Food Assistance

The Food Stamp Program, one of the nation's largest welfare programs, is the single largest program run by the U.S. Department of Agriculture (USDA). In fiscal year 1997, the government provided $21 billion worth of food stamps to about 24 million recipients. Reviews by GAO, USDA's Office of Inspector General, and others have provided ample evidence that the system for delivering food stamps is vulnerable to, and is being victimized by, significant fraud, waste, and abuse. This testimony discusses fraud, waste, and abuse in the Food Stamp Program from three perspectives: (1) the nature and the extent of the problem; (2) the roles and the responsibilities of the major federal agencies that are seeking to minimize it; and (3) the potential of electronic benefits transfer, which would replace traditional food stamp coupons with a debit card, to reduce it.

GAO noted that: (1) fraud, waste, and abuse in the Food Stamp program takes two primary forms: (a) overpayments to food stamp recipients; and (b) the use of food stamps to obtain cash or other non-food items, a process known as trafficking; (2) according to the Department of Agriculture (USDA), in fiscal year (FY) 1996, about $1.5 billion was paid out to individuals who either should not have received any food stamps at all or received more than they were entitled to receive; (3) these overpayments represented nearly 7 percent of the approximately $22 billion in food stamps provided; (4) overpayments are caused by both inadvertent and intentional errors made by recipients and errors made by state caseworkers; (5) program regulations specify that recipients use food stamps only to purchase food from authorized retailers; (6) USDA recently estimated that up to $815 million in food stamps, approximately 4 percent of the food stamps issued, were traded for cash in FY 1993 through retail stores; (7) numerous retailers are caught each year paying recipients a discounted value of the stamps and then redeeming the stamps at full face value; (8) there are no reliable data on the extent of trafficking that occurs before food stamps are redeemed by an authorized retailer; (9) the Food and Consumer Service (FCS) administers the Food Stamp Program in partnership with the states, which are responsible for the day-to-day operation of the program, including determining applicants' eligibility and benefit levels; (10) FCS provides criteria for determining eligibility and the amount recipients are entitled to receive; (11) FCS monitors the accuracy of state benefit determinations and operates a system of incentives and sanctions to encourage states to reduce the errors; (12) FCS approves retailers to participate in the program and monitors and investigates their activities to identify those potentially violating program regulations; (13) USDA's Inspector General devotes a substantial share of its audit and investigative resources to identifying program irregularities, especially trafficking; (14) EBT systems have the potential to reduce some aspects of the fraud, waste, and abuse in the Food Stamp Program, but not others; (15) by providing a clear paper trail of all food stamp transactions, EBT systems help reviewers identify trafficking activities and remove or prosecute retailers engaged in such activities; (16) EBT systems also address problems associated with food stamp theft; and (17) EBT cannot address problems associated with determining eligibility or benefit levels.