Supplemental Nutrition Assistance Program: Observations on Employment and Training Programs and Efforts to Address Program Integrity Issues
Released: 2018-05-09T00:00:00

Letter

Background

USDA’s Food and Nutrition Service (FNS) is responsible for promulgating SNAP program regulations, ensuring that state officials administer the program in compliance with program rules, and authorizing and monitoring retailers from which recipients may purchase food. States are responsible for determining applicant eligibility, calculating the amount of their benefits, issuing benefits on Electronic Benefit Transfer (EBT) cards—which can be used like debit cards to purchase food from authorized retailers—and investigating possible program violations by recipients.

SNAP Work Requirements

SNAP recipients are subject to various work requirements. Generally, all SNAP recipients ages 16 through 59, unless exempted by law or regulation, must comply with work requirements, including registering for work, reporting to an employer if referred by a state agency, accepting a bona fide offer of a suitable job, not voluntarily quitting a job or reducing work hours below 30 hours a week, and participating in a SNAP E&T program or a workfare program—in which recipients perform work on behalf of the state—if assigned by the state agency. SNAP recipients are generally exempt from complying with these work requirements if they are physically or mentally unfit, responsible for caring for a dependent child under age 6 or an incapacitated person, employed for 30 or more hours per week or receive weekly earnings which equal the minimum hourly rate set under federal law multiplied by 30, or are a bona fide student enrolled half-time or more in any recognized school training program, or institution of higher education, amongst other exemptions. SNAP recipients subject to the work requirements—known as work registrants— may lose their eligibility for benefits if they fail to comply with these requirements without good cause.

One segment of the work registrant population, SNAP recipients ages 18 through 49 who are “able-bodied,” not responsible for a dependent child, and do not meet other exemptions—able-bodied adults without dependents (ABAWDs)—are generally subject to additional work requirements. In addition to meeting the general work requirements, ABAWDs must work or participate in a work program 20 hours or more per week, or participate in workfare, in which ABAWDs perform work to earn the value of their SNAP benefits. Participation in SNAP E&T, which is a type of work program, is one way for ABAWDs to meet the 20 hour per week ABAWD work requirement, but other work programs are acceptable as well. Unless ABAWDs meet these work requirements or are determined to be exempt, they are limited to 3 months of SNAP benefits in a 36-month period.

At the request of states, FNS may waive the ABAWD time limit for ABAWDs located in certain areas of a state or an entire state under certain circumstances. A waiver may be granted if the area has an unemployment rate of over 10 percent or there are an insufficient number of jobs to provide employment for these individuals. If the time limit is waived, ABAWDs are not required to meet the ABAWD work requirement in order to receive SNAP for more than 3 months in a 36-month period yet they must still comply with the general work requirements.

SNAP Employment and Training Programs

Federal requirements for state SNAP E&T programs were first enacted in 1985 and provide state SNAP agencies with flexibility in how they design their SNAP E&T programs, including who to serve and what services to offer. The state has the option to offer SNAP E&T services on a voluntary basis to some or all SNAP recipients, an approach commonly referred to as a voluntary program. Alternatively, the state can require some or all SNAP work registrants to participate in the SNAP E&T program as a condition of eligibility, an approach commonly referred to as a mandatory program. Further, states determine which service components to provide participants through their SNAP E&T programs, although they must provide at least one from a federally determined list. This list includes job search programs, job search training programs, workfare, programs designed to improve employability through work experience or training, education programs to improve basic skills and employability, job retention services, and programs to improve self-sufficiency through self- employment. Total federal expenditures on SNAP E&T programs were more than $337 million in fiscal year 2016. States are eligible to receive three types of federal funding available for state SNAP E&T programs: 100 percent funds—formula grants for program administration, 50 percent federal reimbursement funds, and ABAWD pledge funds—grants to states that pledge to serve all of their at-risk ABAWDs.

SNAP Program Integrity

The Office of Management and Budget has designated SNAP as a high- priority program due to the estimated dollar amount in improper payments—any payments that should not have been made or were made in an incorrect amount (including overpayments and underpayments) under statutory, contractual, administrative, or other legally applicable requirements. According to USDA’s fiscal year 2015 agency financial report, $2.6 billion, or 3.66 percent, of all SNAP benefits paid in fiscal year 2014 were improper, the most recent year for which data are available. SNAP improper payments are caused by variances in any of the key factors involved in determining SNAP eligibility and benefit amounts, and, according to USDA, household income was the most common primary cause of dollar errors. States review the accuracy of SNAP payments to recipients on an ongoing basis, and FNS assesses the accuracy of state reviews and determines a national improper payment rate annually.

FNS and states share responsibility for addressing SNAP fraud, which can occur through the eligibility process and when benefits are being used. Specifically, recipients may commit eligibility fraud when they misrepresent their household size, income, or expenses in order to fraudulently obtain SNAP benefits. Another type of fraud—trafficking— occurs when recipients exchange benefits with authorized retailers or other individuals for cash or non-food items (e.g. rent or transportation). In a typical retailer trafficking situation, for example, a retailer may charge $100 to a recipient’s EBT card and give the recipient $50 in cash instead of $100 in food. The federal government reimburses the retailer $100, which results in a fraudulent $50 profit to the retailer.

State agencies are directly responsible for preventing, detecting, investigating, and prosecuting recipient fraud, including eligibility fraud and trafficking by SNAP recipients, under the oversight and guidance of FNS. States play a key role in preventing fraud when determining eligibility for SNAP. State agencies collect applicant information, such as household income and employment, and verify it through data matches with other information sources. After benefits are issued, the agencies may monitor EBT transaction data to identify spending patterns that may indicate trafficking. If an individual or household intentionally violates SNAP rules, such as by trafficking or making false or misleading statements in order to obtain benefits, states conduct administrative disqualification hearings or, in some cases, refer the case for criminal prosecution.

FNS is responsible for authorizing and overseeing retailers who participate in the program—totaling more than 263,000 in fiscal year 2017—including investigating potential retailer trafficking. In order to participate in SNAP, a retailer applies to FNS and demonstrates that they meet program requirements, such as those on the amount and types of food that authorized stores must carry. FNS verifies a retailer’s compliance with these requirements and generally authorizes retailers for 5 years. FNS then monitors retailers’ continued compliance with program requirements and administratively disqualifies, or assesses money penalties on, those who are found to have trafficked benefits. To this end, FNS officials collect and monitor EBT transaction data to detect irregular patterns of transactions that may indicate trafficking and also conduct undercover investigations. If found to be trafficking, retailers are generally permanently disqualified from SNAP or incur a monetary penalty in lieu of permanent disqualification.

A Small Percentage of SNAP Recipients Participate in SNAP E&T Programs, Which Have Experienced Changes in Characteristics and FNS Oversight

A Small Percentage of SNAP Recipients Participate in SNAP E&T

According to FNS data, about 14 percent of SNAP recipients, or about 6.1 million, were work registrants who were subject to work requirements, and about 0.5 percent of SNAP recipients, or about 200,000, participated in state SNAP E&T programs, in an average month of fiscal year 2016. (See fig. 1.) According to FNS, most SNAP recipients are exempt from work requirements. For example, according to FNS, almost two-thirds of SNAP recipients were children, elderly, or adults with a disability in an average month of fiscal year 2016—groups that are generally exempt. Further, adults who are already working at least 30 hours a week are also exempt from SNAP work requirements, and according to FNS data, more than 31 percent of non-elderly adult SNAP recipients were employed in an average month of fiscal year 2016. SNAP work registrants who are not participating in SNAP E&T programs may be participating in other activities to meet work requirements or eligible for other exemptions. FNS officials told us that the state data reported to FNS on SNAP E&T participants are the best and most recent data available on this group, yet they also have limitations, which we will continue to explore in our ongoing work.

In recent years, the number and percentage of SNAP recipients and work registrants participating in SNAP E&T programs appears to have decreased, according to FNS data. From fiscal year 2008 through fiscal year 2016, the average monthly number of SNAP E&T participants decreased from about 256,000 to about 207,000, or by 19 percent, according to state data on SNAP E&T participants reported to FNS. (See fig. 2.) However, over the same time period, the average monthly number of SNAP recipients appears to have increased from about 27.8 million to about 43.5 million, and work registrants appears to have increased from about 3 million to about 6.1 million, according to FNS data. As a result, the percentage of total SNAP recipients participating in SNAP E&T programs decreased from about 0.9 to about 0.5 percent, and the percentage of SNAP work registrants participating in these programs decreased from approximately 8.1 percent to 3.4 percent, from fiscal year 2008 through fiscal year 2016.

Available information suggests the characteristics of SNAP E&T participants are generally similar to those of SNAP work registrants who do not participate in these programs. A recent FNS study, which surveyed SNAP E&T participants and SNAP work registrants who had not participated in SNAP E&T, found that members of the two groups had similar demographic characteristics, including age and gender, and received similar monthly SNAP benefit amounts. Further, at the time they were surveyed, about one third of each group were employed, and their average wage rates were similar, at about $10 per hour.

State SNAP E&T Programs Have Changed in Several Ways

State SNAP agencies have broad flexibility in how they design their SNAP E&T programs, and the characteristics of these programs have changed in several ways over the last decade. For example, states have increasingly moved from mandatory to voluntary programs, focused on serving ABAWDs, and partnered with state and local organizations to deliver services.

States Have Increasingly Moved from Mandatory to Voluntary Programs

According to FNS data, states have increasingly moved from mandatory to voluntary SNAP E&T programs in recent years. In fiscal year 2010, 17 states operated voluntary programs; however, by fiscal year 2017, 35 states operated voluntary programs, according to FNS data. (See fig. 3.) FNS officials told us that they have been actively encouraging states to provide more robust employment and training services, such as vocational training or work experience, through voluntary programs. They said that they believe these types of robust services are more effective in moving participants toward self-sufficiency, but that funding may not be sufficient to provide these to the large numbers of participants served in mandatory programs. In addition, FNS officials told us that voluntary programs are less administratively burdensome than mandatory programs, as they allow states to focus on serving motivated participants rather than sanctioning non-compliant individuals.

According to FNS officials, when states move to a voluntary program, they generally experience a decline in SNAP E&T participation—a trend consistent with our analysis of FNS data—which may have contributed to the decline in overall SNAP E&T participation. Of the 22 states or territories that changed from a mandatory to a voluntary program from fiscal year 2010 through fiscal year 2016, according to FNS data, 13 experienced a decrease in SNAP E&T participation—ranging from a 21 percent decrease to a 93 percent decrease. Overall, voluntary programs are generally smaller than mandatory programs, according to our analysis of FNS data. In fiscal year 2016, for example, the 32 states or territories operating voluntary programs together served less than half of the total number of SNAP E&T participants served by the 21 states or territories operating mandatory programs, although these two groups of states had similar numbers of new work registrants. Furthermore, states operating voluntary programs served an average of nearly 7,000 SNAP E&T participants per state, while states operating mandatory programs served an average of 23,000 SNAP E&T participants per state.

Focus on ABAWDs Has Increased as Waivers Have Expired

Evidence suggests that states have increased their focus on serving ABAWDs—a sub-population of SNAP recipients subject to benefit time limits and additional work requirements—through SNAP E&T, as related waivers have expired in recent years, according to FNS data. During and after the 2007-2009 recession, the majority of states operated under statewide waivers of the ABAWD time limit due to economic conditions. However, as the economy recovered, most statewide waivers expired, and the ABAWD time limit was reinstated. For example, according to FNS data, in fiscal year 2011, 45 states or territories had a statewide waiver and 7 states had a partial waiver—one applying to certain localities. By fiscal year 2017, the number of states or territories with a statewide waiver had decreased to 9, while 27 states had partial waivers. FNS officials and state SNAP agency officials we spoke with in some states told us that, as the waivers have ended, state SNAP E&T programs have become increasingly focused on serving ABAWDs.

Although state data on SNAP E&T programs reported to FNS suggest a greater percentage of ABAWDs have been participating in these programs in recent years, according to FNS officials, these data have limited usefulness in assessing state trends in serving ABAWDs for several reasons. For example, in recent years, FNS officials learned that there was widespread confusion among states regarding the need to track ABAWDs when waivers were in place, and that as a result, some states had not been tracking ABAWDs or properly documenting SNAP recipients’ ABAWD status. This is consistent with what some of the selected states we spoke with reported. As part of our ongoing work, we are continuing to explore the availability and reliability of data on ABAWDs.

States Increasingly Developed Partnerships to Deliver SNAP E&T Services

State SNAP agencies have increasingly partnered with other state and local organizations, such as workforce agencies, community-based social service providers, and community colleges, to provide services to SNAP E&T participants in recent years, according to FNS and states we selected for our review. In fiscal year 2018, nearly all states partnered with at least one other organization to deliver SNAP E&T services, with the majority partnering with more than one, according to an analysis by FNS.

In recent years, FNS has urged states to make use of the broad network of American Job Centers. The American Job Centers, also known as one- stop centers, are funded through the Department of Labor’s Employment and Training Administration and designed to provide a range of employment-related services, such as training referrals, career counseling, job listings, and similar employment-related services, to job seekers under one roof. Our prior work has highlighted the value of coordination between federally funded employment and training programs to ensure the efficient and effective use of resources. Despite encouraging such partnerships, FNS officials said that American Job Centers typically provide lighter touch services to SNAP E&T participants, such as job search and job search training, and they therefore may not be well suited for SNAP E&T participants who have multiple barriers to employment. In our 2003 work on SNAP E&T, we found that while workforce system programs offered some of the activities needed by SNAP E&T participants, officials from 12 of the 15 states we contacted said that most participants were not ready for these activities, in part, because they lacked basic skills, such as reading and computer literacy, that would allow them to successfully participate.

An alternative service delivery strategy that FNS has promoted is the development of third party partnerships with community-based social service providers, community colleges, and other entities to help states enhance their SNAP E&T programs. According to FNS, in this model, third party organizations use non-federal funding to provide allowable SNAP E&T services and supports, which are then eligible for 50 percent federal reimbursement funds through the state’s SNAP E&T program. According to FNS officials, third party partnerships enable states to leverage additional resources, grow their SNAP E&T programs, and reach more SNAP participants. In addition, FNS officials said that these partnerships allow states to improve their program outcomes by tapping into providers currently serving communities that include SNAP recipients. Federal 50 percent reimbursement funds expended increased from nearly $182 million to more than $223 million, or by 23 percent, from fiscal year 2007 to fiscal year 2016.

FNS Has Taken Steps to Increase Support and Oversight of SNAP E&T

FNS has taken steps to increase federal support of states’ SNAP E&T programs by increasing the number of federal staff responsible for SNAP E&T and providing additional technical assistance to states. Specifically, FNS officials said that in 2014, they created the Office of Employment and Training to provide support and oversight for the SNAP E&T program and expanded SNAP E&T staff in FNS headquarters from one to five fulltime employees. FNS has also taken steps to increase technical assistance to states. For example, they have developed tools, including the SNAP E&T Operations Handbook, intended to help states implement and grow their program, and by adding a dedicated SNAP E&T official in each of FNS’s seven regional offices. According to FNS, regional officials have targeted technical assistance to states on, for example, developing third-party partnerships, and they have emphasized evidence-based approaches to administering the program, such as providing skills-based training for in-demand occupations.

FNS officials rely on various information sources to oversee states’ SNAP E&T programs, including participant outcome data reported by states for the first time in January 2018. For example, FNS officials conduct management evaluation reviews of states, annually review states’ SNAP E&T plans for compliance, and collect data from states on program participation and expenditures. In addition, as of January 2018, FNS has begun receiving new data on SNAP E&T program participants and outcomes from states. These data include employment outcomes, such as the number of SNAP E&T participants in unsubsidized employment after participation in the program, and participant characteristics, such as the number of participants entering the program with a high school degree or equivalent. FNS officials said that although states generally submitted the new data on time, states experienced challenges that likely affected the accuracy of the data. For example, some states needed to manually collect data on participant characteristics due to the limited capacity of their data systems. Further, according to FNS officials, some states did not correctly interpret certain reporting definitions or time periods. To address these challenges, FNS officials have been providing technical assistance to states to help them refine their participant and outcome data reports. Officials told us that they expect the states to submit revised reports by May 2018; we will examine these data and related issues in our ongoing work.

FNS Has Taken Steps to Address SNAP Program Integrity Issues, but Concerns Remain

FNS and the states partner to address issues that affect program integrity, including improper payments and fraud, and FNS has taken some steps to address challenges in these areas, but concerns remain. For example, regarding SNAP recipient and retailer fraud, FNS has taken some steps to address challenges identified in our 2006 and 2014 reports related to fraud committed by SNAP recipients and authorized retailers, but more remains to be done. We currently have ongoing work to assess the steps FNS and states have taken to address our recommendations related to recipient and retailer fraud and other program vulnerabilities.

SNAP Improper Payments

In 2016, we reviewed SNAP improper payment rates and found that states’ adoption of program flexibilities and changes in federal SNAP policy in the previous decade, as well as improper payment rate calculation methods, likely affected these rates. For example, when states adopted available SNAP policy flexibilities that simplified or lessened participant reporting requirements, these changes reduced the opportunity for error and led to a decline in the improper payment rate, according to a USDA study. In addition, we found that the methodology SNAP used to calculate its improper payment rate was generally similar to the methodologies used for other large federal programs for low- income individuals, including Medicaid, Earned Income Tax Credit, and Supplemental Security Income. However, we also found that some of the procedural and methodological differences in the rate calculation among these programs likely affected the resulting improper payment rates, such as how cases with insufficient information or certain kinds of errors were factored into the improper payment rate.

In 2014, USDA identified SNAP improper payment data quality issues in some states and has since been working with the states to improve improper payment estimates. Although USDA reported national SNAP improper payment estimates for benefits paid through fiscal year 2014, USDA did not report a national SNAP improper payment estimate for benefits paid in fiscal years 2015 or 2016. In response to a report from USDA’s Office of Inspector General that identified concerns in the application of SNAP’s quality control process, which is used to identify improper payments, USDA began a review of state quality control systems in all states in 2014. According to USDA, due to the data quality issues uncovered in 42 of 53 states during the reviews, the improper payment rates for those states could not be validated, and the department was unable to calculate a national improper payment rate for benefits paid in fiscal year 2015. To address the data quality concerns, USDA updated guidance, provided training to relevant state and federal staff, and worked with states to update their procedures to ensure consistency with federal guidelines. According to USDA, the department also required individual states to develop corrective action plans to address issues identified and monitored progress to ensure states took identified actions. On June 30, 2017, USDA notified the states that the department would not release a national SNAP improper payment rate for benefits paid in fiscal year 2016 and remained focused on conducting the fiscal year 2017 review.

SNAP Recipient Fraud

FNS has increased its oversight of state anti-fraud activities in recent years by developing new guidance and providing training and technical assistance to states on detecting fraud by SNAP recipients and reporting on anti-fraud activities to FNS. In 2014, we reported on 11 selected states’ efforts to combat SNAP recipient fraud and made several recommendations to FNS to address the challenges states faced. We found that FNS and states faced challenges in the following areas:

Guidance on use of data tools to detect fraud: States faced challenges using FNS-recommended data tools to detect fraud, and FNS is in the process of developing improved guidance to address this concern. Specifically, FNS’s guidance on the use of EBT transaction data to uncover potential patterns of benefit trafficking lacked the specificity states needed to uncover such activity, and we recommended FNS develop additional guidance. Since then, FNS contracted with a private consulting firm to provide 10 states with technical assistance in recipient fraud prevention and detection, which included exploring the use of data analytics to analyze and interpret eligibility and transaction data to identify patterns or trends and create models that incorporate predictive analytics. FNS officials also recently told us that the agency is developing a SNAP Fraud Framework to provide guidance to states on improving fraud prevention and detection. FNS officials anticipated releasing the framework in mid- 2018.

Tools for monitoring e-commerce websites: We also found FNS- recommended tools for automatically monitoring potential SNAP trafficking on e-commerce websites to be of limited use and less effective than manual searches, and FNS has developed but not finalized guidance on using such tools. We recommended that FNS reassess the effectiveness of its current guidance and tools for states to monitor e-commerce and social media websites. In August 2017, FNS officials told us that they had developed revised guidance for states on using social media in detection of SNAP trafficking. According to FNS, the guidance will be incorporated into the SNAP Fraud Framework.

Staff levels: During the time of our 2014 work, most of our 11 selected states reported difficulties conducting fraud investigations due to reduced or stagnant staff levels while numbers of SNAP recipients had greatly increased, but FNS decided not to make changes to address this issue. Specifically, 8 of the 11 states we reviewed reported inadequate staffing due to attrition, turnover, or lack of funding. Some states suggested changing the financial incentive structure to promote fraud investigations because agencies were not rewarded for cost-effective, anti-fraud efforts that could prevent ineligible people from receiving benefits. Specifically, when fraud by a SNAP recipient is discovered, a state may generally retain 35 percent of any recovered overpayments. However, there are no recovered funds when a state detects potential fraud by an applicant and denies the application. To help address states’ concerns about resources needed to conduct investigations, we recommended in our 2014 report that FNS explore ways that federal financial incentives could be used to better support cost-effective anti-fraud strategies. FNS reported that it took some steps to explore alternative financial incentives, through a review of responses to a Request for Information in the Federal Register. However, FNS decided not to pursue bonus awards for anti-fraud and program integrity activities. Given that FNS has not made changes in this area, state SNAP fraud agencies may continue to report resource concerns in addressing fraud.

Reporting guidance: We also found that FNS did not have consistent and reliable data on states’ activities because of unclear reporting guidance, and FNS has since revised its data collection form and provided training on the changes. To improve FNS’s ability to monitor states and obtain information about more efficient and effective ways to combat recipient fraud, we recommended in 2014 that FNS take steps, such as providing guidance and training, to enhance the consistency of what states report on their anti-fraud activities. In response, FNS revised the form used to collect recipient integrity information and changed the reporting frequency from annual to quarterly, effective fiscal year 2017. FNS officials also reported providing training to approximately 400 state agency and FNS regional office personnel on the updates to the form and related instructions.

In our ongoing work, we are further reviewing states’ use of data analytics to identify SNAP recipient fraud, including that which may be occurring during out-of-state transactions. Because transactions that may appear suspicious—such as those made out-of-state—may in fact be legitimate, states may use data analytic techniques to include additional factors that may help them better target their efforts to identify potential fraud. However, states may have different levels of capacity for using data analytics to detect fraud. We are examining how 7 selected states are using data analytics and identifying the advantages and challenges states have experienced in doing so. We are also assessing FNS’s efforts to assist states in implementing GAO’s leading practices for data analytics outlined in GAO’s Framework for Managing Fraud Risks in Federal Programs outlined in GAO’s Framework for Managing Fraud Risks in Federal Programs. In addition, we are conducting our own analysis of EBT out-of-state SNAP transaction data. We expect to report on our findings later this year.

SNAP Retailer Trafficking

FNS has taken some steps to prevent, detect, and respond to retailers who traffic SNAP benefits since our last report on the issue in 2006, but trafficking continues to be a problem. For example, in February 2018, a federal jury convicted a grocery store operator in Baltimore on charges of wire fraud in connection with a scheme to traffic more than $1.6 million in SNAP benefits for food sales that never occurred. The grocery store operator paid cash for SNAP benefits, typically paying the recipient half the value of the benefits and keeping the other half for himself. In our 2006 report, we found that SNAP was vulnerable to retailer trafficking in several areas, including:

Requirements for food that retailers must stock to participate in SNAP: In 2006, we found that FNS had minimal requirements for the amounts of food that retailers must stock, which could allow retailers more likely to traffic into the program, although the agency has since taken steps to increase these requirements. In our 2006 report, FNS officials said that they authorized stores with limited food stock to provide access to food in low-income areas where large grocery stores were scarce. At that time, retailers were generally required to stock a minimum of 12 food items (at least 3 varieties of 4 staple food categories, such as fruits and vegetables), but FNS rules did not specify how many items of each variety would constitute sufficient stock. FNS officials told us that a retailer that only carries small quantities of food, such as a few cans of one kind of vegetable, may intend to traffic. In 2016, FNS promulgated a final rule increasing food stock requirements. FNS officials told us that these new rules are designed to encourage stores to provide more healthy food options for recipients and discourage trafficking. According to FNS, retailers are now generally required to stock at least 36 food items (a certain variety and quantity of staple foods in each of the 4 staple food categories).

Focus on high-risk retailers: We also found in 2006 that FNS had not conducted analyses to identify characteristics of retailers at high risk of trafficking and to target its resources—a shortcoming FNS has since taken some steps to address. For example, we reported that some stores may be at risk of trafficking because one or more previous owners had been found trafficking at the same location. However, FNS did not have a system in place to ensure that these retailers were quickly targeted for heightened attention. In addition, once a store was authorized to participate in the program, FNS staff typically would not inspect the store again until it applied for reauthorization 5 years later. We recommended that FNS identify the stores most likely to traffic and provide earlier, more targeted oversight to those stores. In 2009, FNS began establishing risk levels for each authorized retailer, identifying high-risk stores as those with a prior permanent disqualification at that location or a nearby location. In 2013, FNS required all high-risk retailers to go through reauthorization and to provide additional documentation regarding store ownership. That same year, FNS also consolidated its retailer management functions, including those for authorizing stores and analyzing EBT transaction data, into a single national structure known as the Retailer Operations Division. FNS officials told us that this structure enables the agency to identify and deploy their investigative resources to the areas of highest risk nationally, rather than within a given region.

Penalties to deter retailer trafficking: We also found in our 2006 report that FNS’s penalties for retailer trafficking may be insufficient to deter traffickers, and since then, FNS has proposed—but not finalized—rules to increase them. FNS imposes administrative penalties for retailer trafficking—generally a permanent disqualification from the program or a monetary penalty. FNS relies on the USDA Office of Inspector General (OIG) and other law enforcement entities to conduct investigations that can lead to criminal prosecutions. In our 2006 report, we recommended that FNS develop a strategy to increase penalties for trafficking. The Food, Conservation, and Energy Act of 2008 (known as the 2008 Farm Bill) gave USDA authority to impose higher monetary penalties, and the authority to impose both a monetary penalty and program disqualification on retailers found to have violated relevant law or regulations (which includes those found to have trafficked). In 2012, FNS proposed regulatory changes to implement these authorities. However, FNS has not finalized these rules, and as of fall 2017, the rules were considered “inactive.”

In our ongoing work, we are continuing to assess FNS’s efforts to prevent, detect, and respond to retailer trafficking, as well as examining what is known about the extent of retailer trafficking nationwide. As part of this work, we are continuing to review FNS’s response to our prior recommendations, as well as related recommendations made by USDA’s OIG. We are also studying FNS’s periodic estimates of the rate of retailer trafficking, expressed as the dollar value and percentage of all SNAP benefits that were trafficked and the percentage of retailers involved. These data suggest an increase in the estimated rate of retailer trafficking since our 2006 report. However, we and others, including a group of experts convened by FNS, have identified some limitations with the retailer trafficking estimates. For example, the trafficking rate is calculated based on a sample of retailers that FNS considers most likely to traffic. Although FNS adjusts the data to better represent the broader population of authorized retailers, it is uncertain whether the resulting estimates accurately reflect the extent of trafficking nationwide. We are reviewing these limitations and FNS’s efforts to address them in our ongoing work.

Chairman Jordan, Chairman Palmer, Ranking Member Krishnamoorthi, Ranking Member Raskin, and Members of the Subcommittees, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time.

GAO Contact and Staff Acknowledgments

If you or your staff have any questions about this testimony, please contact Kathryn Larin, Director, Education, Workforce, and Income Security Issues at (202) 512-7215 or LarinK@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 testimony include Rachael Chamberlin, Celina Davidson, Swati Deo, Rachel Frisk, Alexander Galuten, Danielle Giese, Kristen Jones, Morgan Jones, Lara Laufer, Monica Savoy, and Kelly Snow.

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