Food Stamp Program

According to the most recent Food and Nutrition Service study available, about $815 million, or four percent of the food stamps issued, was trafficked at retail stores during fiscal year 1993. Supermarkets and large grocery stores redeemed 82.5 percent of all food stamp benefits and had a combined trafficking rate of 1.9 percent of all benefits redeemed. In contrast, smaller grocery stores redeemed 17.5 percent of the benefits but had a combined trafficking rate of 13 percent of the benefits redeemed. During fiscal years 1990 through 1997, the Food and Nutrition Service identified food stamp trafficking in more than 5,700 retail stores, the Office of Inspector General investigated and reported on 5,551 trafficking cases, and the Justice Department and state and local cases prosecuted about 2,650 cases referred by the Office of Inspector General. In the 432 food stamp trafficking cases GAO reviewed, store owners alone were caught trafficking in about 40 percent of the cases, clerks alone were involved in 47 percent of the cases, and store owners and clerks together were caught trafficking in 13 percent of the cases. The Food and Nutrition Service disqualified the owners caught trafficking from the Food Stamp Program in 428 cases and assessed penalties totaling $1.1 million. The courts assessed $1.4 million in penalties and sentenced owners to jail in 16 cases. Store clerks--caught trafficking in 260 cases--received about $36,500 in penalties and jail sentences in nine cases. GAO summarized this report in testimony before Congress; see: Food Assistance: Observations on Reducing Fraud and Abuse in the Food Stamp Program, by Robert A. Robinson, Director of Food and Agriculture Issues, before the Senate Committee on Agriculture, Nutrition, and Forestry. GAO/T-RCED-98-167, Apr. 23 (13 pages).

GAO noted that: (1) according to the most recent Food and Nutrition Service (FNS) study available, about $815 million, or about 4 percent of the food stamps issued, was trafficked at retail stores during fiscal year 1993; (2) supermarkets and large grocery stores redeemed 82.5 percent of all food stamp benefits and had a combined trafficking rate of 1.9 percent of all benefits redeemed; (3) smaller grocery stores redeemed 17.5 percent of the benefits and had a combined trafficking rate of 13 percent of the benefits redeemed; (4) this study did not reflect the electronic redemption of food stamps; (5) therefore, an analysis of the extent of trafficking that includes electronic data may detect that violations are now occurring at a greater or lesser rate; (6) the Department of Agriculture (USDA) and Department of Justice (DOJ) are the principal federal agencies responsible for minimizing food stamp trafficking by retailers; (7) within USDA, both the FNS and the Office of Inspector General (OIG) are responsible for identifying and investigating retail stores engaged in trafficking; (8) FNS can take administrative actions against store owners engaged in trafficking, including disqualifying them from participating in the program and assessing fines; (9) OIG conducts criminal investigations and can refer store owners or clerks engaged in trafficking to DOJ or state or local governments for prosecution; (10) during fiscal years 1990 through 1997, FNS identified food stamp trafficking in over 5,700 retail stores, OIG investigated and reported on 5,551 trafficking cases, and DOJ and state and local governments prosecuted about 2,650 cases referred by OIG; (11) DOJ, in some jurisdictions, will pursue civil actions against store owners to collect money under the False Claims Act when it has not allocated resources to conduct criminal prosecutions or when it has a case in which the evidence for criminal prosecution is insufficient; (12) since 1992, when USDA began referring cases to DOJ, 566 false claims totalling over $5.9 million have been settled; (13) in the 432 food stamp trafficking cases GAO reviewed, store owners alone were caught trafficking in about 40 percent of the cases, and store owners and clerks together were caught trafficking in 13 percent of the cases; and (14) FNS permanently or temporarily disqualified the owners caught trafficking from participating in the Food Stamp Program in 428 cases and assessed financial penalities totalling $1.1 million against owners in 175 cases.