Supplemental Nutrition Assistance Program: Enhanced Detection Tools and Reporting Could Improve Efforts to Combat Recipient Fraud
Published: 2014-08-21T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In fiscal year 2013, SNAP, the nation's largest nutrition support program, provided about 47 million people with $76 billion in benefits. Fraud, including trafficking—the misuse of program benefits to obtain non-food items—has been a long-standing concern, and technology has provided additional opportunities to commit and combat such activities. State agencies are responsible for addressing SNAP recipient fraud under the guidance and monitoring of FNS. GAO was asked to review state and federal efforts to combat SNAP recipient fraud.
GAO reviewed: (1) how selected state agencies combat SNAP recipient fraud; (2) the effectiveness of certain state fraud detection tools; and (3) how FNS oversees state anti-fraud efforts. GAO reviewed relevant federal laws, regulations, guidance, and documents; interviewed officials in 11 states; interviewed federal officials; tested fraud detection tools using fiscal year 2012 program data; and monitored websites for potential trafficking online. Although results are not generalizable to all states, the 11 states, selected based on various criteria including the size of their SNAP recipient household population and their payment error rates, served about a third of SNAP recipient households.
section_title: What GAO Found
paragraphs: The 11 states GAO reviewed employed a range of detection tools, but experienced mixed success investigating and pursuing cases to combat potential Supplemental Nutrition Assistance Program (SNAP) recipient fraud. States reported using detection tools required or recommended by the Food and Nutrition Service (FNS), such as matching recipient data against prisoner and death files. However, most of selected states reported difficulties in conducting fraud investigations due to either reduced or maintained staff levels while SNAP recipient numbers greatly increased from fiscal year 2009 through 2013. Some state officials suggested changing the financial incentives structure to help support the costs of investigating potential SNAP fraud. For example, investigative agencies are not rewarded for cost-effective, anti-fraud efforts which prevent ineligible people from receiving benefits at all.
GAO found limitations to the effectiveness of recommended replacement card data and website monitoring tools for fraud detection. FNS requires states to monitor SNAP households that request at least four cards per year, but selected states reported limited success detecting fraud this way. GAO's analysis found potential trafficking in 73 percent of households reviewed by focusing on SNAP households requesting cards in at least four monthly benefit periods. Benefits are allotted monthly, and a recipient selling their benefits and then requesting a new card would generally have one opportunity per month to do so. As a result, additional card requests in the same benefit period may not indicate increased risk of trafficking. Additionally, GAO found the FNS recommended e-commerce website monitoring tool to be less effective than manual searches in detecting posts indicative of SNAP trafficking. GAO found the recommended tool for monitoring social media to be impractical due to the volume of irrelevant data.
FNS has increased its oversight of state anti-fraud activity in recent years by issuing new regulations and guidance, conducting state audits, and commissioning studies on recipient fraud since fiscal year 2011. Despite these efforts, FNS does not have consistent and reliable data on states' anti-fraud activities because its reporting guidance lacks specificity. For example, the guidance from FNS did not define the kinds of activities that should be counted as investigations, resulting in data that were not comparable across states. Additional oversight efforts, such as providing guidance to states for reporting consistent data, could improve FNS's ability to monitor states and obtain information about more efficient and effective ways to combat recipient fraud.
section_title: What GAO Recommends
paragraphs: GAO recommends, among other things, that FNS reassess current financial incentives and detection tools and issue guidance to help states better detect fraud and report on their anti-fraud efforts. Agency officials agreed with our recommendations.

section_title: Letter
paragraphs: In fiscal year 2013, the federal government provided more than $76 billion  in benefits to help about 48 million people purchase food through the  Supplemental Nutrition Assistance Program (SNAP). On average,  recipient households received about $275 a month in assistance in that  year. Since fiscal year 2009, SNAP has experienced an over 50-percent  increase in distributed benefits and an over 40-percent increase in  recipients. Such rapid program growth can increase the potential for fraud  unless appropriate agency controls are in place to help minimize these  risks. The Office of Management and Budget has designated SNAP as a  high-error program due to the estimated dollar amount in improper  payments for fiscal year 2013. Furthermore, program officials have had  long-standing concerns that some recipients falsify information to  improperly receive benefits, or misuse their benefits to solicit or obtain  non-food goods, services and cash—a practice known as trafficking.  Technology has provided new opportunities to commit as well as to  combat such fraud. For example, e-commerce and social media websites  have emerged as new venues for trafficking benefits. Conversely,  monitoring recipient transaction data may provide clues to potential SNAP  fraud.
The state and federal governments share responsibility for addressing  SNAP recipient fraud. State agencies are directly responsible for  detecting, investigating, and prosecuting recipient fraud, and the U.S.  Department of Agriculture’s Food and Nutrition Service (FNS) is  responsible for guiding and monitoring this state activity. FNS has  traditionally focused on pursuing retailer fraud. We reported on these  efforts in fiscal year 2007 and found that FNS was making progress in  using electronic data to investigate trafficking.FNS implemented most of our recommendations by taking additional  steps to target and provide early oversight of stores most likely to traffic;  developing a strategy to increase penalties for trafficking; and promoting  state efforts to pursue recipients suspected of trafficking. Since then, the  agency has increased attention to the recipient side of trafficking. For  example, in fiscal year 2012, FNS recommended that states use certain  tools, such as analyzing transaction data for those requesting multiple  benefit card replacements and monitoring websites where traffickers may  be attempting to buy or sell SNAP benefits. In light of this increased  emphasis, you asked us to review federal and state efforts to combat  SNAP recipient fraud.
To enhance these efforts,  This report examines: (1) how selected state agencies combat SNAP  recipient fraud; (2) the effectiveness of certain fraud detection tools  recommended to states, including benefit card replacement data and e- commerce and social media website monitoring; and (3) FNS’s oversight  of state anti-fraud efforts.
For all three reporting objectives, we focused on federal and state SNAP  recipient anti-fraud work for fiscal years 2009 to 2014, a period after the  program received additional funding through the American Recovery and  Reinvestment Act of 2009 (Recovery Act). We reviewed relevant federal  laws, regulations, program guidance and reports, and we interviewed  FNS officials in headquarters and all seven regional offices to obtain  information for all three objectives. For the first objective, we selected 11  states for our review—Florida, Maine, Massachusetts, Michigan,  Nebraska, New Jersey, North Carolina, Utah, Tennessee, Texas, and  Wyoming—to achieve variation in geographic location, and a mix of high,  medium and low SNAP payment error rates, percent of the total number  of SNAP households nationwide, and proportion of recipients whom state  officials reported as disqualified from the program due to non-compliance.  For all 11 states, we interviewed knowledgeable state and local officials  about their recipient anti-fraud work and obtained related documentation.  For the second objective, we monitored a popular e-commerce website  for 30 days and a popular social media website for 5 days, to determine  how our selected states could use certain automated monitoring tools  recommended by FNS to detect potential SNAP fraud. We also analyzed  fiscal year 2012 replacement card and transaction data for households in  three of the selected states—Michigan, Massachusetts, and Nebraska— to assess the extent to which certain analyses could better uncover  patterns of potential fraud. We selected these three states to provide  information on a mix of high, medium and low states in terms of their  percentage of the total number of SNAP households nationwide.  Recipient households in the 11 states we reviewed represent about one- third of all SNAP program households; however, the information we report  from these states is not generalizable to all states. For the third objective,  we obtained and analyzed documents and reports relevant to FNS’s  program oversight, including their fiscal year 2013 assessments of state  anti-fraud work for all 50 states and the District of Columbia. All of the  data included in this report were assessed and determined to be  sufficiently reliable for our purposes.
We conducted this performance audit from April 2013 through July 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 we obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Background
subsections: section_title: Federal and State Roles for Addressing SNAP Fraud
paragraphs: The goal of SNAP, formerly known as the federal Food Stamp Program,  is to help low-income individuals and households obtain a more nutritious  diet. It does so by supplementing their income with benefits to purchase  allowable food items. The federal government pays the full cost of the  benefits and shares the responsibility and costs of administering the  program with the states. Specifically, FNS is responsible for promulgating  program regulations and ensuring that states comply with these  regulations by issuing guidance and monitoring their activity. FNS officials  at headquarters are assisted in this oversight work by officials in seven  regional offices. FNS also determines which retailers are eligible to  accept SNAP benefits in exchange for food and investigates and resolves  cases of retailer fraud. State officials, on the other hand, are responsible  for determining the eligibility of individuals and households, calculating  the amount of their monthly benefits and issuing such benefits on an  electronic benefit transfer (EBT) card in accordance with program rules.  States are also responsible for investigating possible violations by benefit  recipients and pursuing and acting on those violations that are deemed  intentional. Intentional program violations include acts of fraud, such as  making false or misleading statements in order to obtain benefits and  trafficking (i.e., using benefits in unallowable ways, such as by  exchanging benefits for cash or non-food goods and services or  attempting to do so).
Recipients can traffic benefits by:
Selling benefits to retailers – recipients collaborate with retailers who  exchange cash for SNAP benefits. For example, a retailer can allow a  recipient to charge $100 on his or her EBT card and then pays the  recipient $50 instead of providing food.
Selling EBT cards to another person – recipient exchanges the EBT  card and the corresponding Personal Identification Number (PIN) cash or non-food goods or services (e.g., rent or transportation).  These sales can occur in person or by posting offers on social media  and e-commerce sites.
All of these trafficking activities may result in recipients having to give  their EBT card and PINs to another person who may not return the card.  Recipients can report sold EBT cards as lost or stolen to state agencies  or EBT management contractors and receive new cards which can be  used for future transactions, for example, when the benefits are  replenished the next month.
According to a September 2012 U.S. Department of Agriculture Office of  Inspector General (USDA OIG) report, the magnitude of program abuse  due to recipient fraud is unknown because states do not have uniform  ways of compiling the data that would provide such information.  Therefore, in the report, the USDA OIG recommended that FNS  determine the feasibility of creating a uniform methodology for states to  calculate their recipient fraud rate. As FNS seeks to address this  recommendation, it is legally required to monitor its potential improper  payments of SNAP benefits. The agency estimated an improper payment  or error rate of the program at 3.4 percent, which represented an  estimated $2.6 billion in wrongful payments, in fiscal year 2013. The  percentage represents benefits distributed in error due to administrative  as well as recipient errors, not all of which can be attributed to fraud.  However, due to the large dollar amount involved in improper payments,  the Office of Management and Budget (OMB) has placed SNAP on its list  of high-error programs. Furthermore, after studying the cause of these  errors, USDA officials stated that over 90 percent were due to verification  errors. These types of errors occur when an agency fails to or is unable to  verify recipient information—including earnings, income, assets, or work  status—even though verifying information exists in third-party databases  or other resources. Examples of verification errors include an agency not  confirming a recipient’s reported earnings or work status through existing  databases, or the recipient failing to provide an agency with information  on earnings.
Given FNS’s role of directly overseeing retailer eligibility and  disqualification, federal officials have traditionally focused on retailer  trafficking. In 1996, FNS was given legal authority to disqualify retailers by  using EBT transaction data— which display suspicious patterns of benefit  use—as its sole form of evidence. FNS maintains such transaction data  within its Anti-Fraud Locator Using Electronic Benefits Transfer Retailer  Transactions (ALERT) system. In our October 2006 report on potential  retailer fraud, we found that federal officials had concerns about state  efforts to address recipient trafficking, and recognized that retailer  trafficking can only occur when willing recipients are involved. At the  time of that report, federal officials told us that they were providing state  officials with lists of recipients involved in their retailer trafficking cases,  but many states were not acting on this information at the time because it  was difficult and costly to prove individual trafficking cases. Furthermore,  as we noted in our September 2010 report, the USDA OIG found that  states were not analyzing their EBT data to detect misuse of benefits,  largely because FNS did not require this. FNS has calculated a retailer  trafficking rate, which was estimated to involve 1.3 percent of benefits  issued from fiscal year 2009 to 2011—a total of $858 million.
section_title: State Anti-Fraud Activity Requirements
paragraphs: States must adhere to several requirements for detecting SNAP recipient  fraud, conducting investigations and providing due process prior to  disqualifying program violators. For example, states are required to have  fraud detection units covering areas in which 5,000 or more households  participate in the program; however, those working on fraud investigations  need not be dedicated to this work full-time or exclusively to SNAP cases.  States must also conduct data matches at the time of application and at  other times to determine whether the information provided for a potential  recipient is for someone who is incarcerated, deceased, or disqualified  from the program. State SNAP agencies are responsible for pursuing  judgments against those who intentionally violate SNAP rules. These  judgments can be pursued within the state agency through an  Administrative Disqualification Hearing (ADH) or through the judicial  system in a court determined to have jurisdiction over the case. When a  state decides to administratively pursue disqualification of a recipient for  intentional program violations, the state is responsible for conducting a  series of actions, such as providing timely notification to the recipient that  there will be an ADH, and for states that have waiver procedures, that the  recipients may waive their right to a hearing. If it is determined through  the hearing or criminal prosecution that a person has intentionally violated  program rules or the person has waived the hearing, only the person  involved in the case is disqualified and not the entire household, but the  entire household is responsible for repaying the specific ill-gotten or  misused benefit amount. States are generally allowed to retain 35 percent  of the fraud-related, overpaid benefits they collect, and the rest is  returned to the federal government. In fiscal year 2012, states reported to  FNS that they collected about $74 million in fraud-related claims. eDRS is also a data matching tool to help prevent improper payments and FNS  requires that states check this system prior to providing benefits to an applicant. penalties, which vary based on the number and type of offense.  Furthermore, states are required to report their fraud-related activity to  FNS on their annual Program and Budget Summary Statements. This  report, provided through the form FNS-366B, is to include the number of  investigations and disqualifications, and the dollar amount of their fraud  claims.
section_title: Selected States Employed a Range of Tools to Detect Fraud, but Conducted Investigations with Limited Staff and Pursued Cases with Mixed Success
paragraphs: The 11 states we reviewed employed a range of detection tools, but  experienced mixed success in combating SNAP fraud. Although some  were able to leverage additional resources, officials in most states  reported challenges with potential fraud because their staff remained  limited while recipient numbers grew. Furthermore, pursuing cases  through administrative hearings and the courts generally resulted in  disqualifications but collecting overpayments was a challenge.
subsections: section_title: For Fraud Detection, Selected States Employed Tools Such As Data Matching, Referrals, Analysis of Transaction Data, and Website Monitoring
paragraphs: In the majority of states we reviewed, officials told us they were using  well-known tools for detecting potential recipient eligibility fraud, such as  data matching and referrals obtained through fraud reporting hotlines and  websites. Specifically, all 11 states that we reviewed had fraud hotlines or  websites, and all matched information about SNAP applicants and  recipients against various data sources to detect those potentially  improperly receiving benefits, as FNS recommended or required. (See  table 1.)
Beyond the required and recommended data matches, Florida, Texas,  Michigan, and one county in North Carolina use specialized searches that  check numerous public and private data sources, such as school  enrollment, vehicle registration, vital statistics, and credit reports and  other data on out-of-state program participation and benefit use to detect  potential fraud prior to providing benefits to potential recipients. Florida  officials told us that this focus on preventive efforts was key to helping  them manage recent constraints on their investigative budgets.  Specifically, Florida officials mentioned that when their investigative staff  was reduced because of budget cuts in 2005, they shifted the majority of  their anti-fraud resources from post-eligibility fraud investigations to  preventing ineligible individuals from receiving SNAP benefits. This shift  has allowed the state to more cost-effectively manage its efforts to  combat potential fraud by developing detection tools against eligibility  fraud and improper benefit receipt, such as identification verification  software and profiles that case workers can use to identify error-prone  applications.
To address trafficking, officials in the 11 states reported that they  analyzed patterns of EBT transactions and monitored replacement card  data and online postings, as recommended or required by FNS. (See  table 2.) When reviewing EBT transactions, state officials attempt to  uncover patterns that may indicate trafficking, much in line with what FNS  has been doing for years to uncover retailer fraud. Officials in two states  mentioned that, for some cases, this EBT data analysis is done only after  receiving fraud referrals through the hotline and websites. For example,  while Florida officials reported that they routinely review EBT transaction  data for suspicious patterns, Texas officials reported that they only review  transactions for individuals or households after they have been referred to  them because of potential fraud.
section_title: Most of the Selected States Reported Difficulty Conducting Fraud Investigations Due to Limited Staff and Growing Numbers of Recipients, but Some Leveraged Additional Resources
paragraphs: The size and organization of the investigative units differed among the 11  states we reviewed, with wide variation in the number of staff available to  investigate potential SNAP recipient fraud. For example, in 2013,  Massachusetts and New Jersey had 498,580 and 432,270 recipient  households, respectively, but Massachusetts, where SNAP was  administered at the state level, had just 37 investigators, while county- administered New Jersey had nearly 300. Furthermore, the investigators  in the 11 states we reviewed each had responsibilities unrelated to SNAP.  Although officials in three states—Massachusetts, Tennessee, and  Wyoming—reported that the majority of their investigations involved  potential SNAP fraud, state investigators in all 11 states we reviewed  were also responsible for pursuing fraud in other public assistance  programs, such as Medicaid, Temporary Assistance for Needy Families,  and child care and housing assistance programs. In North Carolina, fraud  investigation was not the primary responsibility of some local officials who  did this work; state officials reported that some counties opted to have  caseworkers or program supervisors conduct fraud investigations. In  general, state officials reported that limits on staffing levels are significant  hindrances to their investigations of eligibility fraud and trafficking, with 8  of the 11 states we reviewed reporting inadequate staffing due to attrition,  turnover, or lack of funding. Of the 10 states that were able to provide the  information, the number of SNAP households per investigator increased  in 8 states between fiscal years 2009 and 2013 by as much as 155  percent. In contrast, Maine and Michigan have increased their  investigative staff, which decreased their household-to-investigator ratios  in fiscal year 2013. (See fig. 1.)
In their effort to combat potential fraud, some states implemented a way  to leverage their available investigative resources. Specifically, four of the  states we reviewed—Florida, Massachusetts, Michigan and Nebraska— had implemented and two states—Maine and North Carolina—were in the  process of implementing state law enforcement bureau (SLEB)  agreements. FNS has been supportive of states’ efforts to establish these  agreements between state SNAP agencies and federal, state, and local  law enforcement agencies which enable state SNAP investigators to  cooperate in various ways with local, state, and federal law enforcement  agents, including those within the USDA OIG. For example, under these  agreements, law enforcement agencies can notify the SNAP fraud unit  when they arrest someone who possesses multiple EBT cards, and  SNAP agencies can provide “dummy” EBT cards for state and local  officers to use in undercover trafficking investigations. According to  officials in one Florida county, this type of cooperation allowed local police  officers to make 100 arrests in its first undercover operation of recipients  who were allegedly trafficking SNAP benefits. Furthermore, some state  and local officials in Michigan, Maine, and Florida told us that increasing  awareness of SNAP trafficking among local law enforcement officials  helps in resolving these matters when potential trafficking is uncovered in  other police investigations. For example, while investigating drug-related  crimes, officials in those states told us they have uncovered multiple EBT  cards in the possession of one person.
In light of their increased SNAP caseload, some officials suggested  changing the incentive structure to help states address the costs of  investigating potential SNAP fraud. According to GAO’s Fraud Prevention  Framework, investigations, although costly and resource-intensive, can  help deter future fraud and ultimately save money. Officials in one state  told us that it would help if FNS would provide additional financial  incentives for states to prevent potential fraud at the time of application  beyond what is currently provided for recovered funds. When fraud by a  recipient is discovered, the state may generally retain 35 percent of the  recovered overpayment, but when a state detects potential fraud by an  applicant and denies the application, there are no payments to recover.  Officials in four of the states we reviewed said that their anti-fraud efforts  could be enhanced if the percentage of recovered overpayments that  states may retain was increased, and officials in three states said that  FNS should direct that states apply the retention money to anti-fraud  efforts. Overall, state anti-fraud incentives have the potential to produce  federal cost savings by encouraging state officials to prevent the benefits  from being issued to ineligible people as well as deter fraud by more  actively investigating and recovering funds.
section_title: While Selected States Pursue Fraud through Administrative Hearings and the Courts, They Reported Difficulties with Prosecutions and Overpayment Recovery
paragraphs: Officials in most of the 11 states we reviewed said that they have mainly  pursued cases of eligibility fraud, such as the misrepresentation of  household income or composition. In addition to testimony from  witnesses, state investigators are able to build cases based on public  records and employment statements to prove the misrepresentation.  However, state officials reported that trafficking is more difficult to prove.  Officials in North Carolina and a prosecutor in Michigan noted that  trafficking cases involve two individuals breaking the law, and it can be  difficult to get one to testify against the other. For example, the Michigan  prosecutor told us about a case in which a landlord for a subsidized  housing complex was receiving SNAP benefits in exchange for rent, and  the tenants would not testify against this person because they thought  she was doing them a favor by accepting the SNAP benefits as payment.
State officials we interviewed also reported that the willingness of local  prosecutors to pursue charges in court for SNAP fraud has varied across  jurisdictions. Officials in eight states reported that a minimum dollar  threshold of fraudulently-obtained benefits was required for prosecuting  cases in court, ranging from $100 (in Tennessee) to $5,000 (in Texas).  Prosecutors in some local jurisdictions were not willing to accept SNAP  fraud cases at all. For example, prosecutors in one county in North  Carolina told SNAP officials that they would not prosecute SNAP fraud  cases because they need their resources for more serious criminal cases.  Texas officials said that some local prosecutors in their state have also  refused to prosecute SNAP cases due to workload concerns. Other  prosecutors we interviewed said that to make efficient use of their limited  resources, they have often sought plea deals that require the individual to  repay the government rather than going to trial. Such plea deals may call  for the individual to be arrested if the SNAP benefits are not repaid, and  may also require that a person have a criminal record as a result of the  plea. Furthermore, plea deals mitigate some of the unpredictability of  trying a case before a jury. Prosecutors in Tennessee and Florida said  that juries may be unwilling to convict individuals of SNAP fraud because  they may be sympathetic to recipient claims that they do not understand  government regulations or are compelled to commit fraud to support their  families. SNAP officials in North Carolina said they were concerned about  losing the deterrent effect of prosecutions due to the unwillingness of the  judicial system to undertake SNAP recipient fraud cases.
Recovering overpayments from individuals found to have committed fraud  in either an administrative or a court proceeding has been a challenge,  according to officials we interviewed in Florida and Michigan. Specifically,  those officials reported that an individual who is disqualified may be  required to repay an overpayment, but may not have enough income to  do so. Furthermore, if the individual becomes eligible for SNAP benefits  again after the period of disqualification is over, the state may garnish the  future SNAP benefits to repay the recipient’s prior debt. However, when  an individual is permanently disqualified from the program, garnishment is  not possible. To encourage people to repay the benefits, one local  Michigan prosecutor has established a program that offers to erase the  individual’s criminal record if the individual makes full restitution through a  repayment plan. The program helps collect restitution of fraud payments  in all the county’s welfare programs and has had an 80 percent success  rate in collecting repayments, according to the local prosecutor. States’  difficulty collecting overpayments compounds their concerns about having  adequate resources for investigations because some states use  recovered overpayments for this purpose.
section_title: FNS’s Guidance and Tools Can Be Used to Detect Potential SNAP Trafficking but Effectiveness is Limited
paragraphs: Selected states reported difficulties using FNS recommended  replacement card data as a fraud detection tool, and our data analysis  found that a more targeted approach may better identify potential fraud.  Our testing found the recommended e-commerce monitoring tool less  effective than manual searches in detecting postings indicative of  potential trafficking, and we found the tool for monitoring social media to  be impractical for states due to the volume of irrelevant data.
subsections: section_title: Selected States Report Limited Success Using Replacement Card Data as a Detection Tool
paragraphs: Although FNS requires that states look at replacement card data as a  potential indicator of trafficking, states reported difficulties using the data  as a fraud detection tool. In 2012, FNS issued guidance to states based  on a best practice used in North Carolina, encouraging states to review  recipients who have requested four or more replacement EBT cards  within 12 months because such behavior may indicate trafficking. In 2014,  FNS finalized a rule that requires states to monitor replacement card data  and send notices to those SNAP households requesting excessive  replacement cards, defined as at least four cards in a 12-month period.  All 11 states we reviewed reported tracking recipients who make  excessive requests for replacement EBT cards and sending them warning  letters, as required by FNS, but they have not had much success in  detecting fraud through that method. At the time of our review, four states  reported that they had not initiated any trafficking investigations as a  result of this monitoring, and five states reported a low success rate for  such investigations. One state had just started monitoring replacement  card data. Only one of our selected states reported some success using  the replacement card data to identify and pursue trafficking. Furthermore,  although state officials recognized that some replacement card requests  may be related to potential fraud, officials from 7 of the 11 states reported  that the current detection approach specified by FNS often leads them to  people who make legitimate requests for replacement cards for reasons  such as unstable living situations or a misunderstanding of how to use the  SNAP EBT card. North Carolina officials also mentioned that when they  originally developed this approach currently required by FNS, it was not  intended to detect trafficking. Rather, it was to help them manage the  number of replacement card requests they received.
FNS is aware of states’ concerns about the effectiveness of this effort, but  it continues to stress that monitoring these data is worthwhile. For  example, FNS officials reported that they are also aware that many  replacement card requests are legitimate but they feel that the monitoring  of replacement card data has an important educational component, as it  allows states to identify situations where a recipient requires education on  how to use their SNAP EBT card. FNS officials also reported that states  have seen a reduction in households continuing to request replacement  cards related to these efforts. However, FNS’s Western Regional officials  reported that, given states’ experiences with the current process, it may  be better for states to be more selective in sending notices.
section_title: Targeted Analysis of Excessive Replacement Cards Found Potential Recipient Trafficking
paragraphs: Our analysis found indicators of potential SNAP trafficking in households  with excessive replacement cards, suggesting that states may be able to  use replacement card data to help identify trafficking by taking a targeted  approach to analyzing the data in conjunction with related transaction  data. We identified 7,537 SNAP recipient households in three selected  states—Michigan, Massachusetts and Nebraska—that both received  replacement cards in four or more monthly benefit periods in fiscal year  2012 and made transactions considered to be potential signs of  trafficking. Furthermore, as discussed below, we developed an approach  for analyzing replacement card data that may provide states with a more  targeted way to identify potential trafficking activity and reduce the  number of households for further review by up to 40 percent. Given that  states reported having limited resources for conducting investigations, a  more targeted approach may enhance their ability to pursue SNAP  households at higher risk of trafficking.
Overall, our approach to analyzing replacement card data reduced the  number of households for further review by 33 percent compared to the  current FNS regulation. For the purposes of our analysis, we defined  excessive replacement card households as those receiving replacement  cards in four or more unique benefit periods in a year. Our approach took  into account FNS’s rule that defines excessive replacement cards as at  least four requested in a year. However, we further refined our analysis to  consider the monthly benefit period of replacement card requests. SNAP  benefits are allotted on a monthly basis, and a recipient who is selling the  benefits on their EBT card and then requesting a replacement card would  generally have only one opportunity per month to do so. If a SNAP  recipient is requesting a replacement card because they have just sold  their EBT card and its associated SNAP benefits, it is unlikely that there  would be more benefits to sell until the next benefit period. As a result,  additional replacement card requests in the same benefit period may not  indicate increased risk of trafficking. The current FNS regulation would  include households for review that received at least four replacement  cards at any time in the previous year, including households receiving  four cards in the same monthly benefit period. Alternatively, the number  of benefit periods with replacement cards may be a better indicator of  trafficking risk than simply the number of requested replacement cards.
By taking into account the benefit period of replacement card requests,  we significantly decreased the number of households in the three  selected states that may warrant further review of potential trafficking  compared to all households requesting four or more replacement cards at  any time during fiscal year 2012. For example, as shown in table 3, while  there were 8,190 recipient households in Michigan that received four or  more replacement cards in fiscal year 2012, our approach identified 4,935  households that received replacement cards in four or more benefit  periods.
For the 10,266 high replacement card households we reviewed, we found  that 73 percent were conducting other suspicious activities based on  criteria used by FNS and state SNAP officials.  We reviewed fiscal year  2012 transaction data, analyzing transactions from the same benefit  period when the household received a replacement card for indications of  trafficking. Specifically, we analyzed the data for trafficking indicators  based on suspicious transaction types already used by FNS and state  SNAP officials, such as unusually large-dollar transactions or even-dollar  transactions. We tested the transaction data for six different suspicious  transaction types, resulting in 22,866 transactions flagged as potential  trafficking indicators.  As shown in table 4, we identified 7,537  households out of those we reviewed that made at least one suspicious  transaction in the same benefit period that the household received a  replacement card in fiscal year 2012. These 7,537 households made over  $26 million in purchases with SNAP benefits during fiscal year 2012.
Overall, 84 percent of high replacement card households in  Massachusetts, 65 percent in Michigan, and 63 percent in Nebraska  made at least one suspicious transaction indicating potential trafficking.  For more detailed information on the number of flagged transactions  made by selected households in each of the three states, see appendix II.
Furthermore, we found that the likelihood of suspicious transactions  generally increased with the number of benefit periods in which  replacement cards were requested. For example, while 60 percent of  Michigan households with replacement cards in four benefit periods made  at least one suspicious transaction, 86 percent of households with  replacement cards in seven benefit periods had made suspicious  transactions, and 100 percent of households with replacement cards in 10  or 11 benefit periods had. In Nebraska, 100 percent of households with  replacement cards in eight or more benefit periods also made suspicious  transactions, indicating potential trafficking.
While 84 percent of households had five or fewer trafficking flags, there  were 262 households, or 3 percent, with 10 or more trafficking flags. The  highest number of flags for a single household was 41. This household’s  flagged transactions showed suspicious large, even-dollar transactions,  often at the same small grocery store. Table 5 provides examples of  suspicious transactions made by this household in one benefit period.
By comparing the number of benefit periods with replacement cards and  the total number of transaction trafficking flags, we were able to better  identify those households that may be at higher risk of trafficking. For  example, as shown in figure 2, while there were 4,935 SNAP households  in Michigan that received excessive replacement cards, we identified just  39 households that received excessive replacement cards and made  transactions resulting in 10 or more trafficking flags. While state SNAP  officials may not want to limit their investigations to such a small number  of households, this type of analysis may help provide a starting point for  identifying higher priority households for further review.
Recognizing the challenges with the current approach, FNS officials  stated that they are working on how to better link excessive replacement  card requests to potential trafficking. To inform these efforts, FNS has  also commissioned a study focused on detecting indications of potential  trafficking by those requesting excessive replacement cards. FNS officials  feel it is too early provide additional guidance or draw conclusions about  the effectiveness of current efforts, but officials intend to provide  additional guidance to states once they have sufficient data to inform a  trafficking detection methodology that can be used nationwide.
section_title: Officials from Selected States Reported Difficulties Using Social Media and E-commerce Website Monitoring Tools
paragraphs: FNS provided states with guidance on installing free web-based software  tools for monitoring certain e-commerce and social media websites for  online sales of SNAP benefits, but some state officials from selected  states reported problems with these detection tools. The tools employ  Really Simple Syndication (RSS) technology, which is designed to keep  track of frequently-updated content from multiple websites and  automatically notify users of postings that contain key words. FNS stated  that these tools could automate the searches that states would normally  have to perform manually on these websites, but acknowledged that the  tool for social media websites may not work well, given that these  websites do not organize their posts geographically. Of the 11 states we  reviewed, officials from only one selected state (Tennessee) reported that  the tool worked well for identifying SNAP recipients attempting to sell their  SNAP benefits online. Officials in three states—Michigan, Utah, and  Florida—reported that they monitored social media websites manually  because of the technical challenges they experienced with using the  tools, including installation and operation. Additionally, officials in one  state noted that the automated tools have placed an excessive demand  on staff because they had to sift through the many false-positive leads  that were generated. Officials from three of the states we reviewed  reported that although they do not routinely monitor websites to detect  fraud, they have found these websites to be useful sources of information  about recipients they are already investigating.
FNS officials acknowledge that there are limitations to the current  monitoring tools, and stated that they provided these tools at the request  of states to help with monitoring efforts as states had reported that  manual monitoring was cumbersome and difficult given limited resources.  FNS officials report that they are currently conducting a study of the  effectiveness of the guidance to states and intend to make  recommendations for improvements based on the results of the study. In  addition to the guidance provided to states, FNS officials reported that  they have contacted popular e-commerce and social media websites in  the past regarding potential SNAP trafficking online, and continue to work  with the websites on detecting and removing postings advertising the sale  of SNAP benefits online.
section_title: Effectiveness of Current Automated Monitoring Tools for Recipient Fraud Detection by States is Limited
paragraphs: We tested the automated detection tools recommended by FNS on  selected geographical locations covering our selected states and found  them to be of limited effectiveness for states’ fraud detection efforts. A  crucial element to an effective fraud prevention framework requires  resources and tools to continually monitor and detect potential fraud.   Our testing of the recommended automated tool for monitoring e- commerce websites found it did not detect most of the postings found  through manual website searches. Furthermore, we found the automated  tool for monitoring social media websites to be impractical for states’  fraud detection efforts.
subsections: section_title: E-commerce Monitoring
paragraphs: Although the recommended automated tool for monitoring e-commerce  websites was intended to potentially replace the need for states to  perform manual searches on these websites, our testing found that  manual searches returned more postings indicative of potential SNAP  trafficking than the automated tool, and that most of the postings detected  through manual searches were not detected by the automated tool. We  tested the recommended tool on one popular e-commerce website over  30 days, and monitored 19 geographical locations covering the 11  selected states. (10 hours total) monitoring for postings indicative of potential SNAP  trafficking. Through our manual and automated searches, we detected a  total of 1,185 postings containing one of our two key words of “EBT” or  “food stamps.” Out of these 1,185 postings, we detected 28 postings  indicative of potential SNAP trafficking. They advertised the potential sale  of food stamp benefits in exchange for cash, services, or goods (see fig.
We limited our searches to two key terms (i.e. “EBT” and “food stamps”). The use of  other terms could have yielded additional or fewer posting results through our automated  and manual searches.
4). postings that did not indicate trafficking as false positives. (See fig. 3.)
section_title: GAO Monitoring Results
paragraphs: Jacksonville and Southern Florida (FL)
Boston and Worcester (MA)
Maine (ME)
Detroit metro and Grand Rapids (MI)
Charlotte and Raleigh (NC)
Lincoln and Omaha (NE)
Northern New Jersey (NJ)
Memphis and Nashville (TN)
Houston and San Antonio (TX)
Salt Lake City and Provo (UT)
Wyoming (WY)
North Carolina's SNAP program is county-administered.
subsections: section_title: FNS Increased Its Oversight of State Anti-Fraud Activities but Lacks Reliable Data on These Efforts
paragraphs: FNS has recently issued regulations and guidance and conducted a  national review of state anti-fraud activities as part of its increased  oversight. Despite these efforts, FNS does not have consistent and  reliable data on state anti-fraud activities, primarily because its guidance  to the states on what data to report is unclear.
subsections: section_title: FNS Issued Regulations and Guidance and Conducted a Nationwide Review as a Part of Its Increased Oversight
paragraphs: Since 2011, FNS increased its anti-fraud oversight activities, which  included new regulations and guidance and a nationwide review of state  agencies. Partially in response to public concerns, the Secretary for Food,  Nutrition, and Consumer Services asked states to renew their efforts to  combat SNAP recipient fraud, and since then FNS promulgated new  regulations and provided additional guidance to direct states in these  efforts. (See table 6 for details on key regulations, guidance and policy  developments since 2011.)
In fiscal year 2013, for the first time, FNS examined states’ compliance  with federal requirements governing SNAP anti-fraud activities through  Recipient Integrity Reviews. (See fig. 5 for an overview of the review  components.) These assessments were conducted by FNS regional office  staff and included interviews with state officials, observations of state  hearing proceedings, and case file reviews in all 50 states and the District  of Columbia. As part of these reviews, federal officials also analyzed  information from program reports, including those from eDRS, which are  used to track disqualified SNAP recipients, and the Program and Budget  Summary (Form FNS-366B), which are used to report anti-fraud activities  for all the states. Following these reviews, FNS regional officials issued  state reports that included findings and, where appropriate, required  corrective actions. FNS officials told us that timeframes for taking  corrective actions varied by the problem, but they generally allow states a  year to address them. FNS regional officials also acknowledged states’  noteworthy initiatives or best practices in the state reports – such as  Michigan’s case management system which will improve the state’s ability  to track the status and outcomes of investigations, Washington’s  standardized training for investigators, and Indiana’s out-of-state usage  report aimed at identifying potential trafficking by listing households that  made 100 percent of their EBT transactions in another state for three  months. FNS officials also reported that they provide their regional staff  the opportunity to discuss such best practices during monthly  teleconferences. Additionally, FNS officials present information on best  practices to states during national conferences. FNS began conducting  fiscal year 2014 Recipient Integrity Reviews in November 2013 and  intends to complete them in September 2014.
In addition to its oversight efforts, FNS has 10 studies under way that are  aimed at improving federal and state efforts to address potential recipient  fraud. These studies represent a significant increase in its investment to  learn more about recipient fraud; specifically, FNS designated about $3  millionprior years. Among other topics, these studies are to explore strategies  for improving fraud detection. For example, the study titled Social Media  Fraud Discovery is intended to assess the effectiveness of FNS’s current  fraud detection approach and make recommendations for improvements.  There is also a series of work, known as the SNAP Recipient & Retailer  Fraud Data Mining Studies, aimed at improving FNS and the states’   for this work in fiscal years 2013 and 2014, compared to none in  ability to more effectively anticipate, discover and address fraudulent  activity using predictive modeling. FNS expects to receive the results of  these studies by September 2014. (Additional information on the 10  studies is provided in App. V.)
section_title: FNS Lacks Reliable Data on State Anti-Fraud Activities
paragraphs: Although states are required to regularly submit information on their anti- fraud activities to FNS, we found that these data are not reliable for  ensuring program integrity and assessing states’ performance.  Specifically, our review found that over half of the 2013 Recipient Integrity  Review reports mentioned problems with the data states entered into  eDRS, thereby affecting the information state officials used to ensure  program integrity. Federal officials found that 30 states did not enter data  within the federally-required timeframes, a problem that cut across each  of the oversight regions. Federal officials also found that 15 states did  not enter disqualification information for some cases at all. For 2 of these  states, federal officials found that over 30 percent of the disqualifications  mentioned in other federal reports were missing from their eDRS data.  Furthermore, federal officials found that 10 states had entered data into  the system inaccurately. Given the concerns with data quality, even  though state officials are required to check eDRS to gather information on  whether a program applicant has been disqualified in another state before  issuing benefits, they are not allowed to deny an application based solely  on the system’s data. Federal regulations require that states gather  additional verifying information about a disqualification before denying a  claim based solely on information from eDRS.
FNS regional officials told us that state’s eDRS data problems stemmed  from a variety of factors, including challenges with receiving timely  information about administrative hearing and court decisions and  transferring data to the system. To help address concerns with eDRS  data quality, FNS officials are currently offering tools, guidance, and  training to state and regional officials. Furthermore, states with related  findings from the Recipient Integrity Reviews are expected to take  corrective action, including improving communications with ADH and  court officials to receive more timely information and enhance their  procedures for validating data entered into the system.
Through our review of the 2013 Recipient Integrity Review reports, we  also found that FNS has a nationwide problem with receiving inaccurate  data on state anti-fraud activities through the Program and Budget  Summary Statement (Form FNS-366B), thereby potentially limiting its  ability to provide oversight. We found that FNS regional officials could not  reconcile the FNS-366B data reported with supporting documentation for  24 states, primarily due to data entry errors. Furthermore, some federal  and state officials we interviewed recognized that there is not a consistent  understanding of what should be reported on FNS-366B because the  guidance from FNS is unclear. For example, on the form, FNS instructs  states to report investigations for any case in which there is suspicion of  an intentional program violation before and after eligibility determination.  According to state and federal officials we interviewed, this information  does not clearly establish a definition for what action constitutes an  investigation and should then be reported on this form. Also, officials in  three of the seven regional offices were not aware of FNS-sponsored  training on what should be reported on this form. However, officials from  the remaining four offices mentioned that FNS provided them training  such as webinars and teleconferences on this form. As a result, various  types of state efforts can be counted in the total number of investigations.
After reviewing states’ reports, we found examples of inconsistencies in  what states reported as investigations on the FNS-366B. Specifically, in  fiscal year 2009, one state had about 40,000 recipient households, but  reported about 50,000 investigations. During the same year, another state  that provided benefits to a significantly larger population (about 1 million  recipient households) reported about 43,000 investigations. Officials from  the state that serves a smaller population explained that they included  activities such as manually reviewing paper files provided by the state’s  Department of Labor for each SNAP recipient with reported wages in the  state; therefore, even if fraud was not suspected, this review was counted  as an investigation. Officials from the state that serves a larger population  said that they counted the number of times a potential fraud case was  actively reviewed by investigators, including interviews with witnesses  and researching of related client information. Given these differences,  state officials said that FNS and states are not able to compare program  integrity performance, because each state is not counting the same  activities. In addition, by fiscal year 2012, the new head official in the  state that serves a smaller population decided to use an automated  system to review the wage data. Therefore, the query results identified  cases indicative of a benefit overpayment, either from potential fraud or  unintentional errors, were counted among the cases that needed to be  investigated. As a result, for fiscal 2012, the state that serves a smaller  population only reported conducting about 8,000 investigations, making  this count of investigations not comparable to others for that state over  time. Furthermore, these data inconsistencies could limit in FNS’s ability  to identify more effective and efficient practices for state anti-fraud efforts.  For example, the lack of consistent data on investigations does not allow  for studying the matters, such as the cost-benefit of investigations versus  fraud claims established and/or collected across states, which could be of  interest to FNS and states given states’ concerns with managing  investigative resources.
section_title: Conclusions
paragraphs: Given the ongoing fiscal pressures that face our nation, the  unprecedented increase in SNAP participation and spending in recent  years has focused attention on the  importance of ensuring that these  publicly-funded benefits are used appropriately, and that both the federal  government and state agencies have strong controls for detecting and  addressing fraud.  Although investigations can ultimately deter fraud and  save agency resources, states we reviewed have faced the challenge of  limited staff to manage a growing program and raised questions about  whether federal incentive structures could be designed to better support  their work. For example, even though GAO has found preventative efforts  to be the most efficient and effective means to address fraud and may  stop ineligible people from receiving benefits that may not be fully  recovered, state officials said the current fraud-related incentive is  focused on collecting overpayments. While federal officials would need to  be mindful of the costs and benefits that any changes to the incentive  structure would have for the overall program, absent additional incentives,  states may not be taking advantage of opportunities to aggressively  pursue recipient fraud.
These investigative challenges have made efficient anti-fraud activities all  the more critical. Although some states have questioned the efficacy of  tools FNS requires or recommends for detecting SNAP benefit trafficking,  some additions and refinements to the guidance for these tools could  make them more effective. For example, a more targeted approach to  reviewing requests for replacement benefit cards could substantially  reduce the administrative burden by identifying recipients who are more  likely to be misusing their benefits throughout the year. Furthermore,  although FNS has tried to improve efficiency with monitoring online  postings, the lack of relevant leads using the recommended tools cause  others to question whether this monitoring could be done in a better way.
Meanwhile, FNS is working to learn more about states’ activities and  better support anti-fraud work. For example, FNS has commissioned 10  studies intended to help the agency gain knowledge on how states can  better detect potential recipient fraud. However, absent additional actions  from FNS, such as guidance and training to the states on how and what  data to report on their fraud-related activities, these data are not likely to  be as useful as they should. Specifically, without performance data that  are consistent across states, FNS will not be able to determine whether  certain state anti-fraud efforts may be more efficient and effective than  others. FNS will need accurate and comprehensive information at the  state level if it is to move forward in building a stronger national  infrastructure for program integrity.
section_title: Recommendations for Executive Action
paragraphs: The Secretary of Agriculture should direct the Administrator of FNS to  take the following four actions:
Explore ways that federal financial incentives can better support cost- effective state anti-fraud activities;
Establish additional guidance to help states analyze SNAP transaction  data to better identify SNAP recipient households receiving  replacement cards that are potentially engaging in trafficking, and  assess whether the use of replacement card benefit periods may  better focus this analysis on high-risk households potentially engaged  in trafficking;
Reassess the effectiveness of the current guidance and tools  recommended to states for monitoring e-commerce and social media  websites, and use this information to enhance the effectiveness of the  current guidance and tools; and
Take steps, such as guidance and training, to enhance the  consistency of what states report on their anti-fraud activities.
section_title: Agency Comments and Our Evaluation
paragraphs: We requested comments on a draft of this product from USDA. On July  28, 2014, the Director of the SNAP Program Accountability and  Administration Division provided us with the following oral comments.  FNS agreed with our recommendations and reported that efforts were  underway to address each of them. Specifically, FNS reported that,  although the agency cannot change the state retention rate for  overpayments without a change to federal laws, it plans to issue grants in  this fiscal year to support state process improvements for detecting,  investigating and prosecuting recipients engaged in trafficking.  Furthermore, in the next fiscal year, FNS reported that it will issue grants  to support states in building information technology to strengthen recipient  integrity efforts, as authorized by the Agricultural Act of 2014. FNS also  reported that its commissioned studies will help inform its efforts to assist  states in developing better recipient fraud detection tools, including  potentially issuing new related guidance. As of May 2014, the agency had  already begun to receive study results. Lastly, in May 2014, FNS also  formed a working group, consisting of program integrity staff from each of  the regional offices, to revamp the Form FNS-366B. Among other things,  FNS reported that this group is tasked with exploring ways to clearly  define the data elements on this form and adding elements that will help  FNS glean better information on recipient trafficking as well as the value  and impact of state anti-fraud efforts. FNS also provided technical  comments, which were incorporated into the report as appropriate.
We are sending copies of this report to relevant congressional  committees, the Secretary of Agriculture, the FNS Administrator and other  relevant parties. This report will also be available at no charge on the  GAO website at http://www.gao.gov .
If you or your staff have any questions about this report, please contact  us at (202) 512-7215 or brownke@gao.gov, or (202) 512-6722 or  bagdoyans@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  VI.
section_title: Appendix I: Objectives, Scope and Methodology
paragraphs: The objectives of this report were to review the following: (1) how  selected state agencies combat SNAP recipient fraud; (2) the  effectiveness of certain fraud detection tools recommended to states,  including benefit card replacement data and e-commerce and social  media website monitoring; and (3) FNS’s oversight of state anti-fraud  efforts. To address these objectives, we focused on federal and state  SNAP recipient anti-fraud work for fiscal years 2009 to 2014, a period  after the program received additional funding through the American  Recovery and Reinvestment Act of 2009 (Recovery Act). We reviewed  relevant federal laws, regulations, program guidance, and reports, and we  interviewed FNS officials in headquarters and all seven regional offices to  address all three objectives. Specifically, to determine how selected state  agencies are pursuing SNAP recipient fraud, we reviewed 11 states,  where we interviewed knowledgeable state and local officials about their  recipient anti-fraud work and obtained related documentation. (See below  for more information on the criteria we used to select states.) We also  analyzed fiscal year 2012 replacement card and transaction data for  households in three of the selected states to assess the extent to which  certain analyses of replacement cards could better uncover patterns of  potential fraud. (See below for more information about these tests and  analyses.) Further, we tested automated tools and guidance that FNS  recommended to states for monitoring popular e-commerce and social  media websites for postings indicative of SNAP trafficking. Our test  involved determining the extent to which our 11 selected states can use  these tools for their fraud detection efforts. Lastly, to determine FNS’s  oversight of state anti-fraud efforts, we analyzed documents and reports  relevant to FNS’s program oversight, including their fiscal year 2013  assessments of state anti-fraud work—known as Recipient Integrity  Review reports—for all 50 states and the District of Columbia. All the data  included in this report were assessed and determined to be sufficiently  reliable for our purposes.
We conducted this performance audit from April 2013 through September  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 we obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives.
subsections: section_title: State Selection Criteria
paragraphs: To determine how selected state agencies are pursuing SNAP recipient  fraud, we selected 11 states for our review—Florida, Maine,  Massachusetts, Michigan, Nebraska, New Jersey, North Carolina, Utah,  Tennessee, Texas, and Wyoming—based on geographic dispersion,  SNAP payment error rates, percent of the total number of SNAP  households nationwide, and the percent of recipients they reported as  disqualified from the program due to non-compliance. For three of these  criteria—the percent of the total number of households, the percent of the  total number of disqualifications, and the payment error rates- we  assigned the states to high, medium, and low categories under each set  of data based on natural breaks in the data when the states were ranked  from the lowest to the highest percent. As a result, states were  designated based on data ranges shown in table 7.
We selected the states to review for variety within our criteria. Table 8  provides information on how the selected states align with our criteria.
We interviewed officials who oversee state activities in state fraud units in  each of the 11 states. In some states, we also interviewed auditors and  prosecutors who had knowledge of state activities. During each interview,  we collected information on state policies and procedures for responding  to and investigating fraud claims. We also gathered and reviewed  information on how state authorities manage their investigations. We also  discussed state anti-fraud efforts and common recipient fraud schemes  that have been occurring in recent years. We conducted site visits in  Michigan, North Carolina, and Florida and interviewed officials in the  remaning eight states by telephone.
The information we gathered for our report represents the conditions  present at the time of the review. We cannot comment on any changes  that may have occurred after our fieldwork was completed. Although the  11 states we reviewed administered SNAP for about one-third of the  program’s recipient households, the information we report from these  states is not generalizable.
section_title: Targeted Analysis of Excessive Replacement Card Data
paragraphs: To assess the effectiveness of replacement card data as a state fraud  detection tool, we analyzed replacement card data for SNAP households  in 3 of the 11 selected states—Michigan, Massachusetts, and Nebraska.  We selected these states to include high, medium, and low percentage of  the total number of SNAP households nationwide. We obtained  replacement card data from the appropriate state agency overseeing  SNAP in the three selected states, and analyzed fiscal year 2012 data to  determine the number of households receiving four or more replacement  cards in that year. We also analyzed the data to identify households  receiving replacement cards in four or more monthly benefit periods, the  approach we took to identifying households with excessive replacement  cards. We then obtained fiscal year 2012 transaction data from FNS for  those households that received excessive replacement cards. We  analyzed the transaction data for suspicious transactions indicating  potential trafficking that occurred during the same benefit period when a  household received a replacement card. We tested the transaction data  for six different suspicious transaction types that were reported to us as  commonly used by FNS and state SNAP officials to identify potential  trafficking. At the request of SNAP officials to maintain confidentiality over  their fraud detection methods, we did not include descriptions of all six  transaction tests in the report. We assessed the reliability of replacement  card and transaction data used in analyses through review of related  literature, interviews with knowledgeable officials, and electronic testing of  the data, and found them to be sufficiently reliable for our purposes.
section_title: Assessment of Tools Recommended by FNS for Monitoring Online SNAP Trafficking
paragraphs: We installed and used the automated tools recommended by FNS  pursuant to the guidance FNS released to the states for monitoring  popular e-commerce and social media websites for postings indicative of  SNAP trafficking. We tested the automated tools and guidance to  determine the extent to which our 11 selected states can use these tools  for their fraud detection efforts. We also used GAO’s Fraud Prevention  Framework to assess the automated tools and guidance.
Specifically, from November 22, 2013 to December 23, 2013, we spent  30 days testing the automated tool for monitoring e-commerce websites  on one popular e-commerce website, comparing our automated search  results against our manual search results from the same e-commerce  website. Our automated and manual search queries were set to detect  postings containing one of the key words “EBT” or “food stamps.” Using  both search approaches simultaneously, we monitored 19 selected  geographic locations covering 11 selected states, and spent an average  time of about 30 minutes a day monitoring for e-commerce postings  indicative of potential SNAP trafficking. Then we compared our  automated results with our manual results to determine the extent to  which they were the same. We selected the 19 geographic locations to  monitor (see table 9, below) to include the two highest population cities in  each of the 11 states. For two states—Maine and Wyoming—the e- commerce website only allowed us to monitor postings statewide.
Additionally, from January 7, 2014 to January 13, 2014, we spent 5 days  testing the automated tool and guidance that FNS recommended to  states for monitoring social media websites on a popular social media  using the same key words (“food stamps” and “EBT”). We spent an  average time of about 17 minutes a day monitoring for social media  postings indicative of potential SNAP trafficking. We were unable to  compare the automated tool for social media websites to corresponding  manual searches because, at the time of our testing, the popular social  media website did not offer a capability to perform manual searches  based key words, such as “EBT” and “food stamps.”
section_title: Appendix II: Trafficking Flags in SNAP Households Receiving Excessive Replacement Cards
paragraphs: As discussed above, we analyzed transaction data for households  enrolled in the Supplemental Nutrition Assistance Program (SNAP) who  received excessive replacement cards in three selected states— Michigan, Massachusetts and Nebraska—in fiscal year 2012. We tested  the transaction data for six different suspicious transaction types,  potentially indicative of trafficking. Tables 10 through 13, below, provide  detailed information on the findings of these tests.
section_title: Appendix III: Total E-commerce and Social Media Postings Detected During Testing Periods
paragraphs: As discussed above, during our 30-day testing period of the automated  tool for e-commerce websites, we detected a total of 28 postings from  one popular e-commerce website that advertised the potential sale of  food stamp benefits in exchange for cash, services, and goods. During  our 5 days of testing the automated tool for social media websites, we  detected a total of 4 postings potentially soliciting food stamp benefits.  The tables below summarize all the e-commerce and social media  postings that we detected through the automated tools and manual  searches.
section_title: Appendix IV: Selected States’ Experiences Using FNS’s Recommended Automated Online Monitoring Tool and GAO Test Results
subsections: section_title: Posts returned indicative of trafficking that
paragraphs: State experiences with  using automated and  manual tools   Automated tools difficult to  use, provides unreliable  data  As a result, monitoring  websites only  Automated tools difficult to  use, provides unreliable  data, not using for social  media websites.  Automated tools not  compatible with state’s  operating system  Using automated tools for  ecommerce websites, but  looking for other tools to  use for monitoring.
section_title: Posts returned indicative of trafficking that
paragraphs: Geographic  locations  GAO  monitored  Memphis  and  Nashville  (TN)
section_title: Total
section_title: Appendix V: List of Food and Nutrition Service-Commissioned Studies
paragraphs: 1.  Indirect Trafficking Fraud Discovery: A study to identify a process  to effectively detect indirect trafficking schemes. An example of an  indirect trafficking scheme occurs when a SNAP recipient sells his or  her EBT card to a third party, at a discount for cash, and the third  party uses the EBT card to purchase eligible food.  2.  Social Media Fraud Discovery: An evaluation on FNS’s current  fraud detection approach using social media in order to identify a  more effective process.  3.  Recipient Integrity Outcomes Metrics: An analysis to identify  metrics that FNS can use to better monitor State performance and  outcomes.  4.  Multiple EBT Card Replacement: A study aimed at improving FNS’s  approach to using card replacement data to identify fraud.  5.  Household Link Analysis: An analysis to further assess the  relationship between client and retailers regarding trafficking  schemes.  6.  Household Demographic Fraud Discovery: An assessment of  recipient benefit data to further refine models used to detect fraud.  7.  Household Time and Distance (Geospatial Analysis): An analysis  of recipient benefit data that focuses on geographical information; for  example, recipients using their cards in Virginia and South Carolina  within an hour.  8.  Identify Clients Shopping in Geographic Areas Outside of their  Normal Patterns (Geospatial Analysis): An analysis to identify an  automated process to assess retailer and recipient EBT data.  9.  Strengthen FNS Recipient Referrals from Disqualified Stores: A  review of the existing recipient referral process and fraud detection  models to develop a model for FNS to deploy that more effectively  identifies suspicious recipients to states for investigation.  10. SNAP Recipient & Retailer Fraud Data Mining Studies: A series of  recipient and retailer based analyses using predictive activity such as  fraud discovery to increase FNS and states ability to detect fraudulent  activity.
section_title: Appendix VI: GAO Contacts and Staff Acknowledgment
subsections: section_title: GAO Contacts
paragraphs: Kay E. Brown, 202-512-7215, brownke@gao.gov.
Seto J. Bagdoyan, 202-512-6722, bagdoyans@gao.gov.
section_title: Key Contributors
paragraphs: In addition to those mentioned above, the following staff members may  significant contributions to this report: Kathryn Larin and Philip Reiff,  Assistant Directors; Celina Davidson and Danielle Giese, Analysts-in- Charge; LaToya King, Flavio Martinez, Erik Shive and Jill Yost.  Additionally, James Bennett, Holly Dye, Linda Miller, Maria McMullen and  Almeta Spencer provided technical support; Shana Wallace provided  methodological guidance; and Alexander Galuten and James Murphy  provided legal counsel.
section_title: Related GAO Products
paragraphs: Standards for Internal Control in the Federal Government: 2013 Exposure  Draft. GAO-13-830SP. Washington, D.C.: September 3, 2013.
Supplemental Nutrition Assistance Program: Payment Errors and  Trafficking Have Declines, but Challenges Remain. GAO-10-956T.  Washington, D.C.: July 28, 2010.
Food Stamp Trafficking: FNS Could Enhance Program Integrity by Better  Targeting Stores Likely to Traffic and Increasing Penalties. GAO-07-53.  Washington, D.C.: October 13, 2006.
Individual Disaster Assistance Programs: Framework for Fraud,  Prevention, Detection and Prosecution. GAO-06-954T. Washington, D.C.:  July 12, 2006.
Hurricanes Katrina and Rita Disaster Relief: Improper and Potentially  Fraudulent Individual Assistance Payments Estimated to be between  $600 Million and $1.4 Billion. GAO-06-844T. Washington, D.C.: June 14,  2006.
Expedited Assistance for Victims of Hurricanes Katrina and Rita: FEMA’s  Control Weaknesses Exposed the Government to Significant Fraud and  Abuse. GAO-06-403T. Washington, D.C.: February 13, 2006.
Standards for Internal Control in the Federal Government.  GAO/AIMD-00-21.3.1 Washington, D.C.: November 1999.