Food Stamp Program: States Seek to Reduce Payment Errors and Program Complexity
Published: 2001-01-19T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In fiscal year 2000, the Department of Agriculture's Food Stamp Program, administered jointly by the Food and Nutrition Service (FNS) and the states, provided $15 billion in benefits to an average of 17.2 million low-income persons each month. FNS, which pays the full cost of food stamp benefits and half of the states' administrative costs, promulgates program regulations and oversees program implementation. The states run the program, determining whether households meet eligibility requirements, calculating monthly benefits the households should receive, and issuing benefits to participants. FNS assesses the accuracy of states' efforts to determine eligibility and benefits levels. Because of concerns about the integrity of Food Stamp Program payments, GAO examined the states' efforts to minimize food stamp payment errors and what FNS has done and could do to encourage and assist the states reduce such errors.
section_title: What GAO Found
paragraphs: GAO found that all 28 states it examined had taken steps to reduce payment errors. These steps included verifying the accuracy of benefit payments calculated through supervisory and other types of casefile reviews, providing specialized training for food stamp workers, analyzing quality control data to determine causes of errors and developing corrective actions, matching food stamp rolls with other federal and state computer databases to identify ineligible participants, and using computer software to assist caseworkers in determining benefits. To reduce payment errors, FNS has imposed financial sanctions on states with high error rates and has waived some reporting requirements.

section_title: Letter
paragraphs: In fiscal year 2000, the U.S. Department of Agriculture’s Food Stamp  Program provided $15 billion in benefits to a monthly average of 17.2  million low-income individuals in the 50 states; Washington, D.C.; Guam;  and the Virgin Islands. Agriculture’s Food and Nutrition Service (FNS) and  the states jointly implement the Food Stamp Program. FNS, which pays the  full cost of food stamp benefits and about half of the states’ administrative  costs, promulgates program regulations and oversees program  implementation. The states administer the program: they determine  whether households meet eligibility requirements, calculate monthly  benefits that households should receive, and issue benefits to participants.  The states’ accuracy in determining eligibility and benefit levels is assessed  annually by FNS’ quality control system. According to the quality control  system, the states overpaid food stamp recipients an estimated $1.1 billion  in fiscal year 1999 and underpaid recipients $450 million. Together, these  errors amounted to nearly 10 percent of food stamp benefits. About 56  percent of these errors occurred when state food stamp workers made  mistakes, such as misapplying complex food stamp rules in calculating  benefits. The remaining 44 percent of the errors occurred because  participants, either inadvertently or deliberately, did not provide accurate  information to state food stamp offices when required.
Because of congressional interest in assuring the integrity of Food Stamp  Program payments, we (1) identified the states’ efforts to minimize food  stamp payment errors, and (2) examined what FNS has done and could do  to encourage and assist the states in reducing such errors. In doing this  work, we analyzed information obtained through structured interviews  with state food stamp officials in 28 states, including 14 states with  payment error rates below the national average and 14 states with error  rates above the national average (see app. I). These 28 states delivered 74  percent of all food stamp benefits in fiscal year 1999. We also obtained and  analyzed information from officials at FNS’ headquarters and seven  regional offices. We performed our work from February through November  2000 in accordance with generally accepted government auditing  standards.
subsections: section_title: Background
paragraphs: FNS’ quality control system measures the states’ performance in accurately  determining food stamp eligibility and calculating benefits. Under this  system, the states calculate their payment errors by annually drawing a  statistically valid sample of at least 300 to 1,200 active cases, depending on  the average monthly caseload; by reviewing the case information; and by  making home visits to determine whether households were eligible for  benefits and received the correct benefit payment. FNS regional offices  validate the results by reviewing a subset of each state’s sample to  determine its accuracy, making adjustments to the state’s overpayment and  underpayment errors as necessary. To determine each state’s combined  payment error rate, FNS adds overpayments and underpayments, then  divides the sum by total food stamp benefit payments. As shown in figure 1,  the national combined payment error rate for the Food Stamp Program was  consistently above 9 percent from fiscal year 1993 through fiscal year 1999.  About 70 percent of the food stamp payment errors resulted in  overpayments to recipients, while about 30 percent resulted in  underpayments. FNS’ payment error statistics do not account for the  states’ efforts to recover overpayments; in fiscal year 1999, the states  collected $213 million in overpayments. (See app. II for information about  states’ error rates and collections of overpayments.)
Errors in food stamp payments occur for a variety of reasons. For example,  food stamp caseworkers may miscalculate a household’s eligibility and  benefits because of the program’s complex rules for determining who are  members of the household, whether the value of a household’s assets  (mainly vehicles and bank accounts) is less than the maximum allowable,  and the amount of a household’s earned and unearned income and  deductible expenses. Concerning the latter, food stamp rules require  caseworkers to determine a household’s gross monthly income and then  calculate a net monthly income by determining the applicability of six  allowable deductions: a standard deduction, an earned income deduction, a  dependent care deduction, a medical deduction, a child support deduction,  and an excess shelter cost deduction. (See app. III for the factors that state  caseworkers consider in calculating a household’s excess shelter cost  deduction.) The net income, along with other factors such as family size,  becomes the basis for determining benefits. Other payment errors occur  after benefits have been determined primarily because households do not  always report changes in income that can affect their benefits and the  states do not always act on reported changes, as required by food stamp  law.
To reduce the likelihood of payment errors, FNS regulations require that  states certify household eligibility at least annually, and establish  requirements for households to report changes that occur after  certification. In certifying households, states are required to conduct face- to-face interviews, typically with the head of the household, and obtain  pertinent documentation at least annually. In establishing reporting  requirements, the states have the option of requiring households to use  either (1) monthly reporting, in which households with earned income file  a report on their income and other relevant information each month; or (2)  change reporting, in which all households report certain changes, including  income fluctuations of $25 or more, within 10 days of the change.  According to FNS, many states have shifted from monthly reporting to  change reporting because of the high costs associated with administering a  monthly reporting system. However, change reporting is error-prone  because households do not always report changes and the states do not  always act on them in a timely fashion, if at all.
section_title: All States We Contacted Took Actions to Reduce Payment Errors
paragraphs: Each of the 28 states we contacted has taken many actions to reduce  payment error rates. Further, 80 percent of the states took each of five  actions: (1) case file reviews by supervisors or special teams to verify the  accuracy of food stamp benefit payments, (2) special training for  caseworkers, (3) analyses of quality control data to identify causes of  payment errors, (4) electronic database matching to identify ineligible  participants and verify income and assets, and (5) use of computer  software programs to assist caseworkers in determining benefits. It is  difficult to link a specific state action to its effect on error rates because  other factors also affect error rates. However, almost all state food stamp  officials cited case file reviews by supervisors and others as being one of  their most effective tools for reducing error rates. Additionally, state  officials most often cited the competing pressure of implementing welfare  reform as the primary challenge to reducing food stamp payment errors in  recent years.
subsections: section_title: States Took Various Actions to Reduce Payment Error Rates
paragraphs: The following subsection summarizes our findings on state actions to  reduce payment errors.
Case file reviews to verify payment accuracy: In 26 of the 28 states we  contacted, supervisors or special teams reviewed case files to verify the  accuracy of benefit calculations and to correct any mistakes before the  state’s quality control system identified them as errors. Supervisory  reviews, used by 22 states, typically require that supervisors examine a  minimum number of files compiled by each caseworker. For example,  Alaska requires monthly supervisory review of five cases for each  experienced caseworker and all cases for each new caseworker.  Furthermore, 20 states, including many of the states using supervisory  review, use special teams to conduct more extensive reviews designed  to identify problems in specific offices, counties, or regions. Reviewers  correct mistakes before they are detected as quality control errors,  where possible; identify the reasons for the mistakes; and prescribe  corrective actions to prevent future errors. For example, in Genesee  County, Michigan, the teams read about 2,800 case files, corrected errors  in nearly 1,800, and provided countywide training in such problem areas  as shelter expenses and earned income. In Massachusetts, caseworkers  reviewed all case files in fiscal year 2000 because of concerns that the  state’s error rate would exceed the national average and that FNS would  impose financial sanctions. Massachusetts corrected errors in about 13  percent of the case files reviewed; these would have been defined as  payment errors had they been identified in a quality control review.
Special training for caseworkers: In addition to the training provided to  new caseworkers, 27 states provided a range of training for new and  experienced caseworkers aimed at reducing payment errors. For  example, these states conducted training specifically targeted to  calculating benefits for certain categories of food stamp households,  such as those with earned income or those with legal noncitizens, for  which rules are more likely to be misapplied. Many states also  conducted training to update caseworkers and supervisors on food  stamp policy changes that affect how benefits are calculated; new  policies often introduce new calculation errors because caseworkers  are unfamiliar with the revised rules for calculating benefits, according  to several state officials.
Analysis of quality control data: Twenty-five states conducted special  analyses of their quality control databases to identify common types of  errors made in counties or local offices for use in targeting corrective  actions. For example, California created a quality control database for  the 19 largest of its 54 counties and generated monthly reports for each  of the 19 counties to use. Georgia assigned a staff member to review  each identified quality control error and work with the appropriate  supervisor or worker to determine why the error occurred and how it  could be prevented in the future. With this process, officials said,  counties are much more aware of their error cases, and now perceive  quality control as a tool for reducing errors. In Michigan, an analysis of  quality control data revealed that caseworkers were misinterpreting a  policy that specified when to include adults living with a parent in the  same household, and changes were made to clarify the policy.
Electronic database matching: All 28 states matched their food stamp  rolls against other state and federal computer databases to identify  ineligible participants and to verify participants’ income and asset  information. For example, all states are required to match their food  stamp rolls with state and local prisoner rolls. In addition, most states  routinely match their food stamp participants with one or more of the  following: (1) their department of revenue’s “new hires” database (a  listing of recently employed individuals in the state) to verify income,  (2) the food stamp rolls of neighboring states to identify possible fraud,  and (3) their department of motor vehicle records to verify assets.  Officials in four states said the “new hires” match reduced payment  errors by allowing caseworkers to independently identify a change in  employment status that a household had not reported and that would  likely affect its benefits. Mississippi food stamp officials said the vehicle  match helped reduce payment errors because caseworkers verified the  value of applicants’ vehicles as part of determining eligibility.
Computer assistance in calculating benefits: Twenty-three states had  developed computer software for caseworkers to use in determining an  applicant’s eligibility and/or in calculating food stamp benefit amounts.  Twenty-two of the states have software that determines eligibility and  calculates benefits based on information caseworkers enter; the  remaining states’ software is limited to calculating benefits after the  caseworker has determined eligibility. These programs may also cross- check information to correct data entry errors; provide automated alerts  that, for example, a household member is employed; and generate  reminders for households, for example, to schedule an office visit. The  most advanced software programs had online interview capabilities,  which simplified the application process. Some states had automated  case management systems that integrated Food Stamp Program records  with their Medicaid and other assistance programs, which facilitated the  administration of these programs.
Some states took other actions to reduce their payment errors. For  example, even though FNS regulations only require that food stamp  households be recertified annually, 16 states increased the frequency with  which certain types of food stamp households must provide pertinent  documentation for recertifying their eligibility for food stamp benefits. In  particular, 12 of the 16 states now require households with earned income  to be recertified quarterly because their incomes tend to fluctuate,  increasing the likelihood of payment errors. More frequent certification  enables caseworkers to verify the accuracy of household income and other  information, allowing caseworkers to make appropriate adjustments to the  household’s benefits and possibly avoid a payment error. However, more  frequent certification can also inhibit program participation because it  creates additional reporting burdens for food stamp recipients.
In addition to more frequent certification, five states reported that they  access credit reports and public records to determine eligibility and  benefits. Seven states have formed change reporting units in food stamp  offices serving certain metropolitan areas, so that participants notify these  centralized units, instead of caseworkers, about starting a new job or other  reportable changes.
section_title: States Believe That Case File Reviews Have Been Key to Reducing Error Rates
paragraphs: Food stamp officials in 20 of the 28 states told us that they have primarily  relied on case file reviews by supervisors and others to verify payment  accuracy and reduce payment errors. For example, Georgia officials noted  one county’s percentage of payment errors dropped by more than half as a  result of the state’s requirement that management staff in 10 urban counties  re-examine files after a supervisor’s review. In each of the past 3 years,  Ohio food stamp administrators have reviewed up to 100 cases per county  per year and have awarded additional state funding to counties with low  error rates. In fiscal year 1999, the counties used $2.5 million in state funds  primarily for payment accuracy initiatives.
There was less consensus about the relative usefulness of other initiatives  in reducing payment errors. Specifically, food stamp officials in 13 states  told us that special training for caseworkers was one of their primary  initiatives; officials in 8 states cited recertifying households more  frequently; officials in 6 states identified the use of computer software to  determine eligibility and/or benefits; officials in 5 states identified  computer database matches; and officials in 4 states cited analyses of  quality control data.
section_title: Implementation of Welfare Reform Has Taken Priority Over Error Reduction Efforts
paragraphs: Food stamp officials in 22 of the states we contacted cited their states’  implementation of welfare reform as a challenge to reducing error rates in  recent years. In particular, implementing welfare reform programs and  policy took precedence over administering the Food Stamp Program in  many states—these programs competed for management attention and  resources. In Connecticut, for example, caseworkers were directed to help  participants find employment; therefore, the accuracy of food stamp  payments was deemphasized, according to state officials. Similarly, Hawaii  officials said agency leadership emphasized helping recipients to find  employment and instituted various programs to accomplish this, which  resulted in less attention to payment accuracy. Furthermore, officials from  14 states said welfare reform led to an increase in the number of working  poor. This increased the possibility of errors because the income of these  households is more likely to fluctuate than income of other food stamp  households.
State food stamp officials cited three other impediments to their efforts to  reduce payment errors, although far less frequently. First, officials in 12  states cited a lack of resources, such as a shortage of caseworkers to  manage food stamp caseloads, as a challenge to reducing error rates.  Georgia, Mississippi, and Texas officials said caseworker turnover was  high, and New Hampshire officials said they currently have a freeze on  hiring new caseworkers. Second, officials in 10 states cited problems  associated with either using, or making the transition from, outdated  automated systems as challenges to reducing payment errors. For example,  New Hampshire officials found that their error rate increased from 10.2  percent in fiscal year 1998 to 12.9 percent in fiscal year 1999 after they  began to use a new computer system. In addition, Connecticut and  Maryland officials noted that incorporating rules changes into automated  systems is difficult and often results in error-prone manual workarounds  until the changes are incorporated. Finally, officials in nine states told us  that food stamp eligibility revisions in recent years, particularly for legal  noncitizens, have increased the likelihood of errors.
section_title: FNS Has Encouraged States to Reduce Payment Error Rates, but Simplifying Food Stamp Rules May Reduce Errors Further
paragraphs: To encourage the states to reduce error rates, FNS has employed financial  sanctions and incentives, approved waivers of reporting requirements for  certain households, and promoted initiatives to improve payment accuracy  through the exchange of information among the states. However, state food  stamp officials told us the single most useful change for reducing error  rates would be for FNS to propose legislation to simplify requirements for  determining Food Stamp Program eligibility and benefits. Simplifying food  stamp rules would not necessarily alter the total amount of food stamp  benefits given to participants, but it may reduce the program’s  administrative costs (the states spent $4.1 billion to provide $15.8 billion in  food stamp benefits in fiscal year 1999). FNS officials and others expressed  concern, however, that some simplification options may reduce FNS’  ability to precisely target benefits to each individual household’s needs.
subsections: section_title: FNS Has Used Three Principal Methods to Reduce States’ Payment Errors
paragraphs: The three principal methods FNS has used to reduce payment errors in the  states are discussed in the following subsections.
subsections: section_title: Financial Sanctions and Enhanced Funding
paragraphs: As required by law, FNS imposes financial sanctions on states whose error  rates exceed the national average. These states are required to either pay  the sanction or provide additional state funds—beyond their normal share  of administrative costs—to be reinvested in error-reduction efforts, such as  additional training in calculating benefits for certain households. FNS  imposed $30.6 million in sanctions on 16 states with payment error rates  above the national average in fiscal year 1999 and $78.2 million in sanctions  on 22 states in fiscal year 1998—all of which were reinvested in error- reduction efforts. (See app. IV.)
Food stamp officials in 22 states reported that their agencies had increased  their commitment to reducing payment errors in recent years; officials in  14 states stated that financial sanctions, or the threat of sanctions, was the  primary reason for their increased commitment. For example, when the  Texas Department of Human Services requested money to cover sanctions  prior to 1995, the Texas legislature required the department to report  quarterly on its progress in reducing its payment error rate. Officials in  Texas, which has received enhanced funding for the past 2 fiscal years,  cited the department’s commitment and accountability to the Texas  legislature as primary reasons for reducing the error rate over the years and  for maintaining their focus on payment accuracy.
FNS also rewards states primarily on the basis of their combined payment  error rate being less than or equal to 5.9 percent—well below the national  average. FNS awarded $39.2 million in enhanced funding to six states in  fiscal year 1999 and $27.4 million to six states in fiscal year 1998. In the past  5 years, 16 states have received enhanced funding at least once. Officials in  one state told us that the enhanced funding remained in the state’s general  fund, while officials in four states said the enhanced funding supplemented  the state’s appropriation for use by the Food Stamp Program and other  assistance programs. For example, in Arkansas, the food stamp agency  used its enhanced funding for training, systems development, and  equipment. Arkansas officials told us that enhanced funding was a major  motivator for their agency, and they have seen an increase in efforts to  reduce payment errors as a direct result.
section_title: Waivers to Reporting Requirements
paragraphs: In July 1999, FNS announced that it would expand the availability of  waivers of certain reporting requirements placed on food stamp  households. FNS was concerned that the increase in employment among  food stamp households would result in larger and more frequent income  fluctuations, which would increase the risk of payment errors. FNS also  was concerned that the states’ reporting requirements were particularly  burdensome for the working poor and may, in effect, act as an obstacle to  their participation in the program. This is because eligible households may  not view food stamp benefits as worth the time and effort it takes to obtain  them. As of November 2000, FNS had granted reporting waivers to 43  states, primarily for households with earned income. (See app. V.) The  three principal types of waivers are explained below:  The threshold reporting waiver raises the earned income changes that  households must report to more than $100 per month. (Households still  must report if a member gains or loses a job.) Without this waiver,  households would be required to report any wage or salary change of  $25 or more per month. Ohio uses this type of waiver (with a smaller  $80-per-month threshold) specifically for self-employed households.  Ohio credits the use of this and other types of reporting waivers to the  decrease in its error rate from 11.2 percent in 1997 to 8.4 percent in  1999.
The status reporting waiver limits the changes that households must  report to three key events: (1) gaining or losing a job, (2) moving from  part-time to full-time employment or vice versa, and (3) experiencing a  change in wage rate or salary. This waiver eliminates the need for  households to report fluctuations in the number of hours worked,  except if a member moves from part-time to full-time employment.  Texas officials cited the implementation of the status reporting waiver in  1994 as a primary reason that their error rate dropped by nearly 3  percentage points (from over 12 percent) in 1995. Texas’ error rate  reached a low of about 4.6 percent in 1999.
The quarterly reporting waiver eliminates the need for households with  earned income to report any changes during a 3-month period, provided  the household provides required documentation at the end of the  period. The waiver reduces payment errors because any changes that  occurred during a quarter were not considered to be errors and  households more readily understood requirements for reporting  changes. Food stamp officials in Arkansas, which implemented a  quarterly reporting waiver in 1995, believe that their quarterly reporting  waiver is a primary reason for their subsequent stable error rate.
FNS expects that reporting waivers will reduce the number of payment  errors made because households are more likely to report changes and,  with fewer reports to process, the states will be able to process changes  accurately and within required time frames. However, the lower payment  error rates that result from these waivers are primarily caused by a  redefinition of a payment error, without reducing the Food Stamp  Program’s benefit costs. For example, a pay increase of $110 per month  that is not reported until the end of the 3-month period is not a payment  error under Arkansas’ quarterly reporting waiver, while it would be an error  if there were no waiver. As a result, the quarterly reporting waiver may  reduce FNS’ estimate of overpayments and underpayments. FNS estimated,  in July 1999, that the quarterly waiver would increase food stamp benefit  costs by $80 million per year, assuming that 90 percent of the states applied  for the waiver.
Of the 10 states that do not have a reporting waiver, 7 require monthly  reporting for households with earned income. The advantage of monthly  reporting is that benefits are issued on the basis of what has already  occurred and been documented. In addition, regular contact with food  stamp households allows caseworkers to quickly detect changes in the  household’s situation. However, monthly reporting is more costly to  administer and potentially can exacerbate a state’s error rate, particularly if  it cannot keep up with the volume of work. A Hawaii food stamp official  told us that monthly reporting contributed to recent increases in Hawaii’s  error rate because caseworkers have not processed earned income  changes on time, while Connecticut officials said their food stamp workers  were making mistakes by rushing to meet deadlines.
section_title: Fostering Communication Among States
paragraphs: As part of the food stamp quality control program, FNS’ seven regional  offices have assembled teams of federal and state food stamp officials to  identify the causes of payment errors and ways to improve payment  accuracy. Each region also has held periodic conferences in which states  from other regions were invited to highlight their successes and to respond  to questions about implementing their initiatives. Examples of topics at  recent conferences in FNS’ northeastern region included best payment  accuracy practices and targeting agency-caused errors. FNS’ regional  offices also have made funds available for states to send representatives to  other states to learn first-hand about initiatives to reduce payment errors.  Since 1996, FNS has compiled catalogs of states’ payment accuracy  practices that provide information designed to help other states develop  and implement similar initiatives.
section_title: Simplifying Food Stamp Rules Could Reduce Payment Errors and Administrative Costs
paragraphs: Food stamp officials in all 28 states we contacted called for simplifying  complex Food Stamp Program rules, and most of these states would like to  see FNS involved in advocating simplification. In supporting simplification,  the state officials generally cited caseworkers’ difficulty in correctly  applying food stamp rules to determine eligibility and calculate benefits.  For example, Maryland’s online manual for determining a household’s food  stamp benefits is more than 300 pages long. Specifically, the state officials  cited the need to simplify requirements for (1) determining a household’s  deduction for excess shelter costs and (2) calculating a household’s earned  and unearned income.
Food stamp officials in 20 of the 28 states we contacted said simplifying the  rules for determining a household’s allowable shelter deduction would be  one of the best ways to reduce payment errors. The Food Stamp Program  generally provides for a shelter deduction when a household’s monthly  shelter costs exceed 50 percent of income after other deductions have been  allowed. Allowable deductions include rent or mortgage payments,  property taxes, homeowner’s insurance, and utility expenses. Several state  officials told us that determining a household’s shelter deduction is prone  to errors because, for example, caseworkers often need to (1) determine  whether to pro-rate the shelter deduction if members of a food stamp  household share expenses with others, (2) determine whether to use a  standard utility allowance rather than actual expenses, and (3) verify  shelter expenses, even though landlords may refuse to provide required  documentation.
Food stamp officials in 18 states told us that simplifying the rules for  earned income would be one of the best options for reducing payment  errors because earned income is both the most common and the costliest  source of payment errors. Generally, determining earned income is prone  to errors because caseworkers must use current earnings as a predictor of  future earnings and the working poor do not have consistent employment  and earnings. Similarly, officials in six states told us that simplifying the  rules for unearned income would help reduce payment errors. In particular,  state officials cited the difficulty caseworkers have in estimating child  support payments that will be received during the certification period  because payments are often intermittent and unpredictable. Because  households are responsible for reporting changes in unearned income of  $25 or more, differences between estimated and actual child support  payments often result in a payment error.
FNS officials and advocates for food stamp participants, however, have  expressed concern about some possible options for simplifying the rules  for determining eligibility and calculating benefits. For example, in  determining a household’s allowable shelter deduction, if a single standard  deduction were used for an entire state, households in rural areas would  likely receive greater benefits than they would have using actual expenses,  while households in urban areas would likely receive smaller benefits. In  this case, simplification may reduce FNS’ ability to precisely target benefits  to each individual household’s needs. FNS officials also pointed out that  likely reductions in states’ payment error rates would reflect changes to the  rules for calculating food stamp benefits rather than improved  performance by the states.
FNS has begun to examine alternatives for improving the Food Stamp  Program, including options for simplifying requirements for determining  benefits, as part of its preparations for the program’s upcoming  reauthorization. More specifically, FNS hosted a series of public forums,  known as the National Food Stamp Conversation 2000, in seven cities  attended by program participants, caseworkers, elected officials,  antihunger advocates, emergency food providers, health and nutrition  specialists, food retailers, law enforcement officials, and researchers.  Simplification of the Food Stamp Program was one of the issues discussed  at these sessions as part of a broad-based dialogue among stakeholders  about aspects of the program that have contributed to its success and  features that should be strengthened to better achieve program goals. FNS  is currently developing a variety of background materials that will integrate  the issues and options raised in these forums. FNS has not yet begun to  develop proposed legislation for congressional consideration in  reauthorizing the Food Stamp Program.
section_title: Conclusions
paragraphs: FNS and the states have taken actions aimed at reducing food stamp  payment errors, which currently stand at about 10 percent of the program’s  total benefits. Financial sanctions and enhanced funding have been at least  partially successful in focusing states’ attention on minimizing errors.  However, this “carrot and stick” approach can only accomplish so much,  because food stamp regulations for determining eligibility and benefits are  extremely complex and their application inherently error-prone and costly  to administer. Furthermore, this approach, carried to extremes, can create  incentives for states to take actions that may inhibit achievement of one of  the agency’s basic missions—providing food assistance to those who are in  need. For example, increasing the frequency that recipients must report  income changes could decrease errors, but it could also have the  unintended effect of discouraging participation by the eligible working  poor. This would run counter not only to FNS’ basic mission but also to an  overall objective of welfare reform—helping people move successfully  from public assistance into the workforce.
Simplifying the Food Stamp Program’s rules and regulations offers an  opportunity to, among other things, reduce payment error rates and  promote program participation by eligible recipients. FNS has taken initial  steps in examining options for simplification through its forums with  stakeholders. However, it is unclear the extent to which FNS will build on  these ideas to (1) systematically develop and analyze the advantages and  disadvantages of various simplification options, and (2) if warranted,  submit the legislative changes needed to implement simplification  proposals.
section_title: Recommendations
paragraphs: To help ease program administration and potentially reduce payment  errors, we recommend that the Secretary of Agriculture direct the  Administrator of the Food and Nutrition Service to (1) develop and analyze  options for simplifying requirements for determining program eligibility  and benefits; (2) discuss the strengths and weaknesses of these options  with representatives of the congressional authorizing committees; and (3)  if warranted, submit legislative proposals to simplify the program. The  analysis of these options should include, among other things, estimating  expected program costs, effects on program participation, and the extent  to which the distribution of benefits among recipients could change.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided the U.S. Department of Agriculture with a draft of this report  for review and comment. We met with Agriculture officials, including the  Director of the Program Development Division within the Food and  Nutrition Service’s Food Stamp Program. Department officials generally  agreed with the information presented in the report and provided technical  clarifications, which we incorporated as appropriate. Department officials  also agreed with the thrust of our recommendations. However, they  expressed reservations about the mechanics of implementing our  recommendation that they discuss simplification options with  representatives of the congressional authorizing committees. In particular,  they noted the importance of integrating consultation on policy options  with the process for developing the President’s annual budget request. In  addition, they urged a broader emphasis on consideration of policy options  that meet the full range of program objectives, including, for example,  ending hunger, improving nutrition, and supporting work. We agree that  simplification options should be discussed in the larger context of  achieving program objectives. However, we believe that an early dialogue  about the advantages and disadvantages of simplification options will  facilitate the congressional debate on one of the most important and  controversial issues for reauthorizing the Food Stamp Program.
Copies of this report will be sent to the congressional committees and  subcommittees responsible for the Food Stamp Program; the Honorable  Jacob Lew, Director, Office of Management and Budget; and other  interested parties. We will also make copies available upon request.
Please contact me at (202) 512-5138 if you or your staff have any questions  about this report. Key contributors to this report are listed in appendix VI.
section_title: Scope and Methodology
paragraphs: To examine states’ efforts to minimize food stamp payment errors, we  analyzed information obtained through structured telephone interviews  with state food stamp officials in 28 states. We selected the 28 states to  include states with the lowest payment error rates, states with the highest  error rates, and the 10 states with the most food stamp participants in fiscal  year 1999. Overall, the states we interviewed included 14 states with  payment error rates below the national average and 14 states with error  rates above the national average. They delivered about 74 percent of all  food stamp benefits in fiscal year 1999. We supplemented the structured  interviews with information obtained from visits to Maryland,  Massachusetts, Michigan, and Texas.
To examine what the Department of Agriculture’s Food and Nutrition  Service (FNS) has done and could do to help states reduce food stamp  payment errors, we relied in part on information obtained from our  telephone interviews, as well as with information obtained from  discussions with officials at FNS’ headquarters and each of its seven  regional offices. We also analyzed FNS documents and data from its quality  control system.
section_title: Factors in Calculating the Excess Shelter Cost Deduction
section_title: States’ Use of Reporting Waivers
paragraphs:  exceeding 130 percent of the monthly poverty income guideline for its household size. To qualify for  this option, a state must have a certification period of 6 months or more.
The threshold reporting waiver raises the earned income changes that households must report to  more than $100 per month. (Households still must report if a member gains or loses a job.) Without  this waiver, households would be required to report any wage or salary change of $25 or more per  month.
The status reporting waiver limits the income changes that households must report to three key  events: (1) gaining or losing a job, (2) moving from part-time to full-time employment or vice versa, and  (3) a change in the wage rate or salary.
The quarterly reporting waiver eliminates the need for households with earned income to report any  changes during a 3-month period, provided the household provides required documentation at the end  of the period.
The 5-hour reporting waiver limits changes that households must report to three key events: (1)  gaining or losing a job; (2) a change in wage rate or salary; and (3) a change in hours worked of more  than 5 hours per week, if this change is expected to continue for more than a month.
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