Food Stamp Program: States' Use of Options and Waivers to Improve Program Administration and Promote Access
Published: 2002-02-19T00:00:00

Fast Facts:

Highlights:
section_title: What GAO Found
paragraphs: To help states administer their Food Stamp Programs, the Food and Nutrition Service (FNS) offers options and waivers to their program rules and regulations. Almost all states used options or waivers in their food stamp eligibility determination process. More than half of the states chose to make households receiving Temporary Assistance for Needy Families (TANF) services automatically eligible for food stamps. Thirty-three states exempted some or all vehicles in the determination of food stamp eligibility. Although most states used these options and waivers, they considered them a cumbersome way to increase access to the program for families owning a vehicle. Almost all states used at least one option or waiver to change the reporting methods required of food stamp household earnings. The most frequently used reporting waivers exempted recipients from reporting changes in earned income of $25 or more per month. States used these options and waivers to simplify paperwork requirements for both the food stamp recipient and eligibility worker. Although few states were using the new option to provide food stamp benefits to families leaving TANF, 20 other states planned to implement the option. No state was implementing or planning to implement all aspects of the simplified program option, which allows states to merge their TANF and Food Stamp Program for families receiving both types of assistance. States told GAO that the simplified program option would make administering the programs more difficult because it creates a separate program, covering only a subset of food stamp recipients. However, nine states were using a portion of the simplified program to align their food stamp and TANF work or reporting requirements.

section_title: Letter
paragraphs: The U.S. Department of Agriculture’s (USDA) Food Stamp Program is a federal entitlement that provided about $15.5 billion in benefits to a monthly average of 17.3 million low-income individuals during fiscal year 2001. Despite the large number of people served, participation in the Food Stamp Program by eligible individuals has declined significantly since 1994. USDA’s Food and Nutrition Service (FNS) estimates that at least 60 percent of the overall decline in food stamp participation involved recipients receiving welfare benefits.
Data showing that former welfare families leave the Food Stamp Program at rates higher than their nonwelfare counterparts has raised concerns that the federal rules and regulations under which states administer their Food Stamp Programs do not facilitate participation by low-income working families who were affected by welfare reform. While states continue to administer their Food Stamp Programs under these federal rules and regulations, welfare reform enacted in 1996 gave states flexibility to administer their welfare programs through Temporary Assistance for Needy Families (TANF) block grants.
To help states address barriers to participation, and to help them administer their Food Stamp Programs, FNS offers some flexibility by providing options and waivers to program rules and regulations. In light of the reauthorization of the Food Stamp Program in 2002, you asked us to examine states’ use of certain federal food stamp options and waivers. Most of the options and waivers we looked at were offered to states since welfare reform. We assessed the extent to which states used specific program options and waivers related to: (1) determining food stamp eligibility, (2) reporting changes in household circumstances that may affect eligibility and benefit amounts, (3) providing food stamps to households leaving TANF, and (4) aligning food stamp and TANF program rules for families receiving both types of assistance.
Our review is based on telephone interviews that we conducted during  September and October 2001 with officials in 50 states, including food  stamp directors, and policy and quality control officials. We also analyzed  federal legislation and regulations as well as FNS data on waivers. In  addition, we reviewed literature and research that had been conducted on  the Food Stamp Program. Our work took place between July and  November 2001 in accordance with generally accepted government  auditing standards.
subsections: section_title: Background
paragraphs: The Food Stamp Program provides eligible low-income households with  paper coupons or electronic benefits that can be redeemed for food in  stores nationwide. FNS funds food stamp benefits and about half of the  states’ administrative costs and establishes regulations for implementing  the Food Stamp Program. FNS regulations require that states certify  household eligibility at least annually and establish requirements for  households to report changes that occur after they are certified. Recently,  FNS introduced several options and waivers to food stamp rules and  regulations in order to increase program access and reduce the reporting  burden on working families while minimizing the potential for payment  errors. These include options and waivers related to program eligibility,  reporting requirements, extending food stamp benefits to households  leaving TANF, and options related to TANF recipients. To monitor  program accountability, FNS’s quality control system measures states’  performance in accurately determining food stamp eligibility and  calculating benefits.
subsections: section_title: Determination of Eligibility and Benefits
paragraphs: States implement the Food Stamp Program by determining whether  households meet established limits on gross income and assets,  calculating monthly benefits for eligible households, and issuing benefits  to households. The actual amount of the food stamp benefit is based on  household income after certain deductions—including shelter, dependent  care, and child support. To be eligible for benefits, a household’s gross  income may not exceed 130 percent of the federal poverty level and the  value of its assets may not exceed $2,000. If the household owns a vehicle  worth more than $4,650, the excess value is included in calculating the  household’s assets.
Recipients of TANF cash assistance are automatically eligible for food  stamps—a provision referred to as “categorical eligibility” — and do not  have to go through a separate food stamp eligibility determination process.  In the wake of welfare reform, many needy families that are no longer  receiving TANF cash assistance may receive other TANF- funded services  or benefits. FNS gave states the option to extend categorical eligibility to  families receiving TANF-funded benefits or services. States can determine  which TANF-funded services or benefits confer categorical eligibility to  food stamps.
FNS offers two options that states can use to allow households to own a  vehicle worth more than the amount allowed in current regulations and  remain eligible for food stamp benefits. One option allows states to  replace the federal food stamp vehicle asset rule with the vehicle asset  rule from any TANF assistance program, as long as the rule is more liberal  than the federal rule. States adopting the rule of a TANF-funded program  must apply it to all applicants for food stamp benefits. States can also use  the categorical eligibility option as a way to exclude all vehicles, as well as  other assets the family may have, from the determination of eligibility for  food stamps. This option affects the food stamp eligibility only of families  authorized to receive a TANF-funded service or benefit.
section_title: Certification and Reporting Requirements
paragraphs: After eligibility is established, households are certified to be eligible for  food stamps for periods ranging from 1 to 24 months, with 3-, 6-, and 12- month periods the most common. The length of the certification period  depends on household circumstances, but only households in which all  members are elderly or disabled can be certified for more than 12 months.  Once the certification period ends, households must reapply for benefits,  at which time eligibility and benefit levels are re-determined. Households  with stable income are generally given longer certification periods than  households with fluctuating income. Prior to welfare reform, federal  regulations required households to have a face-to-face interview with an  agency worker at each re-certification. Current regulations give states the  option to require only one face-to-face interview a year regardless of the  length of the certification period.
Between certification periods, households must report changes in their  circumstances—such as household composition, income, and expenses—  that may affect their eligibility or benefit amounts. States determine how  frequently households must file reports. A state may require a household  to submit a monthly report on their financial circumstances along with  required verification even if nothing changed. If a household is not  required to file a monthly report, it is required to report changes in income  and other circumstances as they occur—called “change reporting.” States  can require different types of reporting for different household types and  generally require households with earnings to report more frequently than  households with no earned income.
FNS offers alternatives to monthly and change reporting: quarterly and  semiannual reporting. Both of these reporting methods decrease the  frequency with which households with earnings are required to report.  FNS also offers three waivers to change reporting that reduce the  reporting burden on households with earnings. (See table 1.)
section_title: Options Related to TANF Recipients
paragraphs: USDA now provides a transitional benefit option to states to help families  leaving TANF retain their food stamp benefits. Because families leaving  TANF are no longer automatically eligible for food stamps based on their  receipt of TANF cash assistance, they cannot receive food stamps without  a re-determination of eligibility. The Transitional Benefit Alternative,  introduced in November 2000, gives states the option to continue to  provide families with their same food stamp benefit amount for 3 months  after they leave welfare. As part of its deliberations on food stamp  reauthorization, the Congress is considering extending the transitional  benefit to 6 months.
Finally, recognizing that TANF and the Food Stamp Program generally are  administered by the same agency at the local level, the 1996 welfare  reform legislation provided an option for states to merge their TANF and  Food Stamp Program rules into a single set of eligibility and benefit  requirements for households receiving both TANF and food stamps. This  option, called the Simplified Food Stamp Program, allows states to align  all of their TANF and Food Stamp Program rules. The option also allows  states to implement a portion of the simplified program in which only the  food stamp work requirement is replaced by TANF’s work requirement.
section_title: FNS’s Quality Control System
paragraphs: FNS monitors states’ performance by assessing how accurately they  determine food stamp eligibility and calculate benefits. Under FNS’s  quality control system, the states calculate their payment errors by  drawing a statistical sample to determine whether participating  households received the correct benefit amount. The states review case  information and make home visits to determine whether households were  eligible for benefits and received the correct benefit payment. FNS  regional offices validate the results by reviewing a subset of each state’s  sample to determine its accuracy and make adjustments to the state’s  overpayment and underpayment errors as necessary. States are penalized  if their payment error rate is higher than the national average, which was  8.9 percent in fiscal year 2000.
Food Stamp Program payment errors occur for a variety of reasons.  Overpayments can be caused by inadvertent or intentional errors made by  recipients and caseworkers. According to FNS’ quality control system, the  states overpaid food stamp recipients about $976 million in fiscal year  2000 and underpaid recipients about $360 million. A little over half of these  errors occurred when state food stamp workers made mistakes, such as  misapplying complex food stamp rules in calculating benefits. The  remaining errors occurred because participants, either inadvertently or  deliberately, did not provide accurate information to state food stamp  offices.
According to USDA, about half of all payment errors are due to an  incorrect determination of the household’s income. In 1999, every state  except one had a higher payment error rate among households with  earnings as compared with households without earnings. Because their  hours of work per week vary and they change jobs frequently, low-wage  workers often have fluctuating incomes. Recipients are required to report  these income changes, and eligibility workers must adjust their food stamp  benefits correctly to avoid payment errors. In order to minimize payment  errors, states usually certify households with earnings for shorter periods  and require them to report more frequently than households with no  earned income.
section_title: States Used Eligibility Options and Waivers Primarily to Increase Access to Food Stamps
paragraphs: Almost all states used one or more options or waivers to change their food  stamp eligibility determination process. More than half of the states chose  to confer categorical eligibility for food stamps to households receiving  certain TANF-funded services or benefits. Thirty-three states used  available options to exempt some or all vehicles from counting as assets.  States used these options to increase the number of households to be  eligible for food stamps, to simplify the administrative process for  eligibility workers, and to support working families; however, most of  these states considered them a cumbersome way to increase access to  food stamps.
subsections: section_title: Many States Confer Categorical Eligibility to Increase Access
paragraphs: Thirty-four states extended eligibility for food stamps to households that  are eligible to receive TANF-funded services or benefits. Many states  conferred categorical eligibility only to households receiving TANF-funded  benefits such as emergency assistance and childcare; while some states  conferred categorical eligibility to food stamp applicants simply by  providing them with information and referral services paid for with TANF  funds. For example, during the food stamp application process, clients  who may be financially ineligible for food stamps could become  categorically eligible for benefits by virtue of having received a referral to  a specific TANF-funded program.
Although the primary reason states gave for conferring categorical  eligibility was to increase access to food stamps by making households  who are eligible for a TANF-funded service automatically eligible for food  stamps, states cited other benefits of this option. For example, by  eliminating the need to calculate the value of a food stamp applicant’s  assets, the eligibility worker’s administrative burden is reduced.  Furthermore, five states noted that conferring categorical eligibility for  food stamps makes children eligible for the school lunch program, even if  the household does not actually qualify for a food stamp benefit. (See fig.  1.)
While about two-thirds of the states used the categorical eligibility option,  some states pointed out difficulties that the option created. For example,  many individuals made categorically eligible for food stamps through  receipt of a pamphlet or referral to a service may in fact not actually  qualify for a food stamp benefit, possibly increasing the administrative  burden on food stamp workers. In addition, several officials said they  would like the food stamp rules pertaining to categorical eligibility  simplified. They noted that categorical eligibility is determined in part by  the source of the funding for the program under which the household  receives noncash benefits or services. Because many programs have  multiple funding sources, it can be difficult to determine whether a  particular program meets the TANF funding requirements. Another official  said that categorical eligibility is difficult to explain to staff. Other officials  noted problems tied to the variation from state to state that the option  creates. One official commented that allowing states to determine which  of their welfare-funded services to use in granting categorical eligibility for  food stamps could create a great deal of national variation in who can  access this federal entitlement program. Using TANF-funded services as a  basis for categorical eligibility, a state official explained, is a complicated  way of excluding vehicles when determining food stamp eligibility.
section_title: States Used Several Options to Exempt Vehicles
paragraphs: Thirty-three states used available options to exempt some or all vehicles  from counting as assets in determining food stamp eligibility in order to  increase access, support clients’ work efforts, or simplify eligibility  determination for food stamp workers. (See fig. 2.) Twenty-nine of these  states chose to replace their food stamp vehicle rules with their TANF  program rules.While most of these states replaced their food stamp  vehicle asset rules with their TANF cash assistance rules, a few states  used rules from their TANF noncash assistance childcare programs.
Seven states told us that they used the option to confer categorical  eligibility to recipients of TANF-funded services as a way to exclude all  vehicles and other assets from eligibility determination. Specifically, six  of the seven states told us that they used categorical eligibility to increase  access to food stamps and three said that they used it to support client  work efforts. (See fig. 3.)
While most states used available options to liberalize the way vehicles are  considered in the food stamp eligibility determination process, 17 states  used existing Food Stamp Program rules regarding vehicles. Seven of  these states said that they could not replace their food stamp vehicle rules  with TANF vehicle rules because their TANF rules were more restrictive  than their food stamp rules. In at least one of these states, changes to  TANF rules required approval by the state’s legislative body. State officials  in almost half of the states told us that the Food Stamp Program’s vehicle  asset rules should be changed to exempt at least one vehicle per  household. Other state officials wanted the exemption value of a vehicle  increased to reflect the current cost of vehicles.
section_title: States Used Reporting Options and Waivers Primarily to Reduce Payment Errors and Simplify Paperwork
paragraphs: Almost all states used a reporting option or waiver to change the way  households with earnings are required to report changes in their  circumstances that could affect their eligibility for food stamps as well as  their benefit amount. These options and waivers allowed states to alter the  standard reporting methods of monthly and change reporting. Many states  told us that they used reporting options and waivers to reduce their  payment errors, to ease program administration, and to simplify  paperwork requirements for households. Because some reporting options  applied to specific households only, many states considered them  somewhat restrictive.
The most frequently used reporting alternatives were those that eliminated  the requirement to report changes in earned income of $25 or more per  month. Eighteen states chose a waiver allowing households to report  changes in employment status, which includes changes in wage rates,  number of hours worked in a week, and a move from part-time to full-time  employment or vice-versa. Seventeen states chose the waiver to require  recipients to report only changes in income that exceeded $80 or $100.  (See fig. 4.)
States are allowed to use more than one reporting option or waiver.  Thirteen states used two or more alternatives. However, some states chose  not to use any reporting options or waivers, citing concerns over payment  errors and the cost and burden of implementation, such as the cost of  reprogramming computer systems to implement a new reporting system.
Ten states used the semiannual reporting option, and 5 states used the  waiver allowing quarterly reporting. In these states, households with  earned income are allowed to report semiannually or quarterly without  reporting changes in between. Households subject to semiannual reporting  are required to report if their gross income exceeds 130 percent of  poverty. Should a household report a change that would increase the  household’s food stamp benefit, the state must make the change; however,  the state is generally not allowed to make changes that would reduce the  food stamp benefit amount. States are held responsible only for errors  resulting from miscalculating benefits at certification, or if income  exceeds 130 percent of poverty and the change is not reported. State  agencies are not held responsible for errors if the household experienced a  change in its circumstances that the household did not report if the state’s  policies do not require the household to report the change. States selecting  the semiannual reporting requirement must certify households for at least  a 6-month period, and they have the option to eliminate every other face- to-face interview because of the new rule requiring only one face-to-face  interview a year.
Although the semiannual reporting option provides states with an  opportunity to reduce the reporting burden on working families with some  impunity from payment errors, some states want to adjust the food stamp  benefit in response to all reported changes in household income. Half of  the states using the semiannual option requested and received a waiver  allowing them to adjust benefits based on all changes reported by families.  State officials gave various reasons for requesting this waiver to  semiannual reporting. In some states, the Food Stamp Program shared the  same computer system and database used for determining eligibility for  other programs, such as TANF and Medicaid. Since these states link their  programs, changes that families report to one program often automatically  change the food stamp data, and states wanted the ability to adjust  benefits according to this new information. Other states said that the  waiver was useful because their food stamp workers have always adjusted  food stamps based on reported changes; not to do so for all food stamp  recipients would be confusing.
Officials in 28 states said they are considering the semiannual reporting  option. Nine states would implement the option only with the waiver  allowing them to act on all reported changes in part because of computer  integration issues. Others would consider the option with a waiver  allowing them to apply it to all food stamp households, not just  households with earnings. Twelve states are not using or considering the  semiannual reporting option. Officials in these states told us the option is  either too burdensome to implement, the rules are too complicated, or that  it might increase payment errors.
Officials from 38 states said that additional changes to the reporting  requirements were needed. Some noted that states should be allowed to  use the same reporting requirements for all households, not just  households with earnings.
Although states told us that a primary reason they used reporting options  and waivers was to minimize the payment error associated with earnings,  concern over payment accuracy affected states’ decisions regarding other  options and waivers as well. For example, although FNS gave states the  option to limit face-to-face interviews to once a year, some states continue  to require households with earnings to come in more frequently because of  concerns over payment accuracy. Officials in 45 states told us that the  effect on their payment error rate was either the most important factor or  a contributing factor in their decision to use particular options and  waivers. As a result, officials in many states said that USDA’s quality  control program should not focus solely on payment accuracy. State  officials also suggested changes in the way that payment errors are  calculated. For example, they noted that client and agency error should be  counted separately from client error, because the agency had no control  over whether the client reported required information correctly.
section_title: Many States Planning to Use the Transitional Benefit Option
paragraphs: Although only three states reported using the Transitional Benefit  Alternative, many states told us they plan on using it. At the time of our  interviews, the 3-month Transitional Benefit Alternative was not yet fully  implemented, but states could request this option. Twenty states said that  they were considering it. Twenty-seven states said they would implement  the proposed 6-month Transitional Benefit Alternative if it became  available.
The primary reason that states would provide a transitional benefit is to  support working families. Many states said that the option helped with the  transition from welfare to work by stabilizing the families after they leave  welfare by guaranteeing a fixed food stamp benefit regardless of how their  income fluctuates during the transitional benefit period. (See fig. 5.) Some  states that would use the 6-month option but not the 3-month option said  that the additional 3 months of support to families making the transition  from welfare to work would make the implementation costs worthwhile.
The 12 states that had decided not to use transitional benefits said they  were concerned about the implementation costs. At least eight of these  states indicated that the computer changes required to implement the  transitional benefit would be extensive. (See fig. 6.) Eighteen states said  they were undecided about the 3-month option, and 14 states had not yet  decided about the 6-month option. Several of the undecided states  indicated that they were concerned about potential costs associated with  reprogramming their computers.
section_title: No State Is Using All Aspects of the Simplified Food Stamp Program Option
paragraphs: No state is implementing or plans to implement all aspects of the  Simplified Food Stamp Program option. The main reason states gave for  not choosing this option was that it was too complex and difficult to  implement. The simplified program option was to be a vehicle for creating  conformity between TANF and the Food Stamp Program by merging the  programs’ rules into a single set of requirements for individuals receiving  both types of assistance. However, as we reported earlier, since not all  needy households receive both TANF and food stamps, the states selecting  the simplified program option would, in effect, be operating three  programs: one program for TANF recipients following state TANF rules;  one program for food stamp recipients following federal food stamp  regulations; and the simplified program for recipients of both food stamps  and TANF. Furthermore, to whatever extent the states use the simplified  program, they must also have demonstrated that total federal costs would  not be more than the costs incurred under the regular Food Stamp  Program—that is, the program has to be “cost neutral.” Figure 8 shows the  reasons states gave for not choosing the option. In addition, while states  are not planning to use the simplified program, some state officials  indicated that it might be worthwhile to develop such a program if it could  apply to all food stamp households, not just households receiving both  TANF and food stamps.
While no state is implementing all aspects of the simplified program  option, nine states reported using some of the flexibility offered under the  program. Eight states are aligning their food stamp and TANF work  requirements. One state is aligning its TANF and food stamp reporting  requirements to reduce the reporting burden on households participating  in both programs.
section_title: Agency Comments
paragraphs: We provided USDA with the opportunity to comment on a draft of this  report. While USDA did not provide formal comments, it did provide  technical comments, which we incorporated where appropriate.
We are sending copies of this report to the Secretary of Agriculture,  appropriate congressional committees, and other interested parties. We  will also make copies available to others upon request.
If you or your staff have questions about this report, please contact me on  (202) 512-7215 or Dianne Blank on (202) 512-5654. Individuals making key  contributions to this report include Margaret Boeckmann, Elizabeth  Morrison, and Lara Carreon.
section_title: Related GAO Products
paragraphs: U.S. General Accounting Office. Food Stamp Program: Implementation of  Electronic Benefit Transfer System. GAO-02-332. Washington, D.C.: 2002.
U.S. General Accounting Office. Food Stamp Program: Program Integrity  and Participation Challenges. GAO-01-881T. Washington, D.C.: 2001.
U.S. General Accounting Office. Food Stamp Program: States Seek to  Reduce Payment Error and Program Complexity. GAO-01-272.  Washington, D.C.: 2001.
U.S. General Accounting Office. Welfare Reform: Few States are Likely to  Use the Simplified Food Stamp Program. GAO/RCED-99-43. Washington,  D.C.: 2001.
U.S. General Accounting Office. Food Stamp Program: Various Factors  Have Led to Declining Participation. GAO/RCED-99-185. Washington,  D.C.: 2002).