, that contractor in Afghanistan that was overcharging $787 million, they are still operating on a single course 

contract; they don’t even have to compete for the contract and they 

are still in business, so I know that your efforts at debarring people 

is important to this Committee, both sides of the aisle, and moving 

forward on that. I hope that you do proceed. 

But I am hearing from Pat Baker, who does our Mass. law reform, tells me you are doing a very good job, and they are adamant 

to work with you on that. But people are clever and they keep coming up with different ways. 

One of the ones that they have noticed recently crosses the border between abuse or people who abuse the system. They are finding that some women who are supporting their children on this are 

being threatened and sometimes even physically attacked by people 

60 

to get them to turn over their electronic card. Are you addressing 

that issue at all? Has anybody come across that? Because apparently it is more prevalent. 

Mr. CONCANNON. That would be the kind of incident where we 

have a number of partnerships with what we call State law enforcement bureaus as well, and we would definitely want to know 

about that because that absolutely is the worst kind of extortion. 

So we would want to work closely as Inspector General Faulkner 

mentioned, we work very closely with State agencies in a variety 

of things, but that would be horrific. We would be happy to pursue 

that. 

Mr. TIERNEY. Good. Well, thank you all. I think it is important 

that do. 

Thank you, Mr. Chairman. 

Mr. GOWDY. I thank the gentleman from Massachusetts and I 

apologize to the gentleman from Virginia and the gentleman from 

Texas because I got the order out of whack. So I would now recognize the gentleman from Virginia, as I should have, and then the 

gentleman from Texas. 

Mr. CONNOLLY. Mr. Chairman, thank you. No need for an apology. I know the pressure sitting in that chair. 

[Laughter.] 

Mr. CONNOLLY. But you are always gracious and I thank you. 

Mr. Concannon, I am old enough to remember some 

groundbreaking books like Nick Katz’s Let Them Eat Promises and 

Michael Harrington’s The Other America, and the groundbreaking 

work done by the United States Congress, especially by then Senator George McGovern on a bipartisan basis with then Senator Bob 

Dole to establish the food stamp program to address a pervasive 

problem of hunger and malnutrition in the United States. Has the 

food stamp program in fact successfully addressed the issue of hunger and malnutrition in the United States? 

Mr. CONCANNON. I believe the food stamp program has been one 

of the most effective line efforts to reduce hunger in the Country, 

and it also has reduced poverty. We know even the Census Bureau, 

in the last year, pointed out that last year alone 4 million additional Americans would have sunk below the poverty line absent 

the food stamp program. 

As has been mentioned here today, almost half, 47 percent of the 

beneficiaries of food stamps are children; another 8 percent are 

senior citizens over 60; about 20 percent of the households have a 

person with disabilities. And increasingly these days the food 

stamp program is serving households in which 41 percent of the 

household members live in a household where one of the adults is 

earning, that is, is in the workforce. 

And I refer to that group of beneficiaries as often the new faces 

of SNAP. These are folks who have been displaced in this difficult 

economy. They may not be getting as many hours at their work, 

so it is really important that the SNAP program be responsive. 

Across the Country, SNAP is now serving 72 percent of the eligibles in the Country, and that has been moving upwards from in the 

mid-50s, then the mid-60s, now 72 percent; and we are serving 

more than 90 percent of the eligible children across the Country. 

There are a few States that are still far below the rest of the CounVerDate Aug 31 2005 12:13 Jun 21, 2012 Jkt 000000 PO 00000 Frm 00064 Fmt 6633 Sfmt 6633 C:\DOCS\74377.TXT APRIL
61 

try that we continue to dialogue with and work closely with, but 

the program really is responding as it should to the needs of folks 

in this Country. It is the most inclusive of both State and Federal 

feeding programs. 

Mr. CONNOLLY. So if I understand your testimony, in the 40-plus 

years since we started this program, it has in fact achieved its desired result in reducing hunger and malnutrition in rural and parts 

of urban America, as well as reducing the poverty rate in the 

United States. 

Mr. CONCANNON. Yes, indeed. A measure that the Federal Government uses that we publish reports on annually is food insecurity, and we have data that points to the impacts of the food stamp 

program, as it is still known in 20-something States. 

Mr. CONNOLLY. And what percentage of food stamp recipients are 

children? 

Mr. CONCANNON. Forty-seven percent. 

Mr. CONNOLLY. Forty-seven percent. And that translates into 

how many people? 

Mr. CONCANNON. Well, there are 46 million people, so in round 

figures it is somewhere around 21 or 22 million. 

Mr. CONNOLLY. Children. 

It is too bad the title of this hearing is Food Stamp Fraud as a 

Business Model: USDA’s Struggle to Police Store Owners, because 

it seems to suggest or one could infer from that title that we have 

already prejudged the case and apparently fraud is rampant, and 

it kind of begs the question of the purpose and original mission of 

this program, and whether it, in fact, has achieved that mission, 

some fraud that has to be stamped out notwithstanding. 

But let me ask you a question. Given that title, what percentage 

of SNAP funds were improperly issued last year? This Committee, 

the subcommittee I sit on, has looked at improper payments. What 

percentage of the total program has been classified as improper 

payments? 

Mr. CONCANNON. Last year we achieved record low. We and 

States—I should point out we work closely, all of our benefits are 

extended through States and we achieved an improper payment 

rate of 3.81 percent. About 3 percent of that was overpayments and 

just under 1 percent of that was underpayments, meaning the beneficiary, based on his or her income or household income, 3 percent 

of them received more than they should have; less than 1 percent 

received less. This is part of our quality control effort. 

Mr. CONNOLLY. And of that total—I am sorry, we are running—— 

Mr. CONCANNON. Okay. 

Mr. CONNOLLY. Mr. Chairman, your pitch hitter, Mr. Chairman, 

offered to give one extra minute, I think. 

Chairman ISSA. [Presiding] He is so much kinder than I would 

be. 

[Laughter.] 

Mr. CONNOLLY. I lucked out, Mr. Chairman, that is right. So I 

would ask the Chair to honor that request. 

But 3.8 percent, roughly, of improper payments, so all of that 

was not fraud? 

Mr. CONCANNON. Correct. 

62 

Mr. CONNOLLY. What percentage of fraud again? 

Mr. CONCANNON. The fraud figure that we have is 1 percent. 

Mr. CONNOLLY. And have we reduced improper payments over 

the last decade or is that going up? 

Mr. CONCANNON. We have considerably—that is one of the charts 

that I think we handed out. We have reduced it considerably over 

the past decade and continue to focus on it, as well as reducing 

fraud in the program also. 

Mr. CONNOLLY. So it is good that this Committee is having this 

hearing to absolutely highlight there are still problems, and our 

goal should always be to get it to zero. But let’s not overstate the 

problems and let’s not lose sight of the mission, especially at budget time, when some people might be thinking of $100 billion cut in 

the program. 

Ms. Fong, you mentioned to us that you still think that Mr. 

Concannon’s operation still could do a better job of debarment and 

suspension, correct? 

Ms. FONG. That is correct. 

Mr. CONNOLLY. Mr. Concannon, could you address that in my 

final question? 

Mr. CONCANNON. Well, as I mentioned—— 

Chairman ISSA. In your second overrun minute. 

Mr. CONNOLLY. I am sorry, Mr. Chairman. 

Chairman ISSA. Go ahead, please. 

Mr. CONCANNON. Thank you. Well, I mentioned earlier that we 

believe that the approach that we take of moving people out of the 

program immediately is a more effective way and to most of the 

beneficiaries, the stores, I should say, that we are concerned with 

don’t do other business with the Federal Government. But even to 

cover that we have been working with the General Services Administration to have these stores or companies put on the excluded 

parties list system, which will prevent them from being able to participate with other government programs. 

Now, we are also continuing to have dialogue with the Office of 

the Attorney General to see if there are ways we can do both. Our 

desire—we don’t have an aversion to the debarment process; it is 

that it slows it down, and we like the authority we have right now. 

When we find that a store has misled us about their business relationships or where they have been debarred before, we can take 

them out of the program. We send them a letter, we give them 10 

days; they are out. I don’t have to give them more hearings, I don’t 

have to give them more due process; they are gone. 

Mr. CONNOLLY. Mr. Chairman, I thank you for your consideration. 

Chairman ISSA. Of course. And because I know you want full disclosure, Ms. Faulkner, I think you had something to say on those 

questions too. 

Ms. FAULKNER. I wanted to talk about what my SNAP trafficking 

program has found in the fiscal year 2010–2011. We conducted 584 

just SNAP trafficking investigations. We scheduled 158 administrative hearings with a total restitution we received back of over 

$250,000. We disqualified 77 recipients of SNAP benefits who committed trafficking violations, which really gave us a cost savings of 

close to $500,000. And that is with the limited staff that we have. 

63 

So in Pennsylvania, as I stated earlier, we are seeing more fraud, 

we are, and that we have little staff. We hope to get a little bit 

more, but that was our 2010–2011 alone, and we don’t expect it to 

go down. 

Chairman ISSA. I know Ms. Fong has previously said that you 

don’t necessarily concur with those figures independently at this 

point, and I would only ask that since the Secretary said that they 

are going to redo them again, I would hope that we could expect 

them to be mutually agreed to by metrics that then you could essentially concur with. 

Ms. FONG. Yes. We have some work planned for this year to take 

a look at the methodology and those numbers. 

Chairman ISSA. Thank you. 

We now go to the gentleman from Texas, Mr. Farenthold. 

Mr. FARENTHOLD. Thank you, Mr. Chairman. 

I would like to deal with something that I hear about from my 

constituents, and that is the stretching of actually items that qualify under the program. For instance, I received a photograph from 

a constituent of a sign outside of a place that prepares pizzas to 

order, they just don’t cook them. So apparently it qualifies under 

the letter of the law, but certainly I wouldn’t think under the spirit 

of the law. 

The sign out there says Accepts the Lone Star Card, which in 

Texas is our method for doing that. You also see an instance of grocery stores and convenience stores also offering quite a few hot food 

items that I would think would not qualify under the program. 

I guess I will address this to Ms. Fong. What are you all seeing 

with respect to that and what can we do to combat that? 

Ms. FONG. We, as far as I know, have not received any allegations along those lines that would indicate fraud or criminal activity. I would defer to the Under Secretary because I think it is really a policy question. 

Mr. FARENTHOLD. All right. Mr. Secretary? 

Mr. CONCANNON. I would be happy to try to answer it. To the 

second part of your question, when you look at, first of all, consumers in the program cannot buy hot foods, period. They can buy 

frozen foods, and there are pizza chains that have been admitted 

into the program over time. I mentioned earlier in my testimony 

one of the definitions of who is eligible for the program in terms 

of the 231,000 providers is set in the statute through the Farm 

Bill, and it requires a minimum number of certain food groups, it 

is that we refer to as the depth of stock requirement; and I would 

like to see that strengthened because—— 

Mr. FARENTHOLD. Let me follow up on that maybe with Ms. 

Hatcher, because we have the technology now in place through 

UPC codes that we can actually determine what items are qualified 

and don’t qualify, and I guess, if you wanted to get into a Big 

Brother scenario, could actually probably link up who is buying 

what. And with the cost of UPC readers $20, $30 to hook up to a 

PC, I can’t imagine any store being too small to implement it. Do 

you see some technological solutions to these problems? 

I will let you answer it and then I will come back to the Under 

Secretary. 

64 

Ms. HATCHER. Sure. Well, I guess the question about hot foods, 

that one is already taken care of now because our members, and 

we educate them very clearly, hot foods are not eligible, and we 

code in anything that is a hot food item as ineligible in the store. 

Then I think his question on the pizza thing, it would depend exactly. If it is a frozen pizza in the frozen section, then it would be 

eligible; if it is a heated pizza that is in the deli area, it would not 

be eligible. 

Mr. FARENTHOLD. It just strikes me a made to order pizza cooked 

or not cooked is stretching it. 

Mr. Under Secretary, I guess my question to you is do you see 

a technological solution? Again, another complaint that I hear consistently from constituents is people will go in and buy highly processed food with low nutritional value. I don’t want to get into the 

business of dictating what people do and don’t eat, but to some degree our money, our rules. I mean, what do you see as an optimum 

situation there? 

Mr. CONCANNON. Unfortunately, on the processed food question, 

I am not talking about those mini carrots that come from larger 

carrots, I am talking about processed food that has too much sodium and too many trans fats and so on, all of us, unfortunately, 

as Americans eat more processed food than any Country in the 

world. 

So we are trying, through another part that I have responsibility 

for, the Center for Nutrition Policy, to encourage Americans to eat 

healthier, more fruits and vegetables, My Plate, it is a very simple 

but I think a very effective icon. And we are also encouraging access to farmer’s markets for, in your case, Lone Star beneficiaries 

to try to nudge them, direct them to buying healthier, often locally 

grown foods. 

But I still remain very interested in increasing the requirement 

for these small stores to have better choices of fresh fruit, healthier 

foods for people, rather than just the overabundance of processed 

food. 

Mr. FARENTHOLD. All right, I see my time has expired. Thank 

you very much. 

Chairman ISSA. I thank the gentleman. All time has expired. 

I want to thank our panel of witnesses. I think this was informative. Contrary to what might have been perceived, this was a limited hearing, limited to businesses who in fact defraud the government and deny our children, that 22 million or more children, the 

receipt of the actual food rather than trading 50 for 100. 

Our intention is to allow for at least five days for members who 

are not able to get here for questions to supplement by asking all 

of you questions. Would you agree to respond to them if you get 

them in writing? 

Mr. CONCANNON. Certainly. 

Chairman ISSA. I want to thank you. I also would like to ask 

unanimous consent that any witness who thinks of something that 

you didn’t say that wants to supplement their own record be allowed to do so. Without objection, so ordered. 

We stand adjourned. 

[Whereupon, at 11:08 a.m., the committee was adjourned.] 

65 


Insert offset folio 1 here 74377.001
66 


Insert offset folio 2 here 74377.002
67 


Insert offset folio 40 here 74377.040
68 


Insert offset folio 41 here 74377.041
69 


Insert offset folio 36 here 74377.036
70 


Insert offset folio 37 here 74377.037
71 


Insert offset folio 38 here 74377.038
72 


Insert offset folio 39 here 74377.039
73 

Æ