Nutrition Assistance: Actions Needed to Address Potential Online Sales of Infant Formula
Released: 2015-05-19T00:00:00

Letter

Background

Established as a national program in the mid 1970s, WIC is intended to improve the health status of low-income pregnant and postpartum women, infants, and young children by providing supplemental foods and nutrition education to assist participants during critical times of growth and development. Pregnant and post-partum women, infants, and children up to age 5 are eligible for WIC if they are found to be at nutritional risk and have incomes below certain thresholds. According to USDA, research has shown that WIC helps to improve birth and dietary outcomes and contain health care costs, and USDA considers WIC to be one of the nation’s most successful and cost-effective nutrition intervention programs.

WIC Food Benefits

WIC participants typically receive food benefits—which may include infant formula—in the form of paper vouchers or checks, or through an electronic benefit transfer card, which can be used to purchase food at state-authorized retail vendors. USDA has established seven food packages that are designed for different categories and nutritional needs of WIC participants. Authorized foods must be prescribed from the food packages according to the category and nutritional needs of the participants. USDA recently revised the food packages to align with current nutrition science, largely based on recommendations of the National Academies’ Institute of Medicine.

Infants who are not exclusively breastfeeding can receive formula from WIC until they turn 1 year of age. While federal regulations specify the maximum amount of formula different categories of infants are authorized to receive, state and local agency staff also have some flexibility in determining precise amounts to provide, depending on an infant’s nutritional needs. Staff at local WIC agencies play a critical role in determining infants’ feeding categories, and they have the authority to provide them with less formula than the maximum amount allowed for each category, if nutritionally warranted. Nutrition specialists, such as physicians or nutritionists, working at the local agency perform nutritional assessments for prospective participants as part of certification procedures. They use the nutritional assessment information to appropriately target food packages to participants.

WIC Program Oversight and Administration

USDA’s role in operating WIC is primarily to provide funding and oversight, and state and local WIC agencies are charged with carrying out most administrative and programmatic functions of the program. Specifically, USDA provides grants to state agencies, which use the funds to reimburse authorized retail vendors for the food purchased by WIC participants and to provide services. As part of its federal monitoring and oversight obligations, USDA annually reviews the state plan for each state WIC agency, which provides important information about the agency’s objectives and procedures for all aspects of administering WIC for the coming fiscal year. For their part, state agencies are responsible for developing WIC policies and procedures within federal requirements, entering into agreements with local agencies to operate the program, and monitoring and overseeing its implementation by these local agencies.

The WIC oversight structure is part of the program’s internal controls, which are an integral component of management. Internal control is not one event, but a series of actions and activities that occur on an ongoing basis. As programs change and as agencies strive to improve operational processes and implement new technological developments, management must continually assess and evaluate its internal controls to assure that the control activities being used are effective and updated when necessary. Management should design and implement internal controls based on the related cost and benefits. Effective internal controls include: (1) communicating information to management and others to enable them to carry out internal control and other responsibilities and (2) assessing the risks agencies face from both external and internal sources.

National Data on Online Sales of WIC Infant Formula Are Unavailable, but Evidence Suggests Some Participants Attempt Them

USDA does not have data that can be used to determine the national extent of online sales of WIC formula, and department officials told us that USDA has not conducted a comprehensive study to assess these sales. According to the officials, the department does not collect data on this issue, in part because it is not the department’s responsibility to sanction WIC participants for program violations. Rather, they said, it is the responsibility of state agencies to establish procedures to prevent and address participant violations, including attempts to sell WIC food benefits.

According to state officials, states’ monitoring efforts have revealed some WIC formula offered for sale online. Of the officials we spoke to from 12 states, those from 5 states said that they have found WIC formula offered for sale online by participants. Officials in 3 of these states said that they have found fewer than 0.5 percent of their WIC participants attempting these sales online. Officials in 2 other states did not estimate percentages but stated that the incidence is low.

Consistent with these state accounts, our own monitoring of a popular e- commerce website for 30 days in four large metropolitan areas found few posts in which individuals explicitly stated they were attempting to sell WIC-provided formula. Specifically, we identified 2,726 posts that included the term “formula,” and 2 of these posts explicitly stated that the origin of the formula was WIC. In both posts, the users indicated they were selling the WIC formula because they had switched to different brands of formula.

A posting from late June 2014 included the container size in the title and stated: “I am looking to sell 5 [brand name] 12.5oz cans (NOT OPENED) because is super picky and does not want to drink it no matter what i do. will drink the kind for some reason. I told my WIC office to switch me to another brand but they say it might take 3 months. Im asking 35$ but best offer will do since the brand I buy is from so Im not looking to make a profit here if you consider each can is 16$ at the store. please text if interested!! A posting from early July 2014 included the brand, type, and container size in the title and stated: “I have 7 powder cans of they dnt expire for another year at least just got them from my wic n we ended up switching formulas so its $65.oo for pick up all 7 cans or $70 if i have to drive.”

From the same e-commerce website, we also identified 481 posts, of which any number could have been advertising WIC-provided formula. However, these posts did not state that the advertised formula was from WIC, and while the formula offered for sale was generally consistent with formula provided through WIC, we could not identify it as such. Specifically, during our 30 days of monitoring formula advertisements, we applied a number of criteria to narrow the broad pool of advertisements to identify those that may have been selling WIC formula. First, because state agencies are generally required to award single-source contracts for WIC formula, we searched for posts advertising formula brands that matched the state-specific WIC-contracted brand. We found that about three-quarters (2,013 posts) fit this criterion. We then reviewed each of these posts and determined that 346 of the posts fit each of three additional criteria, which we chose because they are generally consistent with WIC formula provided to infant participants. 1. The formula type, such as soy or sensitive, advertised for sale was equivalent to one of the types provided to WIC participants in the state in which the posting was made. 2. The volume of the formula container advertised was equivalent to the volume of one of the containers provided to WIC participants in the state in which the posting was made. 3. The amount of formula advertised represented a large proportion of the maximum amount of formula authorized to be provided to fully formula- fed WIC infant participants each month, averaged across all ages.

Beyond the 346 posts that matched these three criteria, we found another 135 that met at least one, but not all, of the criteria. However, since we did not investigate any of these posts further, we do not know if any or all of these 481 posts were attempts to sell WIC formula.

A posting from mid-June 2014 stated: “$10 a can! 14 -12.9 oz Cans of [brand name and type] Formula. Expiration Date is - July 1, 2015. Please take it all. I will not separate the formula! NOT FROM WIC!!! is now 14 months and no longer needs this. Email only please A posting from mid-June 2014: “ Turn A Year Already, and we Just bought her 7 Brand New Cans of . She no longer needs Formula. Selling each Can for $10. Brand New, NOT Open. 12.4 Oz. EXP. 1 March. 2016.”

Through our monitoring efforts, and through interviews with USDA and state and local WIC officials, we identified a number of key challenges associated with distinguishing between WIC-obtained formula sales and other sales:

Each state’s specific WIC-contracted formula brand is typically available for purchase at retail stores by WIC participants and non- WIC participants alike, without an indicator on the packaging that some were provided through WIC.

There are a number of reasons why individuals may have excess formula. For example, a WIC participant may obtain the infant’s full monthly allotment of formula at one time; alternatively, non-WIC parents may purchase formula in bulk at a lower cost to save money. In either case, if the infant then stops drinking that type of formula, parents may attempt to sell the unused formula.

Individuals posting formula for sale online are able to remain relatively anonymous, so WIC staff may not have sufficient information to link the online advertisement with a WIC participant. According to one WIC official we spoke with, staff in that state identify approximately one posting a week with sufficient detail about the seller—such as name or contact information—for staff to pursue. A WIC official from another state said that staff previously used phone numbers to identify WIC participants posting formula for sale, but they believe participants then began to list other people’s phone numbers on posts.

Advertisements for infant formula sales can be numerous online, and formula for sale originates from varied sources. For example, through our literature search, we found multiple news reports on stolen infant formula advertised for sale online.

USDA Has Assisted States in Preventing and Addressing Online Sales, but Monitoring Guidance is Lacking

USDA has taken steps aimed at clarifying that the online sale of WIC benefits is a participant violation. For example, in 2013, USDA proposed regulations that would expand the definition of program violation to include offering to sell WIC benefits, specifically including sales or attempts made online. Earlier, in 2012, USDA issued guidance to WIC state agencies clarifying that the sale of, or offer to sell, WIC foods verbally, in print, or online is a participant violation. This guidance stated that, in accordance with federal regulations, USDA expects states to sanction and issue claims against participants for all program violations, but it did not provide direction on ways to prevent online sales of WIC foods, including formula. That same year, USDA also sent letters to four e-commerce websites—through which individuals advertise the sale of infant formula—requesting that they notify their customers that the sale of WIC benefits is prohibited, and two of the companies agreed to post such a notification.

More generally, USDA has highlighted the importance of ensuring WIC program integrity through guidance issued in recent years aimed at encouraging participants to report WIC program fraud, waste, and abuse to the USDA Office of the Inspector General (OIG). For example, in 2012, USDA disseminated a poster developed by the OIG and attached it to a guidance document describing its purpose, which includes informing WIC participants and staff how to report violations of laws and regulations relating to USDA programs. The following year, USDA issued additional guidance that encouraged states to add contact information for the OIG to WIC checks or vouchers, or to their accompanying folders or sleeves. USDA indicated that both guidance documents were intended to facilitate participant reports of suspected fraud, waste, and abuse to the OIG, but neither specifically directed states to publicize the fact that attempting to sell WIC benefits, either online or elsewhere, qualifies as an activity that should be reported.

Although WIC regulations require that state agencies establish procedures to control participant violations, we found that states vary in whether their required procedures include informing participants of the prohibition against selling WIC formula. The WIC regulations require that all participants (or their caretakers) be informed of their rights and responsibilities and sign a written statement of rights and obligations during the certification process. The regulations also require certain program violations to be included in the information provided on rights and responsibilities. However, according to USDA officials, the sale of WIC food benefits is not required to be included, nor do the regulations require participants be informed of this violation through other means. In our review of rights and responsibilities statements from 25 states’ WIC policy and procedure manuals, we found that 7 did not require local agency staff to inform participants that selling WIC benefits is against program rules. Inconsistent communication to participants about this violation conflicts with federal internal control standards, and participants who are unaware of this prohibition may sell excess formula online, thus inappropriately using program resources. Based on these findings, we recommended in our December 2014 report that USDA instruct state agencies to include in the rights and responsibilities statement that participants are not allowed to sell WIC food benefits, including online. USDA agreed with this recommendation, and in April 2015, department officials reported that they intend to revise WIC regulations to require state agencies to include in participant rights and responsibilities statements the prohibition against selling WIC food benefits online. In the interim, USDA included this as a best practice in the 2016 WIC State Plan guidance it disseminated to state agencies on April 6, 2015. Department officials indicated that USDA expects states to move forward on this action and not wait for regulations.

In addition, we found that states vary in the ways they identify attempted sales of WIC formula through monitoring efforts, and USDA has not collected information on states’ efforts to address these sales. Of the officials that we spoke to from 12 states, those from 9 states mentioned that they regularly monitor online advertisements. However, the method of monitoring and the level of effort devoted to this activity varied across states. For example, officials in one state said that a number of staff within the state office, as well as a number of those in local agencies, search social media websites daily. In contrast, officials from another state said that staff spend about a half day each week monitoring online sites for attempted sales of WIC food benefits, and an official from a different state said that staff monitor for such sales only when time allows. A USDA official told us that the department would like to provide more support to states in pursuing likely cases of participant fraud related to the online sale of WIC food benefits, but it has not yet determined how to be of assistance.

USDA officials indicated they believe states are monitoring attempted sales of WIC formula online to identify this participant violation; however, the department has not gathered information on the status of state efforts to address online sales. Although USDA officials review each WIC state plan annually to ensure that it is consistent with federal requirements, a state’s procedures for identifying participant violations are not among the required elements for WIC state plans included in federal statute and regulations. Because USDA does not require that state agencies document their procedures for identifying participant sales of WIC foods, including online sales of infant formula, USDA does not know whether or how states are working to ensure program integrity in this area. The fact that the department does not work more directly with states on this issue is also inconsistent with federal internal control standards. We recommended in our December 2014 report that USDA require state agencies to articulate their procedures for identifying attempted sales of WIC food benefits in their WIC state plans and analyze the information to ascertain the national extent of state efforts. USDA agreed with this recommendation, and department officials reported in April 2015 that they intend to revise WIC regulations to require state agencies to include in state plans their procedures for identifying attempted sales of WIC food benefits. In the interim, USDA included this as a best practice in the 2016 WIC State Plan guidance it disseminated to state agencies on April 6, 2015.

USDA and the states also lack information to determine cost-effective approaches for monitoring these attempted sales. According to USDA, state, and local WIC officials, because of the various challenges state WIC staff face in distinguishing between WIC-obtained formula sales and other sales, the return on investment for monitoring these sales is low. One USDA official noted that it is difficult for states to prove that participants are selling WIC food benefits, which increases the amount of time and effort state staff need to spend to address these cases. Officials from one state WIC agency and one local WIC agency we spoke to said that efforts by state and local agency staff to identify and address online WIC formula sales result in few confirmed cases and draw away scarce resources from other aspects of administering the program. One USDA official said that states that sanction a participant for attempting to sell WIC formula without sufficient evidence that it occurred will likely have the violation overturned during the administrative appeal process. These cases also appear unlikely to result in court involvement, as when we asked the 19 officials from 12 states how these cases were addressed, only one said that a couple had gone through the legal system. Federal internal control standards state that agencies should design and implement internal controls based on the related costs and benefits. According to USDA, because of the substantial risks associated with improper payments and fraud related to WIC vendor transactions, both USDA and the states have focused their oversight efforts in recent years on addressing vulnerabilities in the management of this area, rather than focusing on possible participant violations. However, because the use of the Internet as a marketplace has substantially increased in recent years and the national extent of online sales of WIC food benefits is unknown, USDA and the states have insufficient information to assess the benefits of oversight efforts related to this participant violation. Because of this, we recommended in our December 2014 report that USDA collect information to assess the national extent of attempted online sales of WIC formula benefits and determine cost-effective techniques states can use to monitor online classified advertisements. USDA agreed with this recommendation, and department officials reported in April 2015 that they plan to explore ways to assess the extent of online sales of WIC formula and identify and share best practices, cost- effective techniques, or new approaches for monitoring online advertisements with state agencies. To do this, they noted that they will draw on funds designated for addressing high-priority programmatic issues. We believe this approach will help states to strike the appropriate balance of costs and benefits when determining how to target their program integrity resources.

Chairman Rokita, Ranking Member Fudge, and Members of the Subcommittee, this completes my prepared statement. I would be pleased to respond to any questions you may have at this time.

GAO Contact and Staff Acknowledgements

If you or your staff have any questions about this statement, please contact Kay E. Brown, Director, Education, Workforce, and Income Security, at 202-512-7215 or brownke@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this statement include Sarah Cornetto, Aimee Elivert, Rachel Frisk, and Sara Pelton.

This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.