Supplemental Nutrition Assistance Program: Disseminating Information on Successful Use of Data Analytics Could Help States Manage Fraud Risks
Released: 2018-11-01T00:00:00

Letter

Background

Federal and State Roles in Addressing SNAP Fraud

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 by supplementing their income with benefits to purchase allowed 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. The overarching rules governing SNAP are set at the federal level. Accordingly, FNS is responsible for promulgating program regulations and ensuring that state officials administer the program in compliance with program rules. FNS officials in seven regional offices assist headquarters officials in this oversight work. FNS also determines which retailers are eligible to accept SNAP benefits for food purchases and investigates and resolves cases of retailer fraud. The states, or in some cases counties, administer the program by determining whether households meet the program’s eligibility requirements, calculating monthly benefits for qualified households, and issuing benefits to participants on an electronic benefit transfer (EBT) card. States are also responsible for investigating possible violations by benefit recipients and pursuing and acting on those violations that are deemed intentional.

Types of SNAP Fraud and State Anti-Fraud Mitigation Strategies

Intentional program violations include acts of fraud, which involve obtaining something of value through willful misrepresentation. Eligibility fraud involves individuals making false or misleading statements in order to obtain benefits, including statements about household composition, household expenses, and income. Failing to report changes to household circumstances that may affect benefits can also result in eligibility fraud under certain circumstances. When recipients are certified for SNAP, state agencies assign them to a reporting system for notifying the state of certain changes. These changes include when they have a change of address, both in-state or out-of-state. Some systems require recipients to report within a certain period of time of the change occurring, often within 10 days. Other reporting systems– including simplified reporting – require recipients to submit reports periodically. Households subject to reporting on a periodic basis must generally submit reports not less often than once every 6 months. One type of eligibility fraud is dual participation, in which a recipient receives benefits in more than one state in the same month.

Another type of SNAP fraud is trafficking, in which benefits are exchanged for cash or non-food goods and services. Trafficking may occur when recipients collaborate with retailers who pay cash for SNAP benefits. For example, a retailer might allow a recipient to charge $100 on his or her EBT card and then pay the recipient $50 instead of providing food. Trafficking also occurs when a recipient exchanges an EBT card and the corresponding Personal Identification Number (PIN) for cash or non-food goods or services (e.g., rent or transportation) from another individual.

According to a September 2012 USDA Office of Inspector General (OIG) report, the magnitude of program abuse due to recipient fraud is unknown because states do not have uniform ways of compiling such data. OIG recommended that FNS determine the feasibility of creating a uniform methodology for states to calculate their recipient fraud rate. In 2014, FNS responded that it would be infeasible to implement the recommendation as it would require legislative authority mandating significant state investment of time and resources in investigating, prosecuting, and reporting fraud beyond current requirements.

States must adhere to various federal requirements for detecting SNAP recipient fraud, conducting investigations, and providing due process prior to disqualifying recipients from participating in the program. The household is responsible for repaying ill-gotten or misused benefits. States may generally retain 35 percent of the fraudulent benefits they recover, and the rest are returned to the federal government.

Data Analytics

The use of data analytics enables the discovery and communication of meaningful patterns in data so that states can determine which potential SNAP fraud cases to review in detail. States have access to various types of data in their case management systems, including recipient-provided information and benefits data collected throughout the SNAP eligibility determination process. Other information sources available to states include transaction data collected by EBT processors, data from previous fraud investigations, and third-party data from other government agencies or commercial vendors (see fig. 1).

Data-analytics activities can include a variety of techniques to prevent and detect fraud, including data matching and data mining. Data matching is the large scale comparison of records and files to detect errors or incorrect information. It can be used to verify information provided by recipients or detect unreported changes. Data mining is the use of automated computer algorithms to detect otherwise hidden patterns, correlations, or anomalies within large data sets indicative of potential fraud, thus assisting programs in recovering these dollars (see fig. 2).

Federal laws and regulations require states to conduct certain data matches when an application for benefits is submitted and other times to verify an individual’s reported employment and immigration status, as well as to ensure the information provided is not for an individual who is incarcerated, deceased, or disqualified from the program (see table 1).

GAO’s Fraud Risk Framework identifies the following leading practices to help managers effectively use data to mitigate the likelihood and impact of fraud (see table 2).

While these leading practices can help managers design and implement effective data-analytic tools and techniques to prevent and detect potential fraud, as discussed in the Fraud Risk Framework, these techniques alone may not be sufficient to ensure that ineligible individuals do not fraudulently enroll in a program or receive benefits. As a result, managers may need to combine data-analytics activities with additional controls as part of their efforts to combat fraud, in a strategic, risk-based manner.

SNAP Transaction Data from Selected States Show Relatively Few Households with Out- of-State Purchases Indicating Potential Fraud

Out-of-State Purchases Are Allowed by SNAP Rules and Their Dollar Value Represents a Small Percentage of Purchases

A relatively large number of SNAP households made purchases outside their home state, as allowed under the SNAP statute, but the total dollar value of out-of-state purchases was small compared to SNAP purchases overall, according to our analysis of FNS SNAP transaction data. We identified approximately 5.5 million households that made out-of-state SNAP purchases in fiscal year 2017. In comparison, FNS reported that the monthly average number of SNAP households was approximately 21 million in fiscal year 2017. Out-of-state purchases made up approximately 3 percent of all SNAP benefits in fiscal year 2017, with a total dollar value of about $2 billion (see fig. 3).

Out-of-state purchases may occur for different reasons, one of which may be because a recipient lives on or near a state border, and regularly shops across the state line. For example, District of Columbia recipients spent about half of their SNAP benefits out of state in fiscal year 2017. All District of Columbia residents are in close proximity to both Maryland and Virginia, which are no more than approximately 7 miles from any point in the District. In general, about a third (34 percent) of households nationwide with out-of-state purchases spent $50 or less on those purchases in fiscal year 2017. See Appendix II for a detailed listing of out- of-state purchases by state. Out-of-state purchases may also indicate potential program violations, including eligibility fraud or trafficking. However, because out-of-state purchases are permitted, analysis of additional household and transaction information is generally needed to identify potential fraud, as discussed below.

Of out-of-state transactions, purchases in a state that did not border the recipient’s home state (non-border state) made up approximately 1 percent of all SNAP benefits in fiscal year 2017, as shown in figure 3 above. There were 2.2 million SNAP households that made at least one purchase in a non-border state in fiscal year 2017, and the percent of SNAP benefits spent in a non-border state in that year ranged between approximately 0.6 percent and 1.9 percent. In fiscal year 2017, states whose SNAP recipients spent the highest percentage of their SNAP benefits in non-border states included Colorado, Hawaii, Montana, North Dakota, and Rhode Island.

SNAP Purchases in Non- Border States Raise Questions of Residency for a Relatively Small Percentage of Households in Selected States

Overall, we found that for fiscal year 2017, less than 0.5 percent of households in our three selected states spent all their SNAP benefits for the entire fiscal year in a non-border state (see table 3). Use of benefits in stores that are a long distance from a recipient’s residence for extended periods of time, such as purchases exclusively in non-border states over multiple months, could be an indicator of program violations, including eligibility fraud. The total value of SNAP transactions by households in our three selected states that made all purchases in non- border states in fiscal year 2017 was approximately $1.9 million. These purchases represent about 0.1 percent of all SNAP benefits for fiscal year 2017 in the three selected states.

When SNAP benefits are used in a non-border state over an extended period of time, this could indicate possible intentional program violations such as an unreported move and other household changes that could impact eligibility. SNAP officials we interviewed said that in some cases a recipient may delay reporting a move if they are enrolled in SNAP in a state with a lower barrier to entry to the program. At the same time, the rules around reporting a move and residency may make it difficult to determine when a recipient has violated program rules. Recipients are not required to immediately report a move in some cases due to simplified reporting rules that allow a recipient to report household changes only periodically, generally every 6 months. Also, officials we interviewed in the three selected states told us that there are no set time limits for a SNAP recipient to reside in a new state before the former state revokes the recipient’s residency. For example, a recipient may be out of state for an extended period of time for personal reasons, such as helping a relative, but still intend to reside in the state where they are enrolled in SNAP. In that case, according to state officials, the recipient would not necessarily need to report a move and may not be violating program rules.

In addition to the program violations related to an unreported move, use of SNAP benefits in a non-border state over extended periods of time could bring into question whether a recipient is also enrolled in SNAP in another state (i.e., dual participation). Also, it may indicate changes in the household that could impact eligibility, including questions about whether a recipient is earning unreported income in the state where they are using their benefits. While state SNAP agencies stated that they conduct data matching meant to detect dual participation and unreported income, states also noted challenges with these matches. State agencies told us that they use the PARIS system to detect possible dual participation, and both NDNH and the Work Number to identify recipient income. However, challenges officials cited in using these systems included lags in the data provided, and additional work required to confirm data. The use of data analytics to review recipient transaction data may help states identify suspicious household activity more easily than with data matching alone given the challenges associated with these systems. In addition, data analytics may be another tool to help states identify suspicious activities in a timely manner. Given the possibility for eligibility fraud or other program violations, we plan to refer the households that our data analysis identified as spending all benefits in a non-border state to their respective state SNAP agencies for further investigation.

Selected Households’ Out- of-State and In-State SNAP Purchases Had Similar Levels of Potential Trafficking

Based on our analysis of fiscal year 2017 transaction data in the three selected states, we found that SNAP households without out-of-state purchases were generally just as likely to have made the types of purchases that may indicate trafficking of benefits as households with out- of-state purchases. Overall, we found that approximately 2 percent of all households in the three selected states, including both households that shopped out-of-state and those that shopped in state only, had a high number of purchases potentially indicative of SNAP trafficking. However, for two selected states, there was little to no difference in the percentage of households with this activity when we compared households that only shopped in their home state and households that shopped out-of-state. For one state, a greater percentage of households that shopped out-of- state had purchases indicative of SNAP trafficking, but households in this state also had different shopping patterns in general, as discussed below. In addition, for households that shopped out-of-state, few of the transactions we flagged as indicators of potential trafficking occurred outside the home state. Although we found that rates of trafficking indicators were generally similar between households that shopped out- of-state and those that only shopped in their state of residence, the analysis of transaction data for other factors may allow states to identify households at risk of trafficking and make them a higher priority for investigation. Our prior work reported on the benefits of SNAP transaction data analysis for this purpose.

Specifically, we found that for North Dakota and Washington, households that made one or more purchases out of state had similar rates of purchases flagged for potential trafficking compared to households that shopped only in their home state. This held true both for households that only shopped in border states, as well as for households that shopped in non-border states (see table 4). For example, 1.4 percent of Washington SNAP households that only shopped in their home state had purchases resulting in 20 or more trafficking flags in fiscal year 2017, and 1.8 percent of Washington households that also shopped in border states had 20 or more trafficking flags. For Washington households that also shopped in non-border states, 1.5 percent made purchases resulting in 20 or more flags.

Our analysis of District of Columbia households identified higher rates of potential trafficking indicators for households that shopped out-of-state, compared to the other two selected states. Specifically, 1.4 percent of District of Columbia SNAP households that only shopped in their home state had purchases resulting in 20 or more trafficking flags in fiscal year 2017, and 5.7 percent of households that also shopped in border states had 20 or more trafficking flags. For District of Columbia households that also shopped in non-border states, 8 percent made purchases resulting in 20 or more flags. However, the difference in rates for District of Columbia trafficking indicators may reflect the different shopping patterns of its households when compared to other states. As stated previously, District of Columbia households made about half of their SNAP purchases out-of- state, which is a significantly higher amount compared to any other state. And all District of Columbia households are in close proximity to the bordering states of Maryland and Virginia, approximately 7 miles or less. Also, a small percentage of District of Columbia households shopped only in their home state in fiscal year 2017—approximately 7 percent of all households reviewed. In comparison, approximately 62 percent of North Dakota households, and 76 percent of Washington households made all purchases in their home state.

For the households in North Dakota and Washington that shopped out-of- state in fiscal year 2017, we found that most transactions indicating potential trafficking occurred in the recipient’s home state rather than out- of-state (see fig. 4). District of Columbia households were the exception and most transactions indicating potential trafficking occurred in the recipient’s home state or in a border state. However, the pattern of trafficking flags also aligns with where District of Columbia SNAP recipients tend to shop, given that approximately half of their SNAP purchases were made in border states in fiscal year 2017.

While we identified households in selected states with out-of-state purchases that indicated potential trafficking, identifying such households required additional data analysis of factors beyond purchase location. Analysis of additional data elements may allow states to better identify potential trafficking requiring investigation. We found out-of-state purchase information alone is of limited benefit to identify SNAP households that may be engaged in trafficking.

Some Selected States Reported Using Data Analytics Beyond Required Data Matching and Cited Advantages As Well As Organizational and Resource Challenges

Selected States Reported Doing Required Data Matching, and Some Reported Conducting Additional Data Analytics

Officials we interviewed in all seven of the states we selected for review of use of data analytics reported conducting federally required data matching to verify information provided by households when they initially apply or recertify for SNAP benefits. Federal law and regulations require states to conduct certain data matches when determining SNAP eligibility, including matches that provide information on people who may be incarcerated, deceased, or disqualified from receiving SNAP benefits due to intentional program violations. The five databases that state SNAP agencies are required to conduct matches against when determining SNAP eligibility are the Department of Health and Human Services’ (HHS) National Directory of New Hires, the Social Security Administration’s (SSA) Prisoner Verification System, SSA’s Death Master File, U.S. Citizenship and Immigration Services’ Systematic Alien Verification for Entitlements and FNS’s Electronic Disqualified Recipient System (eDRS). As we previously reported, state SNAP agencies use data matching to obtain information about households’ income, verify information provided by households, or identify potential discrepancies. Specifically, agencies are required to verify household data electronically by matching their data with specific government sources and have the option to match against additional data sources.

In addition to the required data matching, officials we interviewed in all seven selected states also reported conducting other data matching with a range of internal and external data sources. These matches used information from federal, state, and commercial data sources on earned income from employment or self-employment or unearned income from other government benefit programs. According to state officials, these sources included Unemployment Insurance information from state workforce agencies, the PARIS file from HHS, and The Work Number, a commercial verification service. Other sources that could be used include Old-Age, Survivors, and Disability Insurance income information and Supplemental Security Income information from multiple data matches with the SSA. In addition to verifying applicants’ initial eligibility, data matching can identify changes in key information that could affect continued eligibility.

Beyond data matching, officials in all seven selected states said that they had access to EBT reports notifying them of suspicious transactions, although the type and frequency of use of these reports varied. For example, while some state officials said that they manually generated reports on an ad hoc basis, other state officials said that they had automated reports that they received and reviewed on a weekly or monthly basis. As we previously reported, automating data analytics tests can allow agencies to monitor large amounts of data more efficiently than with manual tests. Furthermore, officials in all seven selected states reported that they had examined out-of-state transactions to some extent. Some states had access to out-of-state reports as part of their suite of EBT reports but did not review them often, while other states automatically received alerts if households consistently used benefits out of state over a certain extended period of time, such as 70 or 90 days. For example, officials from Massachusetts told us that they flag certain transactions to help ensure recipients comply with the state’s residency requirements for eligibility. Specifically, after a client spends their benefits out of state for 70 days or more, the state agency will send a letter asking the client to prove they are still a Massachusetts resident. Officials generally reported that tracking out-of-state transactions was most useful for finding potential dual participation—a household receiving benefits in two or more states.

Officials we interviewed in five of seven selected states reported conducting further, more sophisticated data analytics involving data mining—the active and recurring monitoring of EBT transactions using algorithms to detect and flag transactions that indicate potential recipient fraud, often on a real-time or near real-time basis. For example, officials told us that these states—the District of Columbia, Massachusetts, Mississippi, Washington, and Wisconsin—examined a range of indicators of potential recipient fraud. Some of the five selected states automated their data mining to monitor data for potential fraud indicators on a continuous, real-time basis.

In addition to data mining, some of these five states reported using other more advanced data analytics techniques, including mapping analysis and a form of predictive analysis to identify SNAP purchases that could indicate trafficking. For example, officials in the District of Columbia reported using location mapping to identify households that spent their benefits long distances from home. Officials we interviewed in Wisconsin reported developing an automated check intended to flag particular types of case characteristics indicative of potential fraud. According to the Wisconsin officials, if a particular case is flagged, a caseworker must follow up and provide extra scrutiny before the case can move forward in the eligibility process. As we previously reported, certain types of predictive data analytics can increase the effectiveness of anti-fraud programs by identifying particular types of potentially fraudulent behavior.

Selected States That Reported Conducting Additional Data Analytics Also Employed More Leading Practices and Cited Advantages in Using Data Analytics

Officials we interviewed in the five selected states that reported conducting additional data analytics—the District of Columbia, Massachusetts, Mississippi, Washington, and Wisconsin— employed more of GAO’s leading practices for data analytics than the two states that used data matching alone—New Mexico and North Dakota.

Organizational and leadership support. The five states with more sophisticated data analytics techniques all reported to us that they had organizational and leadership support for those activities. GAO’s leading practices state that to be effective, data-analytics initiatives need support across the program and, in particular, from program managers. Officials in these states cited support from executive and legislative state leadership for the use of data analytics to combat SNAP recipient fraud. For example, officials in Wisconsin reported that the governor’s office worked to centralize the agency’s data- analytics activities and support infrastructure to improve business processes. Officials in Mississippi told us that the state’s executive leadership fully supports the use of data to combat SNAP recipient fraud and that the state legislature in 2017 passed a law to assist in the identification of waste, fraud, and abuse.

Pursue external data. These states also reported to us that they were able to obtain external data necessary for their data analytics activities. For example, officials in Mississippi told us that they interface with an array of data sources, including the National Accuracy Clearinghouse, the state Department of Employment Security, and the state Department of Education, among others. GAO’s leading practices state that using data from other federal agencies or third-party sources can help managers identify potential instances of fraud. As we mentioned previously, the states that reported conducting additional matching beyond that required by federal law and regulation also reported using an array of federal, state, and third-party sources for these data matches.

Consider program rules or previously encountered schemes.

These five states also reported that they considered program rules and known or previously encountered fraud schemes to help design their data analytics practices, another of GAO’s leading practices for data analytics. These leading practices note that by using information on previously encountered fraud schemes or known fraud risks, managers can identify signs of fraud (i.e., red flags) that may exist within their data. For example, two states reported that they change their data analytics techniques in response to changing patterns of fraud.

All five selected states that reported conducting additional data analytics practices beyond data matching cited a number of associated advantages, including increased efficiency and effectiveness of their anti- fraud efforts.

Automating fraud detection. All five states reported that data analytics provided the advantage of automating the detection of potentially fraudulent activity. For example, officials in Mississippi noted that a new investigation management system implemented in their state would use algorithms to detect potential fraud and automatically generate flags, whereas in the past they had to examine transactions manually.

Financial savings. Four states reported that data analytics had the advantage of financial savings through the collection of overpayments and the closure of cases. For example, officials in Washington said that its data matching activities saved millions of dollars through the closure of cases. Officials in Mississippi reported that its overpayment collections increased $2 million since moving to a new investigation management system a few years ago that incorporates more data analytics techniques.

Prioritizing and enhancing investigations. Four states reported that data analytics helped them prioritize and enhance fraud investigations. For example, officials in Washington said that they had a system in place that used an algorithm to rank each fraud referral based on a number of factors and moved higher-risk referrals to the top of the list of investigations. Officials in Wisconsin said that they combined eligibility, transaction, and retailer data and analyzed it to produce a prioritized list of individuals who appeared most likely to have trafficked at a specific retailer, allowing them to focus their investigative resources on cases most likely to be fraud.

Preventing fraud. Finally, two states reported that data analytics had the advantage of improving the return on investment of anti-fraud activities through the prevention of fraud before it occurs. For example, officials in Wisconsin estimated that data analytics has helped them prevent a large proportion of fraud before it occurs, thereby improving the cost-benefit of their anti-fraud practices. Officials in Mississippi noted that data analytics can be an effective deterrent.

Selected States Reported Organizational and Resource Challenges in Effectively Using Data Analytics

Officials we interviewed in all seven selected states reported a range of organizational and resource challenges that either prevented them from using more advanced data analytics techniques or made their current data analytics practices difficult to implement.

Quantifying benefits of data analytics. Officials we interviewed in two states said it was challenging to quantify the benefits of data analytics, therefore resulting in a lack of sound evidence for supporting the utility of this type of work. For example, officials in Washington reported that it was difficult to conduct a cost-benefit analysis of data analytics because of the challenge of quantifying how often fraud is prevented before it occurs. Officials in Wisconsin reported that it attempted to measure future savings from fraud prevention but that there is no guidance for how to determine these savings.

Obtaining organizational support. Officials in two states reported that it was challenging to obtain sufficient organizational support for conducting data analytics. For example, officials in North Dakota reported that they could not say how much support exists in the state government to pursue additional resources for data analytics. Those in the District of Columbia noted that it is sometimes difficult to convince certain employees of the need for data analytics to detect fraud.

Appearing to criminalize legitimate use. Officials in three states said that a challenge to using more advanced data analytics was that it could appear to profile recipients or make it appear to the general public and to policy-makers that certain legitimate uses of SNAP benefits, such as using benefits out-of-state, were not allowed. For example, Washington tracked the number of replacement EBT cards as a possible indicator of fraud, but officials said that there were many cases in which the client had legitimate reasons for needing a high number of replacement cards, such as mental health issues or homelessness. Washington officials further noted the challenge of using demographic data in a predictive model, reporting that it puts them at risk of profiling even though it can be helpful. For example, when they examined recipients with high balances on their EBT cards, demographic information provided an explanation. In particular, elderly individuals were being frugal with their benefits.

Dealing with changing patterns of fraud. Officials we interviewed in three states said that a challenge to using data analytics was dealing with changing patterns of fraud. They said that the characteristics of transactions that may indicate potential fraud are constantly changing as fraudulent actors change their tactics in response to state enforcement. For example, officials in Mississippi said that recipients committing fraud might change from high-dollar to low-dollar transactions, in which case the state would need to adjust its monitoring accordingly.

Obtaining necessary data. Officials we interviewed also reported challenges with obtaining data needed to conduct data analytics. Officials in three states said that simplified reporting presents a challenge to using data analytics to detect potential recipient fraud. Specifically, simplified reporting made it challenging to use certain information as potentially indicative of fraud because recipients are not required to report certain changes—for example, a move out of state—until it is time for them to recertify for benefits. In addition, officials in three states reported a challenge in verifying necessary data in order for them to be considered reliable for use. For example, Massachusetts reported that one of the biggest challenges of developing investigative leads through data analytics is that not all data are considered equally reliable. For SNAP, FNS guidance defines some data matches as “verified upon receipt” if the match is with a primary or original source of the data (such as information on a government benefit provided by the administering agency, such as SSA). Eligibility workers can use this information without taking additional steps to verify that the data are accurate, according to FNS guidance. In contrast, data from a secondary source, defined in the guidance as not being verified upon receipt, require additional verification before the state agency can take action on an eligibility determination.

High costs and resource demands. Officials in six selected states cited the high costs and resource demands of using advanced data analytics techniques. For example, officials we interviewed in North Dakota, which conducted only data matching, said that they lacked the funding and staff resources to use more advanced techniques. Officials we interviewed in New Mexico noted that they lacked the staff resources to use data analytics. Officials from North Dakota said that they had the option to procure a data analytics tool, but said that the costs were prohibitively high. Officials in Wisconsin, which was employing more data analytics, said that they were not able to purchase access to a third-party data source using SNAP funding alone, and that they had to seek funding from another federal program in order to afford these efforts.

FNS Supported Certain States in Adopting Leading Practices for Data Analytics, but Assistance and Information Sharing Has Been Limited

FNS Helped Some States Adopt Certain Leading Practices for Data Analytics

FNS provided individualized assistance and training to several states across the country to build their capacity for data analytics on SNAP, consistent with several of GAO’s leading practices. FNS provided assistance through grants, pilot projects, and training at conferences. The pilot projects also informed FNS’s early efforts to help states improve their fraud prevention, detection, and investigation processes using data analytics. Specifically, in recent years, FNS’s assistance to states has aligned with 4 of the 10 leading practices for data analytics identified by GAO in its Fraud Risk Framework.

Ensure Employees Have Sufficient Knowledge, Skills, and Training

In fiscal years 2014 through 2017, FNS conducted a 10-state pilot project to identify and test promising practices in state fraud prevention and detection. As part of the project, each participating state received training and technical assistance in the use of data analytics, in addition to a review of its business processes. For example, officials from Utah, who participated in the pilot, said that FNS provided training to them on mining social media data. The officials added that the timing of the training was excellent because the state was beginning to build its capability for data analytics on its own. They said that their data analytics team has incorporated what they learned during the pilot and use various data analytic techniques every month. As a result, according to officials, the state’s overpayment collections increased.

In fiscal years 2014 and 2015, FNS awarded nine Recipient Trafficking Prevention Grants and five Recipient Integrity Information Technology Grants to a total of 13 states, some of which funded training and staff to perform SNAP data analytics. For example, in fiscal year 2014, Kentucky received a grant to purchase and receive training on an analytic tool with the ability to analyze data and capture posts coming from various social media sites. In fiscal year 2015, Alaska received a grant that included 3 months of training related to the installation of the state’s new fraud case management system that, among other things, would provide real-time data and automate manual processes to detect fraud and track cases. According to Alaska’s grant application, this would allow the state to devote more time to investigations, prosecutions, recoupment, and analysis and increase the number of completed investigations.

State officials we interviewed said that they also gained data analytics knowledge and skills from other states at conference workshops. For example, officials from North Dakota told us that they attended a conference presentation in which officials from another state discussed a performance measure that is designed to assess the savings associated with detecting SNAP fraud.

Combine Data Across Programs Within the Agency

FNS has provided grant funding and training to some states to help them combine data from different databases within the state to facilitate SNAP data analytics. For example, FNS’s fiscal year 2015 information technology grants helped five states develop centralized data systems and consolidate data from multiple outdated systems. Nevada received a grant to fund the acquisition of a new data system that, according to its grant application, would combine the state’s data on known SNAP fraud cases with transaction data and third-party data sets. The data on known fraud cases would be used to continuously refine data analyses to identify similar anomalies and patterns in the transaction data. Maine used its grant to acquire a new investigation case management system that consolidates data from multiple systems in a centralized repository. Similarly, New Jersey received a grant to acquire new computer systems that, according to its grant application, will integrate SNAP case management system data with data from several of the state’s data systems, allowing investigators to perform analyses in real time. In addition to the grants, in fiscal year 2016, FNS sponsored a 5-day course on fraud detection that demonstrated how states could combine eligibility data with transaction and other data to identify potential fraud. Officials from six states participated.

Pursue Access to External Data and Conduct Data Matching

FNS has provided grants to assist some states in accessing and using external sources for data matching. For example, in fiscal year 2014, FNS provided recipient trafficking prevention grants to three states—Florida, Nevada, and Ohio—to update the systems that they use to match their SNAP recipients and those that have been disqualified in the state with FNS’s national database of disqualified recipients. According to FNS, each grantee state planned to use the funds to link its system with FNS’s database through the web rather than using a “batch” processing system, which will allow them to match data on applicants at the time of application or recertification rather than at specific intervals after eligibility is determined. Florida officials mentioned in the related grant proposal that using the state’s current batch processing system meant that other states did not have real-time access to information about the state’s disqualified recipients, thereby potentially increasing the chance of an ineligible individual receiving benefits.

In addition, FNS administered a grant on behalf of OMB, which funded a pilot program for five southeastern states to develop the National Accuracy Clearinghouse (NAC), a data sharing system that allows participating states to identify applicants who are receiving benefits in the partnering states in near-real time. According to one state official, a primary benefit of the NAC is that it enables each participating state to match data on individual beneficiaries across five states without having to connect to five different states’ computer systems. One member of the NAC consortium from Florida said that the ability to match in near-real time is helpful because the data available in the PARIS system is older and would only identify individuals potentially receiving benefits in multiple states months after they have occurred, rather than at the time of application. As we have previously reported, data on benefit receipts is updated quarterly in PARIS.

Conduct Data Mining

FNS has funded pilot projects, training, and grants to assist some states in developing their capacity for data mining to identify potential fraud. FNS’s 10-state pilot to test advanced data analytics techniques included the use of data mining, among other data analytic techniques. One of the techniques involved mining recipient transaction data for households that had shopped at disqualified retailers to develop a prioritized list of retailers and recipients to investigate. According to state officials we interviewed in Wisconsin, the technique automated a time and labor intensive process that state analysts had previously performed manually. The pilot project also used other data mining techniques to develop profiles of recipients who commit fraud. For instance, in Utah, the data analysis showed that they are more likely to have multiple replacement EBT cards and make more purchases from small stores than other recipients. At the end of the pilot, FNS sponsored a training course that included detailed instruction on data mining.

Although past efforts by FNS have been limited to some states and encouraged some leading practices, more recently, in May 2018, FNS released a SNAP Fraud Framework that provides more comprehensive guidance to help states adopt all of GAO’s 10 leading practices for data analytics. Specifically, FNS’s SNAP Fraud Framework provides a collection of examples, promising practices, and procedures to help state agencies with the prevention and detection of SNAP fraud that encompass all 10 data analytics leading practices from GAO’s Fraud Risk Framework. (For a comparison of the practices in the two frameworks, see appendix III.) According to FNS officials, the SNAP Fraud Framework is meant to take a holistic, integrated approach to fraud, including data analytics, but they recognize that states differ in their readiness to adopt analytics. The framework’s data analytics section provides a range of approaches, examples, case studies, and methods that allow all states to begin embedding analytics into their processes. FNS officials reported that they began conducting outreach to state officials about the framework in the summer of 2018. FNS officials said that they are also considering using grant funds to assist states with the implementation of components of the framework. Furthermore, FNS officials said that some of the potential technical assistance may include showing states how to develop their own analytic tools.

FNS has also developed a maturity assessment to evaluate each state’s capacity to implement the various components of the fraud framework. It includes a state’s use of data analytics for fraud detection and investigations, and its learning and development opportunities for stakeholders who use the results of data analytics, such as investigators, hearing officials, and court officials. According to FNS officials, FNS’s regional offices will conduct maturity assessments as part of management reviews by the end of fiscal year 2018.

FNS’s Assistance on Developing Data Analytics Capabilities Has Reached a Limited Number of States

Although FNS has assisted some states in developing their data analytic capabilities, the methods it has used to do so were meant to reach only a limited number of states. Specifically, much of FNS’s direct assistance to states came in the form of pilot projects, competitive grants, or conferences. According to officials, FNS is in the early stages of promoting states’ use of data analytics for SNAP fraud prevention and detection, and its efforts have focused on assessing the current capacity of states to use data analytics and determining analytic practices that are effective. Furthermore, FNS’s efforts generally had specific end dates and did not provide ongoing assistance to reach a broader group of states and provide them with the knowledge and tools to develop and maintain their data analytics efforts. (See table 5 for more information on the reach of FNS’s direct assistance efforts.)

Although FNS provided some training on using data analytics, it was not conducted on a recurring basis, and state officials we interviewed expressed concerns about their access to information on successful data analytics approaches. Officials we interviewed in five of our seven selected states said that they attended FNS conferences that provided training in data analytics and participated in regional discussions on the topic; however, these events were provided occasionally and limited to states within the region. State officials said that participating in conferences in which they could learn from other states’ experiences was particularly helpful, and they wanted more opportunities to do so. State officials also told us that it would be beneficial if FNS took a more active role in disseminating states’ successful practices, particularly with regard to data analytics. Further communications about data analytics would be consistent with federal internal control standards that call for agencies to communicate necessary quality information to external parties in order to achieve the agency’s objectives. Federal agencies can support external parties, such as state agencies, in achieving the federal agency’s objectives by sharing information on effective practices used by the program or other external parties.

Furthermore, officials we interviewed in selected states most frequently cited high costs and resource demands as a challenge to using advanced data analytics techniques. Although FNS has provided some financial support to state efforts, officials in two states that we reviewed told us that they were not always able to sustain efforts beyond the life of the FNS pilot or grant. For example, officials we interviewed from Wisconsin said that FNS’s contractor for the 10-state pilot, in an effort separate from the contract, developed a tool that identified SNAP purchases made from disqualified SNAP retailers. Although the state officials found the tool to be highly efficient because it could sift through large amounts of data, the tool was only available to the state for a fee, which they said it could not afford. Similarly, officials from Washington told us that as part of a recipient trafficking prevention grant, the state was able to hire two investigators to detect potential SNAP fraud that may be occurring via social media. However, according to state officials, the state was unable to maintain the effort after the grant ended.

In our prior work on establishing data analytic programs to address fraud, we noted that one way to handle resource challenges is to identify opportunities that leverage a program’s existing capabilities. In September 2016, GAO convened a forum of data-analysis experts to discuss considerations for entities establishing and refining data analytics programs, during which the costs of such programs were raised. Panelists, which included officials from FNS, noted that in developing a data analytics program, an entity should consider ways of leveraging resources throughout the entity. For example, panelists suggested that an entity could improve its data analytics group by combining a data warehouse from one department with existing statistical software from another and incorporating it with its current fraud-prevention system. The forum also suggested that a data analytics group should look across the agency to find staff that may have an interest or experience in working with data. Panelists noted that such efforts may be improved by seeking staff from a diverse set of positions and perspectives, including auditors, evaluators, investigators, and attorneys.

Similarly, some state officials we interviewed shared creative ways to leverage existing resources. For example, officials from Florida and Wisconsin stated that they were able to leverage recovered funds from other programs to purchase access to a commercial database that matches eligibility data for individuals across related programs. In Mississippi, officials said that they used SNAP transaction data to identify individuals living out of state and then determine whether those individuals were ineligible for both SNAP and other assistance programs. By combining data and analyses across two programs, the state officials said that they were able to close more cases and significantly increase cost savings.

However, other state officials noted that leveraging resources, especially data, poses challenges that states will need to learn how to resolve. Specifically, some states reported facing problems sharing data across different systems and with restrictions on sharing sensitive personal information. For example, officials representing four states from the American Association of SNAP Directors (AASD) told us that, for states to leverage data, SNAP states’ data systems need to be integrated across states. However, in their view, the cost of integration may exceed the benefits from integrating the data. In addition, state officials said that in order to leverage personal data, some states as well as programs in the same state will need to reach agreements that define how data will be extracted and used while protecting privacy. For example, a Wisconsin official told us that its data analytics group has difficulty acquiring data across programs within the state because of confidentiality and privacy rules as well as the difficulty of reaching data-sharing agreements with other programs.

Moving forward, FNS’s SNAP Fraud Framework, combined with its maturity assessment, will form the core of FNS’s efforts to assist states with data analytics in a broad-based, systematic manner. According to FNS officials, the agency will be conducting outreach to states about the fraud framework and assessing both states’ capacities in data analytics and barriers to gaining the necessary knowledge and tools for developing and maintaining those efforts.

Conclusions

To ensure that SNAP funds are used for the purposes for which they were intended, both the federal government and state agencies should have appropriate controls for detecting and addressing fraud. The use of data analytics, such as mapping and predictive analysis, may help SNAP agencies increase program integrity and improve administrative efficiency. Data mining and data matching techniques can help identify potential SNAP fraud, and predictive models can help identify characteristics of SNAP traffickers. Our use of analytics on SNAP out-of- state transaction data from three selected states identified only slight differences between those households who shopped out of state and those who did not, suggesting that analyses of other data elements that have been shown to be indicative of potential trafficking may allow states to better identify potential trafficking and, thereby, better target resources.

Although FNS has efforts underway to promote the use of data analytics to improve SNAP fraud detection through its fraud framework and maturity assessment, officials in our selected states cited challenges with accessing and maintaining needed resources such as staff, technology, and tools. While these challenges may limit states’ ability to implement data analytics, some of our selected states have successfully overcome such challenges to implement or enhance data analytics programs. For example, two states described leveraging recovered funds and reinvesting them to combat fraud. Another state leveraged transaction data across two programs, resulting in financial savings and enhanced collections, which could be reinvested to combat fraud. As FNS conducts outreach to help states implement its fraud framework and uses its maturity assessment to assess states’ anti-fraud capabilities, it has an opportunity to regularly assist states with adopting advanced data analytic techniques. Based on the experiences described by state officials, finding ways that states can leverage existing resources to improve their data analytic capabilities may be an important part of any solution. In its role as the federal oversight agency, FNS is in a position to collect and widely disseminate information about those states that have built support for data analytics and leveraged existing resources to implement or expand their data analytics programs to states seeking such examples. With wider dissemination of these examples of state successes, all state SNAP agencies could be better positioned to enhance their own efforts to identify and address SNAP fraud.

Recommendation for Executive Action

Building on ongoing efforts, the Administrator of FNS should develop and implement additional methods to widely distribute information to state agencies on an ongoing basis about successful efforts to adopt data analytics and strategies to leverage existing data, technology, and staff resources to enhance data analytics. (Recommendation 1)

Agency Comments and Our Evaluation

We provided a draft of this product to the U.S. Department of Agriculture for comment. In oral comments on September 14, 2018, FNS officials from SNAP’s Program Accountability and Administration Division and the Deputy Associate Administrator for SNAP agreed with our recommendation. They noted that they have been moving in the general direction of this recommendation and would build on current efforts to address it but noted that state readiness and technical capabilities are limiting factors in the adoption of data analytics. FNS also provided technical comments, which were incorporated into the report as appropriate.

As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to relevant congressional committees, the Secretary of Agriculture, the FNS Administrator, and other relevant parties. In addition, the report will 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 LarinK@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 that made key contributions to the report are listed in appendix IV.

Appendix I: Objectives, Scope, and Methodology

The objectives of this report were to review the following: (1) the extent to which SNAP households in selected states are making out-of-state purchases that may indicate potential recipient fraud; (2) the extent to which selected states are using data analytics—including those applied to out-of-state transactions—to find potential SNAP recipient fraud, and what advantages and challenges, if any, have they experienced doing so, and (3) how FNS has assisted states in implementing leading practices for data analytics for fraud detection. To address these objectives, we primarily focused on federal and state SNAP recipient anti-fraud work since the beginning of fiscal year 2015—the period which follows our August 2014 report on SNAP recipient fraud. 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 and obtained relevant documentation.

To assess the extent that SNAP households in selected states made out- of-state purchases that may indicate potential recipient fraud, we analyzed all out-of-state purchase data nationwide and we analyzed transaction data for SNAP households in the District of Columbia and two states–North Dakota and Washington. We selected these states as they were among the top states for out-of-state spending in a non-border state in fiscal years 2015 and 2016, the two most recent years’ of SNAP data available when we started this review. We obtained SNAP transaction data from FNS for all participating households in the three selected states, and analyzed fiscal year 2017 data for households that spent all their benefits in a non-border state in that year. We also analyzed fiscal year 2017 data for all households in these three states for purchases that may indicate trafficking, based on common suspicious transaction types. We tested the transaction data for ten different suspicious transaction types that have been used by FNS and state SNAP officials to identify potential trafficking. While the transactions we flagged for potential trafficking in our three selected states are generally deemed potential indicators of fraud by SNAP officials, there could also be legitimate reasons for these purchases and they do not prove trafficking. For that reason, our analysis focused on households with a greater frequency of questionable purchases in fiscal year 2017 indicating potential trafficking—specifically purchases that resulted in 20 or more trafficking flags. We assessed the reliability of SNAP transaction data used in analyses through review of related documentation, interviews with knowledgeable officials, and electronic testing of the data, and found them to be sufficiently reliable for our purposes.

To determine how selected state agencies are using data analytics to identify potential SNAP recipient fraud, we interviewed officials from seven state SNAP agencies about their efforts. We obtained related documentation when available. We selected the District of Columbia, Massachusetts, Mississippi, New Mexico, North Dakota, Washington, and Wisconsin to reflect a range of experiences based on the percentage of non-border state transactions, receipt of related technical assistance, geographic region, and FNS’s reports on their capacity to conduct data analysis. We interviewed state SNAP agency officials who oversee anti- fraud practices in each of our seven selected states. During each interview, we collected information on each state’s data analytics activities and whether they have implemented leading practices for data analytics from GAO’s Fraud Risk Framework. We also discussed the advantages and challenges of using data analytics. While information from these seven state SNAP agencies is non-generalizable, it provided illustrative examples of agencies’ efforts to use data analytics.

To determine the degree to which FNS has assisted states in developing the use of data analytics, we reviewed grant documentation FNS awarded to states to help prevent recipient trafficking or improve technology used to improve program integrity. We also reviewed the terms of work for a contract FNS awarded to a private consulting firm to conduct a pilot project with 10 states during fiscal years 2014-2017, as well as reports delivered by the contractor detailing the results of the work. In addition, we reviewed a guide to data analytics that FNS developed for a 5-day training session in August 2016, as well as the data analytics “maturity assessment” questionnaire that is intended for FNS regions to use to assess the capacity of the states. We also obtained and reviewed FNS’s SNAP Fraud Framework and Supplementary Materials that was released in May 2018. After developing an inventory of how FNS has assisted states in assessing and developing its data analytic capacity, we analyzed FNS’s actions with respect to GAO’s set of leading practices for data analytics from GAO’s Fraud Risk Framework and GAO’s standards for internal control. We also analyzed FNS’s SNAP Fraud Framework to assess the degree to which it addressed GAO’s leading practices on how to use data analytics to detect, prevent, and investigate SNAP fraud. Unless specified, we reviewed only data analytic activities that occurred since the beginning of fiscal year 2015, which marks the end of our previous analysis of FNS’ anti-fraud activities concerning the SNAP program. To obtain FNS’ views, we interviewed SNAP program officials at both headquarters and at each of SNAP’s seven regional offices. To obtain a broader perspective on the use of data analytics across states, we interviewed officials representing the American Association of SNAP Directors (AASD) and the United Council on Welfare Fraud (UCOWF). AASD representatives included officials from the SNAP anti-fraud units for California, New York, Tennessee, and Texas. UCOWF representatives included officials from Florida, Louisiana, and Utah. In addition, we interviewed the Deputy Executive Director of American Public Human Services Association, AASD’s parent organization, and officials representing USDA’s Office of Inspector General.

We conducted this performance audit from May 2017 through October 2018 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.

Appendix II: Out-of-state SNAP Spending By State, Fiscal Year 2017

In fiscal year 2017, the share of SNAP benefits spent out of state varied by state from approximately 1 percent to 13 percent, with most out-of- state purchases made in a border state. States whose SNAP recipients had the highest percent of out-of-state purchases included Delaware, District of Columbia, Idaho, Nebraska, New Mexico, Rhode Island, South Dakota, Tennessee, Vermont, and West Virginia. All of these states made at least 5 percent of total purchases out of state. The states with the lowest percent of out-of-state spending by SNAP recipients included Alaska, California, Florida, Hawaii, Michigan, and Texas (see fig. 5). Detailed information on out-of-state spending by SNAP recipients, by state, is also provided in table 6 below.

Appendix III: Leading Practices for Data Analytics and FNS’s 2018 SNAP Fraud Framework Comparison

In May 2018, FNS released a fraud framework that provides guidance to help states adopt all of GAO’s leading practices for data analytics. The table below compares guidance in FNS’s SNAP Fraud Framework to the leading practices in GAO’s Fraud Risk Framework.

Appendix IV: GAO Contacts and Staff Acknowledgments

GAO Contacts

Staff Acknowledgments

In addition to the contacts named above, the following staff members made key contributions to this report: Danielle Giese and Philip Reiff, Assistant Directors; Celina Davidson and Lara Laufer, Analysts-in- Charge; Camille A. Keith; Kelly Snow; and Daren Sweeney. Also contributing to this report were Susan Aschoff, James Bennett, Alexander Galuten, James Murphy, Almeta Spencer, and Shana Wallace.