FNS’ quality control system measures the states’ performance in accurately determining food stamp eligibility and calculating benefits. Under this system, the states calculate their payment errors by annually drawing a statistically valid sample of at least 300 to 1,200 active cases, depending on the average monthly caseload; by reviewing the case information; and by making home visits to determine whether households were eligible for benefits and received the correct benefit payment. FNS regional offices validate the results by reviewing a subset of each state’s sample to determine its accuracy, making adjustments to the state’s overpayment and underpayment errors as necessary. To determine each state’s combined payment error rate, FNS adds overpayments and underpayments, then divides the sum by total food stamp benefit payments. As shown in figure 1, the national combined payment error rate for the Food Stamp Program was consistently above 9 percent from fiscal year 1993 through fiscal year 1999. About 70 percent of the food stamp payment errors resulted in overpayments to recipients, while about 30 percent resulted in underpayments. FNS’ payment error statistics do not account for the states’ efforts to recover overpayments; in fiscal year 1999, the states collected $213 million in overpayments. (See app. II for information about states’ error rates and collections of overpayments.) Errors in food stamp payments occur for a variety of reasons. For example, food stamp caseworkers may miscalculate a household’s eligibility and benefits because of the program’s complex rules for determining who are members of the household, whether the value of a household’s assets (mainly vehicles and bank accounts) is less than the maximum allowable, and the amount of a household’s earned and unearned income and deductible expenses. Concerning the latter, food stamp rules require caseworkers to determine a household’s gross monthly income and then calculate a net monthly income by determining the applicability of six allowable deductions: a standard deduction, an earned income deduction, a dependent care deduction, a medical deduction, a child support deduction, and an excess shelter cost deduction. (See app. III for the factors that state caseworkers consider in calculating a household’s excess shelter cost deduction.) The net income, along with other factors such as family size, becomes the basis for determining benefits. Other payment errors occur after benefits have been determined primarily because households do not always report changes in income that can affect their benefits and the states do not always act on reported changes, as required by food stamp law. To reduce the likelihood of payment errors, FNS regulations require that states certify household eligibility at least annually, and establish requirements for households to report changes that occur after certification. In certifying households, states are required to conduct face- to-face interviews, typically with the head of the household, and obtain pertinent documentation at least annually. In establishing reporting requirements, the states have the option of requiring households to use either (1) monthly reporting, in which households with earned income file a report on their income and other relevant information each month; or (2) change reporting, in which all households report certain changes, including income fluctuations of $25 or more, within 10 days of the change. According to FNS, many states have shifted from monthly reporting to change reporting because of the high costs associated with administering a monthly reporting system. However, change reporting is error-prone because households do not always report changes and the states do not always act on them in a timely fashion, if at all. Each of the 28 states we contacted has taken many actions to reduce payment error rates. Further, 80 percent of the states took each of five actions: (1) case file reviews by supervisors or special teams to verify the accuracy of food stamp benefit payments, (2) special training for caseworkers, (3) analyses of quality control data to identify causes of payment errors, (4) electronic database matching to identify ineligible participants and verify income and assets, and (5) use of computer software programs to assist caseworkers in determining benefits. It is difficult to link a specific state action to its effect on error rates because other factors also affect error rates. However, almost all state food stamp officials cited case file reviews by supervisors and others as being one of their most effective tools for reducing error rates. Additionally, state officials most often cited the competing pressure of implementing welfare reform as the primary challenge to reducing food stamp payment errors in recent years. The following subsection summarizes our findings on state actions to reduce payment errors. Case file reviews to verify payment accuracy: In 26 of the 28 states we contacted, supervisors or special teams reviewed case files to verify the accuracy of benefit calculations and to correct any mistakes before the state’s quality control system identified them as errors. Supervisory reviews, used by 22 states, typically require that supervisors examine a minimum number of files compiled by each caseworker. For example, Alaska requires monthly supervisory review of five cases for each experienced caseworker and all cases for each new caseworker. Furthermore, 20 states, including many of the states using supervisory review, use special teams to conduct more extensive reviews designed to identify problems in specific offices, counties, or regions. Reviewers correct mistakes before they are detected as quality control errors, where possible; identify the reasons for the mistakes; and prescribe corrective actions to prevent future errors. For example, in Genesee County, Michigan, the teams read about 2,800 case files, corrected errors in nearly 1,800, and provided countywide training in such problem areas as shelter expenses and earned income. In Massachusetts, caseworkers reviewed all case files in fiscal year 2000 because of concerns that the state’s error rate would exceed the national average and that FNS would impose financial sanctions. Massachusetts corrected errors in about 13 percent of the case files reviewed; these would have been defined as payment errors had they been identified in a quality control review. Special training for caseworkers: In addition to the training provided to new caseworkers, 27 states provided a range of training for new and experienced caseworkers aimed at reducing payment errors. For example, these states conducted training specifically targeted to calculating benefits for certain categories of food stamp households, such as those with earned income or those with legal noncitizens, for which rules are more likely to be misapplied. Many states also conducted training to update caseworkers and supervisors on food stamp policy changes that affect how benefits are calculated; new policies often introduce new calculation errors because caseworkers are unfamiliar with the revised rules for calculating benefits, according to several state officials. Analysis of quality control data: Twenty-five states conducted special analyses of their quality control databases to identify common types of errors made in counties or local offices for use in targeting corrective actions. For example, California created a quality control database for the 19 largest of its 54 counties and generated monthly reports for each of the 19 counties to use. Georgia assigned a staff member to review each identified quality control error and work with the appropriate supervisor or worker to determine why the error occurred and how it could be prevented in the future. With this process, officials said, counties are much more aware of their error cases, and now perceive quality control as a tool for reducing errors. In Michigan, an analysis of quality control data revealed that caseworkers were misinterpreting a policy that specified when to include adults living with a parent in the same household, and changes were made to clarify the policy. Electronic database matching: All 28 states matched their food stamp rolls against other state and federal computer databases to identify ineligible participants and to verify participants’ income and asset information. For example, all states are required to match their food stamp rolls with state and local prisoner rolls. In addition, most states routinely match their food stamp participants with one or more of the following: (1) their department of revenue’s “new hires” database (a listing of recently employed individuals in the state) to verify income, (2) the food stamp rolls of neighboring states to identify possible fraud, and (3) their department of motor vehicle records to verify assets. Officials in four states said the “new hires” match reduced payment errors by allowing caseworkers to independently identify a change in employment status that a household had not reported and that would likely affect its benefits. Mississippi food stamp officials said the vehicle match helped reduce payment errors because caseworkers verified the value of applicants’ vehicles as part of determining eligibility. Computer assistance in calculating benefits: Twenty-three states had developed computer software for caseworkers to use in determining an applicant’s eligibility and/or in calculating food stamp benefit amounts. Twenty-two of the states have software that determines eligibility and calculates benefits based on information caseworkers enter; the remaining states’ software is limited to calculating benefits after the caseworker has determined eligibility. These programs may also cross- check information to correct data entry errors; provide automated alerts that, for example, a household member is employed; and generate reminders for households, for example, to schedule an office visit. The most advanced software programs had online interview capabilities, which simplified the application process. Some states had automated case management systems that integrated Food Stamp Program records with their Medicaid and other assistance programs, which facilitated the administration of these programs. Some states took other actions to reduce their payment errors. For example, even though FNS regulations only require that food stamp households be recertified annually, 16 states increased the frequency with which certain types of food stamp households must provide pertinent documentation for recertifying their eligibility for food stamp benefits. In particular, 12 of the 16 states now require households with earned income to be recertified quarterly because their incomes tend to fluctuate, increasing the likelihood of payment errors. More frequent certification enables caseworkers to verify the accuracy of household income and other information, allowing caseworkers to make appropriate adjustments to the household’s benefits and possibly avoid a payment error. However, more frequent certification can also inhibit program participation because it creates additional reporting burdens for food stamp recipients.