Nutrition Assistance: Additional Guidance Could Assist States in Reducing Risk of Online Sale of Infant Formula
Published: 2014-12-11T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: WIC provides supplemental foods and assistance to low-income pregnant and postpartum women, infants, and young children. Approximately half of U.S. infants born each year receive WIC benefits, and infant formula is a key component of the food package many receive. Recent news reports suggest that some participants have attempted to sell WIC formula online, and the Internet has substantially increased as a marketplace in recent years. GAO was asked to provide information about online sales of WIC formula.
GAO assessed: (1) how USDA determines the amount of formula to provide to participants, (2) what is known about the extent to which participants sell WIC formula online, and (3) steps USDA has taken to prevent and address the online sale of WIC formula. GAO reviewed relevant federal laws, regulations, and USDA guidance; monitored advertisements to sell formula on one e-commerce website in four metropolitan areas; reviewed a non-generalizable sample of policy manuals from 25 states that as a group serve about two-thirds of WIC participants, and that were selected for their varied WIC caseloads and geography; and interviewed USDA and state and local WIC officials.
section_title: What GAO Found
paragraphs: In recent years, the U.S. Department of Agriculture (USDA) has more closely aligned the amount of formula it authorizes states to provide through the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) with current nutrition science and the nutritional needs of participating infants. These changes were also made, in part, to encourage and support breastfeeding. Specifically, the agency issued revised regulations in 2007, finalized in 2014, that reduced the amount of formula authorized for partially breastfed infants and delayed the age when these infants may begin receiving formula. The regulations also reduced the amount of formula authorized for older fully formula-fed infants because they added infant fruits and vegetables for the first time.
USDA has not conducted any nationwide studies on the extent of online sales of WIC formula by program participants, but information gathered from state WIC officials and GAO's own limited monitoring suggest that some WIC formula is offered for sale online, though program rules prohibit such sales. In 30 days of monitoring one online classifieds website in four large metropolitan areas, GAO found 2 posts in which individuals attempted to sell formula specifically identified as WIC—among 2,726 that advertised infant formula generally. A larger number, 346 posts, advertised formula matching the brand, type, container volume, and amount provided to WIC participants, but did not indicate the source of the formula. Because WIC participants purchase the same brands and types from stores as non-WIC customers, monitoring attempted online sales of WIC formula can present a challenge. State officials GAO spoke with cited other challenges to monitoring online sales, such as the fact that individuals posting formula for sale online are able to remain relatively anonymous, and their posts may contain insufficient information to allow staff to identify them as WIC participants.
USDA has taken steps to clarify that attempting to sell WIC formula online is a participant violation but has provided limited assistance to states in preventing and addressing these sales. For example, USDA has not specifically directed states to instruct participants that selling WIC formula is against program rules, which could lead to participants making these sales unknowingly and using program resources inappropriately. GAO's review of 25 state policy and procedure manuals found 7 that did not require local agency staff to inform participants of the prohibition. Further, although states are responsible for controlling participant violations—including sales of WIC benefits—USDA is responsible for determining compliance with the WIC statute and regulations. However, because the department has not required states to describe their procedures for controlling these violations, USDA is unable to both oversee and assess state efforts to ensure program integrity in this area. The department is also unable to assist states' efforts because it has not assessed the national extent of these sales or techniques for addressing them. Through interviews with 19 state and local WIC agency officials from 12 states, GAO found that states vary in their approaches and the amount of resources devoted to monitoring attempted WIC formula sales. In addition, due to monitoring challenges, some officials expressed concerns about the return on investment for these efforts. Without information on cost-effective monitoring techniques—such as promising search terms or online sites where states may want to focus their efforts—some states may be missing opportunities to better target their limited resources.
section_title: What GAO Recommends
paragraphs: GAO recommends that USDA require state agencies to inform WIC participants that selling WIC formula is against program rules and describe in their state plans how they identify attempted sales. GAO also recommends that USDA assess online sales, including techniques states can use to monitor them. USDA agreed with GAO's recommendations.

section_title: Letter
paragraphs: In fiscal year 2013, the federal government spent approximately $6.5  billion on the Special Supplemental Nutrition Program for Women, Infants,  and Children (WIC), which provides food and services—including nutrition  education, breastfeeding support, and health and social service  referrals—to about 9 million low-income pregnant and postpartum  women, infants, and young children. Approximately half of U.S. infants  born each year receive WIC benefits, and infant formula is a key  component of the WIC food package many receive. The U.S. Department  of Agriculture’s (USDA) Food and Nutrition Service (FNS) oversees WIC  at the federal level and provides grants to state agencies, which in turn  provide food and services to participants through 1,900 local agencies in  10,000 clinic sites. USDA regulations establish the types and maximum  amounts of food, including infant formula, participants may receive, and  state and local agencies establish policies and procedures for  determining specific amounts of WIC foods—at or below these maximum  levels—to provide to participants.
WIC rules prohibit participants from selling foods they receive from the  program, including infant formula. abuse, local WIC directors expressed concerns about these activities, in  part because the high cost of formula can make the activity attractive to  some participants. At that time, we found that there were relatively few  documented cases nationwide of participants selling infant formula for  cash, and generally low rates of WIC participant fraud overall, in contrast  to the relatively high rate of WIC vendor fraud.Internet as a marketplace has substantially increased in recent years, and  news reports suggest that some participants have attempted to sell WIC  formula online. Participants who violate WIC rules are subject to various  sanctions, including repayment of the value of benefits and  disqualification from the program. Moreover, improper use of WIC  benefits undermines the integrity of the program and its ability to provide  key nutrition assistance and services to vulnerable populations. We were  asked to examine online sales of WIC formula.
In our previous study of WIC fraud and   However, the use of the  We assessed: (1) how USDA determines the amount of formula to  provide to participating infants, (2) what is known about the extent to  which participants sell WIC formula online, and (3) what steps USDA has  taken to prevent and address the online sale of WIC formula.
See 7 C.F.R. § 246.2.
Government. To help us understand how federal WIC food requirements  were recently modified, we also reviewed a 2005 report published by the  National Academies’ Institute of Medicine (IOM), since many of the  changes were based on the recommendations of this report. To  determine the role USDA regulations and guidance play in preventing and  addressing online sales of WIC formula, we reviewed a non-generalizable  sample of 25 state WIC policy and procedure manuals to determine how  consistent state policies and procedures are in preventing and addressing  online formula sales. While not generalizable to the U.S., we selected  these states primarily for their variations in WIC caseloads and diverse  geographic location. Also, as a group, these states provide services to  approximately two-thirds of all WIC participants in the U.S. To gather  additional information to answer our second research question, we  monitored online classified advertisements offering formula for sale using  one popular e-commerce website in four metropolitan areas over 30  days. We selected these areas based on (1) high number of births, (2)  high WIC caseloads, and (3) geographic dispersion. To address all of our  questions, we also interviewed USDA officials, as well as 17 state and 2  local WIC officials representing 12 states.description of our scope and methodology, see appendix I.
We conducted this performance audit from April 2014 through December  2014 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: Established as a national program in the mid 1970s, the WIC program is  intended to improve the health status of low-income pregnant and  postpartum women, infants, and young children by providing  supplemental foods and nutrition education. Pregnant and post-partum  women, infants, and children up to age 5 are eligible for WIC if they are  found to be at nutritional risk and have incomes below certain  thresholds.improve birth and dietary outcomes and contain health care costs, and  USDA considers WIC to be one of the nation’s most successful and cost- effective nutrition intervention programs.
subsections: section_title: WIC Food Benefits
paragraphs: In passing the legislation that created WIC, Congress intended the  program to assist participants during critical times of growth and  development. WIC participants typically receive food benefits—which may  include infant formula—in the form of vouchers or checks that can be   USDA has established  redeemed at state-authorized retail vendors.seven food packages that are designed for different categories and  nutritional needs of WIC participants (see fig. 1). The authorized foods  must be prescribed from the food packages according to the category and  nutritional needs of the participants. Because multiple members of a  family may be eligible to receive WIC benefits, individual families could  receive more than one food package.
In 2007, USDA issued interim regulations that implemented the first  comprehensive revisions to the WIC food packages since 1980. After  considering comments received in response to the interim regulations,  FNS issued final regulations in 2014. The revisions aligned the food  packages with the 2005 Dietary Guidelines for Americans and infant  feeding practice guidelines of the American Academy of Pediatrics, and  were largely based on recommendations of the IOM, which FNS  commissioned to review the food packages.
Infants who are not exclusively breastfeeding can receive formula from  WIC until they turn 1 year of age. However, WIC’s authorizing legislation  requires that the nutrition education provided to participants include  breastfeeding promotion and support. In addition, the Child Nutrition  Amendments of 1992 required that USDA establish a program to promote  breastfeeding as the best method for infant nutrition. Accordingly,  USDA, through regulations and guidance, has emphasized the  importance of encouraging participating mothers to breastfeed. WIC  regulations require state and local agencies to create policies and  procedures to ensure that breastfeeding support and assistance are  provided to WIC participants throughout the prenatal and postpartum  period.
section_title: WIC Program Oversight and Administration
paragraphs: USDA’s role in operating WIC is primarily to provide funding and  oversight, and state and local WIC agencies are charged with carrying out  most administrative and programmatic functions of the program.  Specifically, USDA provides grants to state agencies, which use the funds  to reimburse authorized retail vendors for the food purchased by WIC  participants and to provide services. As part of its monitoring and  oversight obligations, USDA annually reviews the state plan for each  state WIC agency, which describes the agency’s objectives and  procedures for all aspects of administering WIC for the coming fiscal  year. USDA’s review of state plans is one of the federal oversight  mechanisms for the program, and state plans provide important  information about how states administer WIC. For their part, state  agencies are responsible for developing WIC policies and procedures  within federal requirements, entering into agreements with local agencies  to operate the program, and monitoring and overseeing its  implementation by these local agencies. WIC regulations define  participant violations, which include the sale of WIC food benefits, and  require state agencies to establish procedures to control participant  violations. However, the regulations do not specify what steps states  should take to prevent participant violations, such as methods for  identifying attempted sales of WIC food benefits. The regulations also  require state agencies to establish sanctions for participant violations,  and require mandatory sanctions for certain types of violations. For  example, when a state establishes a claim of $100 or more against a  participant who improperly disposed of program benefits—such as  through online sales—it must disqualify the participant for 1 year.  Beyond these mandatory sanctions, in most cases the regulations do not  specify how severely states should sanction participants for particular  violations.
The WIC oversight structure is part of the program’s internal controls,  which are an integral component of management. Internal control is not  one event, but a series of actions and activities that occur on an ongoing  basis. As programs change and as agencies strive to improve operational  processes and implement new technological developments, management  must continually assess and evaluate its internal control to assure that the  control activities being used are effective and updated when necessary.  Management should design and implement internal control based on the  related cost and benefits. Effective internal controls include: (1)  communicating information to management and others to enable them to  carry out internal control and other responsibilities and (2) assessing the  risks agencies face from both external and internal sources.
section_title: In Recent Years, USDA Has Further Aligned Formula Amounts with Current Nutrition Science and Infants’ Nutritional Needs
paragraphs: In the past decade, USDA has taken steps to better tailor WIC food  packages containing formula to the nutritional needs of participating  infants. After reviewing the nutritional needs of WIC participants and food  packages in a study contracted by USDA, the IOM recommended  changes to the packages—including those containing formula. USDA  issued revised regulations in 2007—which state agencies were required  to implement at the start of fiscal year 2010—that adopted many of the  recommendations from the IOM report to further encourage and support  breastfeeding among participating mothers. According to USDA, the  revised food packages were developed to better reflect current nutrition  science and dietary recommendations than the food packages they were  replacing. Among other changes, the revised regulations reduced the  amount of formula provided to partially breastfed infants of all ages,  delayed when partially breastfed infants may begin receiving formula, and  reduced the amount of formula provided to older fully formula-fed infants.
Amount of formula for partially breastfed infants: The revised  regulations authorize maximum formula amounts for infant  participants that vary by the extent to which the infant is breastfed  (see fig. 2). Under the previous regulations, partially breastfed  infants could receive up to the same amount of formula as those  who were fully formula-fed. Under the revised regulations,  “partially breastfed,” for the purposes of assigning the WIC food  package, means an infant who is breastfed but also receives  formula from the WIC program up to a maximum amount that is  approximately half the amount of formula allowed for a fully  formula-fed infant. USDA stated that this new category is  intended to provide stronger incentives for continued  breastfeeding, such as by providing partially breastfeeding  mothers with additional quantities and types of supplemental  foods—such as whole wheat bread or other whole grains—that  are not provided to non-breastfeeding mothers. Because  partially breastfed infants require less formula than fully formula- fed infants, this change may have reduced the potential for waste  in the program.
Age at which partially breastfed infants receive formula: To  further support the successful establishment of breastfeeding, the  revised regulations disallow the routine issuance of formula to  partially breastfeeding infants during the first month after birth.  While mothers of partially breastfed infants are not to  automatically receive formula, local agency staff have some  discretion and may determine, based on an assessment of the  nutritional needs of the infant, that it is appropriate to make a  small amount of formula available. According to the IOM, the fact  that partially breastfed infants, under previous regulations, could  receive up to the same amount of formula from birth as fully  formula-fed infants may have interfered with mothers’ milk  production and success at continued breastfeeding. Between  implementation of the revised regulations in fiscal year 2010 and  fiscal year 2014, the number of infant participants who were either partially or fully breastfed increased nearly 4 percent (see fig. 3).
Formula amounts for older fully formula-fed infants: Under the  revised regulations, fully formula-fed infants 6 through 11 months  of age are authorized to receive less formula than they were  authorized to previously. In addition, to introduce infants of this  age to a variety of nutritious foods, the revised regulations, for the  first time, added infant food fruits and vegetables to their food  packages. Because the addition of fruits and vegetables  provides infants greater amounts of nutrients, in its 2005 report,  IOM determined that less formula is needed for infants that  receive these foods. According to USDA, the revised maximum  formula amount authorized for these infants is based on a  scientific review of the calorie and nutrient needs of infants at this  age.
While federal regulations specify the maximum amount of formula  different categories of infants are authorized to receive, state and local  agency staff have some flexibility in determining precise amounts to  provide, depending on an infant’s nutritional needs. Staff at local WIC  agencies play a critical role in determining infants’ feeding categories, and  they have the authority to provide them with less formula than the  maximum amount allowed for each category, if nutritionally warranted.  Nutrition specialists, such as physicians or nutritionists, working at the  local agency perform nutritional assessments for prospective participants  as part of certification procedures. They use the nutritional  assessment information to appropriately target food packages to  participants. WIC staff also provide regular nutrition and breastfeeding  education services to established participants. In the guidance USDA  issued in 2009 to assist state and local agency staff in implementing the  provisions of the new food package regulations, staff were directed to  tailor the amount of infant formula to the assessed needs of breastfed  infants rather than to routinely issue food packages with standard  quantities of infant formula to these infants. Further, the guidance stated  that the maximum amount of formula authorized in the regulations is  rarely warranted for partially breastfed infants.
Even with USDA’s guidance, it is possible that some participants receive  formula that they do not need or cannot use, and state and local policies  on how participants should handle excess formula vary. WIC provided  formula to a monthly average of nearly 1.8 million infant participants in  2013, according to USDA. Although federal regulations define the sale of  WIC food benefits as a participant violation, one USDA official told us  there is no federal guidance that addresses how local agencies should  instruct participants to handle unused formula. Rather, according to  USDA, state, and local WIC officials, state and local agencies establish  their own policies and procedures. Officials from 7 of the 12 states we  spoke with told us that participants are instructed to return unused  formula to local agencies. Further, officials from the 2 local agencies we  spoke with explained that it is relatively common for participants to return  infant formula to their local agency, and one added that participants often  return formula for health reasons, as pediatricians sometimes prescribe  specialized formula because of food allergies. Officials we spoke to from  two states said that the returned formula is given to participants who have  lost their benefit vouchers. Officials from three other states said that  returned formula is donated to food banks or hospitals.
section_title: The National Extent of Online Sales of WIC Infant Formula Is Unknown, but Some Participants Attempt Them
paragraphs: USDA does not have data that can be used to determine the national  extent of online sales of WIC formula; however, officials in 5 of the 12  states we spoke to said that they have found WIC formula offered for sale  online by some participants. USDA officials told us that the department  has not conducted a comprehensive study to assess the national extent  of online sales. According to the officials, the department does not  collect data on this issue, in part because it is not the department’s  responsibility to sanction WIC participants for program violations. Rather,  it is the responsibility of state agencies to establish procedures to prevent  and address participant violations, including attempts to sell WIC food  benefits. Of the officials that we spoke to from 12 states, those from 9  states mentioned that the procedures they have established to identify  this violation include regularly monitoring online advertisements.  Officials in 3 of these states said that through their monitoring efforts, they  have found fewer than 0.5 percent of their WIC participants attempting to  sell WIC infant formula online. Officials in 2 other states did not estimate  percentages but stated that the incidence is low.
Consistent with these state accounts, our own monitoring of a popular e- commerce website for 30 days in four large metropolitan areas found few  posts in which individuals explicitly stated they were attempting to sell  WIC-provided formula. Specifically, we identified 2,726 posts that  included the term “formula,” and 2 of these posts explicitly stated that the  origin of the formula was WIC. In both posts, the users indicated they were selling the WIC formula because they had switched to different  brands of formula.
A posting from late June 2014  included the container size in the title  and stated: “I am looking to sell 5 [brand  name] 12.5oz cans (NOT OPENED)  because  is super picky and does  not want to drink it no matter what i do.   will drink the  kind  for some reason. I told my WIC office to  switch me to another brand but they say  it might take 3 months. Im asking 35$ but  best offer will do since the brand I buy is  from  so Im not looking to make a  profit here if you consider each can is  16$ at the store. please text if  interested!!  A posting from early July 2014  included the brand, type, and  container size in the title and stated:  “I have 7 powder cans of   they dnt expire for another year at least  just got them from my wic n we ended up  switching formulas so its $65.oo for pick  up all 7 cans or $70 if i have to drive.” formula-fed WIC infant participants each month, averaged across all  ages.
Beyond the 346 posts that matched these three criteria, we found another  135 that met at least one, but not all, of the criteria. However, since we  did not investigate any of these posts further, we do not know if any or all  of these 481 posts were attempts to sell WIC formula.
A posting from mid-June 2014 stated:  “$10 a can! 14 -12.9 oz Cans of [brand  name and type] Formula. Expiration Date  is - July 1, 2015. Please take it all. I will  not separate the formula! NOT FROM  WIC!!!  is now 14 months and no  longer needs this. Email only please  A posting from mid-June 2014:  “ Turn A Year Already, and we  Just bought her 7 Brand New Cans of  . She no longer  needs Formula. Selling each Can for  $10. Brand New, NOT Open. 12.4 Oz.  EXP. 1 March. 2016.”
Through our monitoring efforts, and through interviews with USDA and  state and local WIC officials, we identified a number of key challenges  associated with distinguishing between WIC-obtained formula sales and  other sales:
Each state’s specific WIC-contracted formula brand is typically  available for purchase at retail stores by WIC participants and non- WIC participants alike, without an indicator on the packaging that  some were provided through WIC.
There are a number of reasons why individuals may have excess  formula. For example, a WIC participant may obtain the infant’s full  monthly allotment of formula at one time; alternatively, non-WIC  parents may purchase formula in bulk at a lower cost to save money.  In either case, if the infant then stops drinking that type of formula,  parents may attempt to sell the unused formula.
Individuals posting formula for sale online are able to remain relatively  anonymous, so WIC staff may not have sufficient information to link  the online advertisement with a WIC participant. According to one  WIC official we spoke with, staff in that state identify approximately  one posting a week with sufficient detail about the seller—such as  name or contact information—for staff to pursue. A WIC official from  another state said that staff previously used phone numbers to identify  WIC participants posting formula for sale, but they believe participants  then began to list other people’s phone numbers on posts.
Advertisements for infant formula sales can be numerous online, and  formula for sale originates from varied sources. For example, through  our literature search, we found multiple news reports on stolen infant  formula advertised for sale online.
According to USDA, state, and local WIC officials, because of these  challenges, the return on investment for monitoring online sales of WIC  infant formula is low. One USDA official noted that it is difficult for states  to prove that participants are selling WIC food benefits, which increases  the amount of time and effort state staff need to spend to address these  cases. Officials from one state WIC agency and one local WIC agency  we spoke to said that efforts by state and local agency staff to identify and  address online WIC formula sales result in few confirmed cases and draw  away scarce resources from other aspects of administering the program.  One USDA official said that states that sanction a participant for  attempting to sell WIC formula without sufficient evidence that it occurred  will likely have the violation overturned during the administrative appeal  process. These cases also appear unlikely to result in court  involvement, as when we asked the 19 officials from 12 states how these  cases were addressed, only one said that a couple had gone through the  legal system.should design and implement internal controls based on the related costs  and benefits. According to USDA, because of the substantial risks  associated with improper payments and fraud related to WIC vendor  transactions, both USDA and the states have focused their oversight  efforts in recent years on addressing vulnerabilities in the management of  this area, rather than focusing on possible participant violations. However,  because the use of the Internet as a marketplace has substantially  increased in recent years and the national extent of online sales of WIC  food benefits is unknown, USDA and the states have insufficient  information to assess the benefits of broadening their oversight efforts to  include this participant violation, as discussed in more detail later in this  report.
section_title: USDA Has Provided Limited Assistance to States for Preventing and Addressing Online Sales
paragraphs: USDA has taken steps aimed at clarifying that the online sale of WIC  benefits is a participant violation. For example, in 2013, USDA proposed  regulations that would expand the definition of program violation to  include offering to sell WIC benefits, specifically including sales or  attempts made online. Earlier, in 2012, USDA issued guidance to WIC  state agencies clarifying that the sale of, or offer to sell, WIC foods  verbally, in print, or online is a participant violation.that USDA expects states to sanction and issue claims against  participants for all program violations, but it did not provide direction to  states on ways to prevent online sales of WIC foods, including formula.  That same year, USDA also sent letters to four e-commerce websites— through which individuals advertise the sale of infant formula—requesting   This guidance stated  that they notify their customers that the sale of WIC benefits is prohibited,  and two of the companies agreed to post such a notification.
More generally, USDA has highlighted the importance of ensuring WIC  program integrity through guidance issued in recent years aimed at  encouraging participants to report WIC program fraud, waste, and abuse  to the USDA Office of the Inspector General (OIG). For example, in 2012,  USDA disseminated a poster developed by the OIG and attached it to a  guidance document describing its purpose, which includes informing WIC  participants and staff how to report violations of laws and regulations  relating to USDA programs. The following year, USDA issued additional  guidance that encouraged states to add contact information for the OIG to  WIC checks or vouchers, or to their accompanying folders or sleeves. USDA indicated that the intent of both guidance documents was to  increase program integrity by making it easier for participants to report  incidents of suspected fraud, waste, and abuse to the OIG. However,  neither guidance document specifically directed states to publicize the  fact that attempting to sell WIC benefits, either online or elsewhere,  qualifies as an activity that should be reported.
WIC Policy Memorandum #2013-4, OIG Hotline Information on WIC Food Instruments  (June 10, 2013). require participants be informed of this violation through other means. In  our review of rights and responsibilities statements from 25 states’ WIC  policy and procedure manuals, we found that 7 did not require local  agency staff to inform participants that selling WIC benefits is against  program rules. Beyond this approach, some state officials we spoke to  reported using other methods to inform participants of this program rule,  but some methods may not reach all participants. For example, while  officials from two states said that a statement instructing participants not  to sell their benefits is printed either on the food voucher or the envelope  containing the voucher given to participants, an official from another state  said that local agencies in that state display a poster informing  participants that selling WIC benefits online is prohibited. Both USDA  officials and officials we spoke with from two states noted that some WIC  participants do not know that selling food benefits is a program violation.  Inconsistent communication to participants about this violation conflicts  with federal internal control standards, which call for agency management  to ensure that there are adequate means of communicating with external  stakeholders that may have a significant impact on the agency achieving  its goals. Participants who are unaware of this prohibition may sell excess  formula online, thus inappropriately using program resources.
In addition, we found that states vary in the ways they identify attempted  sales of WIC formula through monitoring efforts. According to the state  and local WIC officials we spoke with, the method of monitoring used to  identify online sales of WIC formula and the level of effort devoted to this  activity vary across states. For example, while officials from 10 states said  that state or local staff perform monitoring activities, an official from  another state said that the state contracts with a private investigative firm  to perform this task. Also, officials in one state said that a number of staff  within the state office, as well as a number of those in local agencies,  search social media websites daily. In contrast, officials from another  state said that staff spend about a half day each week monitoring online  sites for attempted sales of WIC food benefits, and an official from a  different state said that staff monitor for such sales only when time allows.
USDA has signaled through recently proposed regulations and policy  guidance that it considers the sale of WIC foods—including formula—to  be a risk to program integrity; however, the department has not worked  with states on developing ways to address these sales. A USDA official  told us that the department would like to provide more support to states in  pursuing likely cases of participant fraud related to the online sale of WIC  food benefits, but it has not yet determined how to be of assistance.  USDA officials told us that some of their regional meetings with state WIC  staff have included discussions of states’ approaches to monitoring online  sales of WIC food benefits, but these meetings were focused broadly on  program integrity issues rather than on this type of monitoring. Without  general information on monitoring techniques—such as promising search  terms or online sites where states may want to focus their efforts—some  states may be missing opportunities to better target their limited  resources. Federal internal control standards call for agencies to analyze  risks from both external and internal sources, and employ mechanisms to  identify and deal with any special risks brought on by changes in  economic or industry conditions. The standards also note that the attitude  and philosophy of management toward control operations such as  monitoring can have a profound effect on internal control.
See GAO-14-641. tools. While these efforts may help to assist state WIC staff monitoring  attempted online sales of WIC formula to some extent, they are not  directly applicable to WIC due to differences in benefit delivery.  Specifically, SNAP benefits are provided through an electronic benefits  transfer card that can be used to purchase a wide variety of foods at an  authorized vendor by swiping the card and entering a personal  identification number. Therefore, efforts to identify SNAP benefit  trafficking focus on monitoring online sales of these cards and their  personal identification numbers, which can be traced back to unique  SNAP participants. In contrast, WIC participants generally receive  benefits through vouchers that they use to purchase specific foods at an  authorized vendor, and they are required to sign the voucher at the time   As a result, efforts to identify online sales of WIC benefits  of purchase.involve monitoring for formula after it has been purchased, and it is  difficult to determine whether the formula was provided through WIC.
42 U.S.C. § 1786(f)(1), 7 C.F.R. § 264.4(a). One related required element is the state  agency’s plan for collecting and maintaining information on cases of participant fraud and  abuse. We also found that the guidance USDA provides to states on developing their state  plans, while relatively detailed in some respects, does not direct states to describe their  plan for identifying program violations, including sales of WIC food benefits. area. According to federal internal control standards, agency  management needs operating information to determine compliance with  laws and regulations. Also, the standards note that factors outside  management’s control or influence can affect an agency’s ability to  achieve all its goals. Because state agencies are responsible for  addressing program violations under the regulations, monitoring the  actions they take is key to ensuring program integrity.
section_title: Conclusions
paragraphs: WIC provides essential supplemental nutrition and assistance to low- income families, and infant formula, in particular, plays a critical role in the  nutritional well-being of the many infant participants receiving it through  the program. By better tailoring the food packages, USDA has better  aligned the maximum amount of infant formula local agencies are allowed  to provide to certain participants. For example, the reduction USDA made  to the amount of formula that can be provided to partially breastfed infants  reduced the amount of excess formula provided to them, which may have  helped reduce opportunities for sales of excess formula. However, it is  clear that some participants are selling WIC formula online,  inappropriately using program resources. Although the extent of this  activity is unknown, explicitly informing WIC participants that such sales  are against WIC rules could help improve program integrity by preventing  some online sales of WIC infant formula. However, USDA has not  required state agencies to inform participants of this prohibition, and  some states are not requiring local staff to do so. As a result, some  participants may attempt to sell excess WIC formula online without the  knowledge that it is against program rules.
Monitoring online classified advertisements for attempted sales of WIC  formula is another way to ensure program integrity. As the technological  environment has changed with the increased use of e-commerce, actions  needed to ensure WIC participants do not inappropriately use infant  formula have changed as well. While USDA officials believe that states  monitor for online sales of WIC formula, USDA currently does not collect  information to confirm this. As a result, USDA is unable to effectively  oversee state efforts to control this participant violation, and the agency  lacks assurance that efforts are taking place nationwide. State officials we  spoke to have responded to the inherent challenges involved in  monitoring websites for infant formula sales with varied approaches,  which likely yield varied outcomes, and some officials told us the return  on investment for their monitoring efforts is low. However, because USDA  and state agencies lack information from a national perspective about  online sales of WIC food benefits and cost-effective approaches for  identifying and addressing these sales, states are likely to be poorly  positioned to strike the appropriate balance of costs and benefits when  determining how to target their resources to ensure program integrity.
section_title: Recommendations for Executive Action
paragraphs: To better ensure that WIC participants are aware of the prohibition  against selling WIC formula, and to assist states’ efforts to prevent and  address online formula sales, we recommend that the Secretary of  Agriculture direct the Administrator of FNS to take the following three  actions:  Instruct state agencies to include in the rights and responsibilities  statement that participants are not allowed to sell WIC food benefits,  including online.
Require state agencies to articulate their procedures for identifying  attempted sales of WIC food benefits in their WIC state plans and  analyze the information to ascertain the national extent of state  efforts.
Collect information to help assess the national extent of attempted  online sales of WIC formula benefits and determine cost-effective  techniques states can use to monitor online classified advertisements.
section_title: Agency Comments
paragraphs: We provided a draft of this report to the Secretary of Agriculture for review  and comment. In oral comments, USDA officials agreed with all three  recommendations. Regarding the first two recommendations, officials  noted that the department will incorporate into the WIC regulations  requirements that states include the prohibition against the sale of WIC  food benefits in participant rights and responsibilities statements and  report to USDA in their WIC state plans on their procedures for identifying  attempted sales of these benefits. USDA officials noted that because the  regulatory process can be lengthy, in the interim period, the department  will consider issuing guidance recommending these as best practices to  state agencies. Regarding the third recommendation, officials said they  would make it a priority to explore options for using available resources to  assess the extent of online sales of WIC formula and to identify and share  best practices, cost-effective techniques, or new approaches with state  agencies to use in monitoring online advertisements. Specifically, they  may draw on funds designated for addressing high-priority programmatic  issues, and collaborate with stakeholders and other FNS program staff on  monitoring strategies. We agree with the department’s planned  approaches to addressing the recommendations, and we believe these  efforts will help to improve WIC program integrity.
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If you or your staff have any questions concerning this report, please  contact me at (202) 512-7215 or brownke@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made key contributions to  this report are listed in appendix II.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: To obtain and evaluate information about online sales of infant formula  provided by the Special Supplemental Nutrition Program for Women,  Infants, and Children (WIC), we used a variety of methods. We reviewed  relevant federal laws, regulations, and U.S. Department of Agriculture  (USDA) guidance to determine requirements related to the provision of  formula to infants receiving WIC, as well as to identify federal, state, and  local roles related to preventing and addressing online sales of WIC  formula. We also interviewed USDA officials and reviewed USDA’s data  on WIC infant participants who breastfeed, which was available for fiscal  years 2010 through 2014. As part of our interviews with USDA officials,  we assessed the reliability of these data and determined that they were  sufficiently reliable for the purpose of this study. To help us understand  how federal WIC food requirements were recently modified, we also  reviewed a 2005 report published by the National Academies’ Institute of  Medicine, since many of the changes were based on the  recommendations of this report. To determine the role USDA regulations  and guidance play in preventing and addressing online sales of WIC  formula, we reviewed a non-generalizable sample of 25 states’ WIC  policy and procedure manuals to determine how consistent states’  policies and procedures are in preventing and addressing online formula  sales. To obtain some information about the extent of online sales of WIC  formula in four metropolitan areas, we conducted monitoring of online  classified advertisements to sell formula using one popular e-commerce  website. To obtain additional information relevant to our study, we also  interviewed an official from the National WIC Association, as well as 19  state and local WIC officials representing 12 states. In addition, we  assessed USDA’s controls against GAO standards for Internal Control in  the Federal Government.
We conducted this performance audit from April 2014 through December  2014 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Review of State WIC Policies and Procedures
paragraphs: To understand efforts to prevent and address online sales of WIC  formula, we reviewed a non-generalizable sample of 25 states’ WIC  policy and procedure manuals, including each state’s WIC participant  rights and responsibilities statement. We selected these 25 states  primarily based on varied size of WIC caseloads and geographic  dispersion, and as a group, the states provided services to approximately   For each  two-thirds of all WIC participants in the U.S in fiscal year 2013.state, we reviewed the sections of the WIC policy and procedure manual  relevant to participant violations, as well as the WIC participant rights and  responsibilities statement. We analyzed each state’s rights and  responsibilities statement to determine if it indicated that (1) the sale of  WIC food benefits is a participant violation, and (2) the sale of WIC food  benefits online is a participant violation. We reviewed these statements  because federal regulations require that all WIC participants be informed  of their rights and responsibilities during the certification process.  However, federal regulations do not require state agencies to inform  participants of this type of program violation. For each state, we also  reviewed the state’s policies on addressing the participant violation of  selling WIC benefits, such as through written warnings or program  disqualifications for a specified time period.
section_title: Monitoring of Online Classified Advertisements
paragraphs: To obtain some information on the extent of online sales of WIC formula  in four metropolitan areas, we conducted limited monitoring of online  classified advertisements to sell formula using one popular e-commerce  website that operates local websites. The selected areas included  Chicago, IL; Dallas-Fort Worth, TX; Los Angeles, CA; and New York, NY.  We selected these areas based on (1) high number of births—defined as  over 100,000 or more in the metropolitan area between July 1, 2012 and  July 1, 2013, (2) high state WIC caseloads—defined as over 275,000  participants in fiscal year 2013, and (3) geographic dispersion. Our  monitoring results are not generalizable to all localities across the United  States.
We conducted our monitoring of potential attempts to sell WIC formula  during a 30-day period, from mid-June 2014 through mid-July 2014.  During that period, we conducted manual search queries of the section of  the website specified for infant- and child-related sales on each non- holiday weekday to detect postings containing the key terms “formula” or  “WIC.” We also conducted manual search queries of the same section of  the website using the name of the formula brand equivalent to the WIC- contracted formula brand specific to the metropolitan area’s state. We  reviewed the text of each posting that contained the term “WIC,” as well  as each posting containing the state-specific WIC-contracted formula  brand. During our reviews of the text of the postings, we also identified  those that met additional criteria generally consistent with WIC formula  provided to participants. Specifically, the formula type and volume of  formula container advertised for sale were equivalent to a type and  volume of formula provided to WIC participants in the state in which the  posting was made, and the amount of formula advertised for sale  represented approximately 85 percent or more of the maximum amount of  formula authorized for fully formula-fed infant WIC participants each  month, averaged across all ages. We included the latter criterion to help  us identify individuals attempting to sell relatively large quantities of  formula. While this provides no information about the individuals’  relationship to the WIC program, we included this criterion because  participants receiving WIC checks or vouchers for formula may be likely  to purchase the infant’s entire monthly allotment of formula at one time.
This may result in WIC participants having multiple cans of unused  formula, for example, if the infant switches formulas during the month, as  noted in the two posts we found that specifically stated the individuals  were attempting to sell WIC formula online. However, a relatively large  amount of formula could also indicate intent to traffic WIC benefits in bulk  in order to make a profit.
When designing our monitoring approach, we relied on lessons learned  by the GAO team that recently conducted a study to assess online sales  of other federal nutrition benefits.  For example, we based our decision to  use the popular e-commerce website on the experience of the other GAO  team, which used both that website and a social media website. The team  found that monitoring efforts were most effective when using the e- commerce website. Similarly, the other team used both an automated and  a manual approach to monitor the e-commerce website but found the  manual approach to be more effective—as measured by more postings  indicative of potential sales of these benefits—than the automated   Our monitoring was conducted to provide some information  approach.on the extent to which WIC participants may have attempted to sell WIC  formula in four metropolitan areas over 30 days. As a result, we  conducted our monitoring activities for illustrative purposes, and we did  not intend to use them as evidence for our own investigations into  potential WIC participant violations. However, we provided information to  USDA officials about the two posts that explicitly stated the formula for  sale was from WIC.
Our monitoring approach had some limitations. In the posts we reviewed,  individuals might have been selling WIC formula, but did not clearly state  in the post that the formula offered for sale was from WIC. As a result, our  finding likely undercounts the number of individuals who offered WIC  formula for sale in the four metropolitan areas during our monitoring  period. Further, because of the general lack of structure to online sales,  our findings on the numbers of posts offering formula for sale that met our  criteria may over- or under-represent the true number. Specifically, while  we excluded duplicate posts we identified on individual days, we were  unable to identify duplicate posts across different days. Therefore, if  someone posted formula for sale that met our criteria on Tuesday, and  then because the formula did not immediately sell, they posted the same  formula for sale on Friday, we would have counted those both as posts  offering formula for sale. As a result, while our methods provide the total  number of formula posts during our monitoring period, excluding duplicate  posts on the same day, we cannot be certain that each post represented  a new offer of formula for sale. In addition, our findings may understate  the total number of posts from individuals attempting to sell WIC formula  online because, although we chose search terms we thought individuals  would be most likely to use, it is possible some individuals used different  terms. We also had to make some assumptions about posts that did not  include sufficient detail in the text of the post. For example, we included in  our findings posts that did not explicitly state the formula brand name,  type, or container volume in the text but included a photo that showed  formula matching the criteria we identified. However, it is possible that the  photo in some posts did not, in fact, match the formula being offered for  sale, resulting in our findings overstating the true number.
section_title: Appendix II: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgements
paragraphs: In addition to the contact named above, Rachel Frisk (Assistant Director),  Sara Pelton (analyst in charge), and Bryant Torres made key  contributions to this report. Other contributors included James Bennett,  Susan Bernstein, Sarah Cornetto, Celina Davidson, Michael Hartnett,  James Healy, Ashley McCall, Jean McSween, and Almeta Spencer.