Food Stamp Program
States Have Made Progress Reducing Payment Errors, and Further Challenges Remain Gao ID: GAO-05-245 May 5, 2005In fiscal year 2003, the federal Food Stamp Program made payment errors totaling about $1.4 billion in benefits, or about 7 percent of the total $21.4 billion in benefits provided to a monthly average of 21 million low-income participants. Because payment errors are a misuse of public funds and can undermine public support of the program, it is important that the government minimize them. Because of concerns about ensuring payment accuracy GAO examined: (1) what is included in the national food stamp payment error rate and how it has changed over time, (2) what is known about the causes of food stamp payment errors, and (3) what actions the Food and Nutrition Service (FNS) and states have taken to reduce these payment errors. To answer these questions, GAO analyzed program quality control data for fiscal years 1999 through 2003 and interviewed program stakeholders, including state and local officials from nine states.
The national dollar payment error rate for the Food Stamp Program, which combines states' overpayments and underpayments to program participants in all states, has declined by almost one-third over the last 5 years to a record low of 6.63 percent. This decline has been widespread; the rate fell in 41 states and the District of Columbia, and rates in 18 of these states fell by at least one-third. However, despite this decrease, some states continue to have relatively high payment error rates. For example, in 2003, 7 states had payment error rates of more than 10 percent. Almost two-thirds of food stamp payment errors are caused by caseworkers, usually when they fail to keep up with reported changes or make mistakes applying program rules, and one-third are caused by participant failure to report required, complete, or correct information, such as household income and composition. State officials said program complexity and other factors, such as the lack of resources and staff turnover, can contribute to these errors. In fiscal year 2003, states referred about 5 percent of all cases identified with errors for suspected participant fraud investigation. To increase food stamp payment accuracy, FNS and the 9 states GAO reviewed took many approaches that parallel good internal control practices. These efforts include increasing the leadership and accountability in the program, performing risk assessments to identify problem areas, implementing various program and process changes in response to the findings from risk assessments, and monitoring and promoting improved performance. The states are using a combination of approaches to improve payment accuracy, making it difficult to tie error rate improvements to specific practices. However, state officials point to their improved state error rates as evidence of a collective impact.
GAO-05-245, Food Stamp Program: States Have Made Progress Reducing Payment Errors, and Further Challenges Remain
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
May 2005:
Food Stamp Program:
States Have Made Progress Reducing Payment Errors, and Further
Challenges Remain:
GAO-05-245:
GAO Highlights:
Highlights of GAO-05-245, a report to congressional committees:
Why GAO Did This Study:
In fiscal year 2003, the federal Food Stamp Program made payment errors
totaling about $1.4 billion in benefits, or about 7 percent of the
total $21.4 billion in benefits provided to a monthly average of 21
million low-income participants. Because payment errors are a misuse of
public funds and can undermine public support of the program, it is
important that the government minimize them. Because of concerns about
ensuring payment accuracy GAO examined: (1) what is included in the
national food stamp payment error rate and how it has changed over
time, (2) what is known about the causes of food stamp payment errors,
and (3) what actions the Food and Nutrition Service (FNS) and states
have taken to reduce these payment errors.
To answer these questions, GAO analyzed program quality control data
for fiscal years 1999 through 2003 and interviewed program
stakeholders, including state and local officials from nine states.
What GAO Found:
The national dollar payment error rate for the Food Stamp Program,
which combines states‘ overpayments and underpayments to program
participants in all states, has declined by almost one-third over the
last 5 years to a record low of 6.63 percent. This decline has been
widespread; the rate fell in 41 states and the District of Columbia,
and rates in 18 of these states fell by at least one-third. However,
despite this decrease, some states continue to have relatively high
payment error rates. For example, in 2003, 7 states had payment error
rates of more than 10 percent.
Food Stamp Payment Errors Have Dropped over the Last 5 Years:
[See PDF for image]
[End of figure]
Almost two-thirds of food stamp payment errors are caused by
caseworkers, usually when they fail to keep up with reported changes or
make mistakes applying program rules, and one-third are caused by
participant failure to report required, complete, or correct
information, such as household income and composition. State officials
said program complexity and other factors, such as the lack of
resources and staff turnover, can contribute to these errors. In fiscal
year 2003, states referred about 5 percent of all cases identified with
errors for suspected participant fraud investigation.
To increase food stamp payment accuracy, FNS and the 9 states GAO
reviewed took many approaches that parallel good internal control
practices. These efforts include increasing the leadership and
accountability in the program, performing risk assessments to identify
problem areas, implementing various program and process changes in
response to the findings from risk assessments, and monitoring and
promoting improved performance. The states are using a combination of
approaches to improve payment accuracy, making it difficult to tie
error rate improvements to specific practices. However, state officials
point to their improved state error rates as evidence of a collective
impact.
www.gao.gov/cgi-bin/getrpt?GAO-05-245.
To view the full product, including the scope and methodology, click on
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[End of section]
Contents:
Letter:
Results in Brief:
Background:
The Food Stamp Error Rate, Which Combines Overpayments and
Underpayments, Has Declined by Almost One-Third over the Last 5 Years:
Caseworkers Cause about Two-Thirds and Participants Cause about One-
Third of Payment Errors:
FNS and States Have Taken Steps to Increase Payment Accuracy:
Concluding Observations:
Agency Comments:
Appendix I: Methodology for Determining the Causes of Food Stamp
Payment Errors for Fiscal Years 1999 through 2003:
Appendix II: Food Stamp Combined Error Rates by State for Fiscal Years
1999 to 2004:
Appendix III: GAO Contacts and Acknowledgments:
Related GAO Products:
Tables:
Table 1: Changes in Payment Error Rates for States Providing the
Largest Amount in Food Stamp Benefits, Fiscal Year 2003:
Table 2: Caseworker Errors Most Often Resulted in Incorrect Household
Income or Deductions, Fiscal Year 2003:
Table 3: Participant-Caused Errors Most Often Resulted in Incorrect
Household Income Determinations, Fiscal Year 2003:
Figures:
Figure 1: Food Stamp Recipiency Has Increased Sharply in the Last 3
Years, Following a Substantial Decline:
Figure 2: National Payment Error Rate for the Food Stamp Program,
Fiscal Years 1999 to 2003:
Figure 3: Map of State Error Rate Changes from Fiscal Year 1999 to
2003:
Figure 4: Map of State Error Rates for Fiscal Year 2003:
Figure 5: Caseworker-and Participant-Caused Errors in Fiscal Year 2003:
Figure 6: California Used a Combination of Internal Control Practices
to Reduce Payment Error:
Abbreviations:
EBT: Electronic Benefits Transfer:
FNS: Food and Nutrition Service:
QC: quality control:
TANF: Temporary Assistance for Needy Families:
USDA: U.S. Department of Agriculture:
United States Government Accountability Office:
Washington, DC 20548:
May 5, 2005:
The Honorable Saxby Chambliss:
Chairman:
The Honorable Tom Harkin:
Ranking Minority Member:
Committee on Agriculture, Nutrition, and Forestry:
United States Senate:
The Honorable Bob Goodlatte:
Chairman:
The Honorable Collin C. Peterson:
Ranking Minority Member:
Committee on Agriculture:
House of Representatives:
In fiscal year 2003, the federal Food Stamp Program, administered by
the U.S. Department of Agriculture's (USDA) Food and Nutrition Service
(FNS), reported it made payment errors totaling about $1.4 billion in
benefits. This sum represents about 7 percent of the total $21.4
billion in benefits provided each year to a monthly average of 21
million low-income program participants. The program is intended to
help low-income individuals and families obtain a better diet by
supplementing their income with benefits to purchase food. However,
payment errors reflect the misuse of public funds and may undermine
public confidence in the program.
The Food Stamp Program is jointly administered by FNS and the states.
State caseworkers must determine an applicant's eligibility and benefit
levels based on a complex formula that takes into account the members
of the household, their assets, and net monthly income; households must
report changes in their circumstances that may affect their eligibility
and benefit levels; and caseworkers periodically recertify eligibility.
Depending on household circumstances, some cases may require more
adjustments than others. For example, households with earned income may
be required to report more income changes to caseworkers than
households without earned income, such as those that are dependent
solely on retirement benefits. In addition, some food stamp
participants receive benefits from other programs, such as Medicaid or
the cash assistance program Temporary Assistance for Needy Families
(TANF). Although the caseworkers who process these eligibility
determinations may be the same as those who administer the Food Stamp
Program, the rules for the various programs can differ. These
differences add to the complexity of determining and recertifying
eligibility and program benefits.
FNS's quality control (QC) system measures payment accuracy and
monitors how accurately states determine food stamp eligibility and
calculate benefits. Under FNS's QC system, states participate in the
calculation of their payment errors by reviewing a sample of cases to
examine whether eligibility was correctly determined and whether
participating households received the correct benefit amount. FNS
validates the sample and the accuracy of the state review.
Because the government must make the best use of funding, it is
important to minimize payment errors. Due to concerns about ensuring
payment accuracy, we examined (1) what is included in the national food
stamp payment error rate and how has the rate changed over time, (2)
what is known about the causes of food stamp payment errors, and (3)
what actions USDA and states have taken to reduce these payment errors.
To determine what is included in the payment error rate, how it has
changed over time, and the causes of payment error, we analyzed FNS's
QC data for fiscal years 1999 through 2003.[Footnote 1] We determined
that the QC data were reliable for the purposes of our work by
reviewing our past reports, FNS and external evaluations of the QC
system, and related documents. We also met with knowledgeable FNS
officials to discuss issues of the QC system's accuracy and
completeness. To understand the causes of payment errors and what
actions have been taken to reduce them, we conducted interviews with
program stakeholders from FNS headquarters, each of FNS's seven
regional offices, and the USDA Office of the Inspector General. In
addition, we interviewed food stamp officials from 9 states, officials
from the state auditor's office in each of these 9 states, food stamp
officials from the local office within 8 of these 9 states with the
largest food stamp caseload, and food stamp researchers and
representatives from special interest groups. The 9 states we selected
were California, Michigan, Mississippi, New Jersey, New York, Oregon,
South Dakota, Texas, and Wisconsin. We chose these states for the
diversity in their locations, number of Food Stamp Program
participants, and payment accuracy performances. We included 3 states
with consistently low error rates, 3 states with consistently high
error rates, and 3 states that reduced their error rate by more than 30
percent between 1999 and 2003. To guide our work on actions taken to
reduce payment errors, we used the key components of internal control
as our framework.[Footnote 2] Finally, to learn about past work
regarding Food Stamp payment error, we reviewed previous GAO reports on
the Food Stamp Program and FNS reports concerning food stamp payment
error. We conducted our work between May 2004 and April 2005 in
accordance with generally accepted government auditing standards.
Results in Brief:
The national payment error rate for the Food Stamp Program combines
states' overpayments and underpayments to program participants and has
declined by almost one-third over the last 5 years to a record low of
6.63 percent in a time of rising caseloads. Of the total $1.4 billion
of errors in fiscal year 2003, 76 percent were due to overpayments and
about 24 percent were underpayments. The payment error rate has fallen
each year since 1999, when it was 9.86 percent. This decline in the
payment error rate has been widespread; the rate fell in 42 states and
the District of Columbia, and rates in 18 of these states fell by at
least one-third. However, despite the decrease in many state error
rates over the past few years, a number of states continue to have
difficulties reducing payment error. For example, in 2003, 7 states had
payment error rates of more than 10 percent. Finally, in addition to
measuring improper payments to program participants, FNS also monitors
households that were refused benefits. In fiscal year 2003, about 8
percent of these cases were improperly denied, suspended, or
terminated. However, these cases are not part of a state's error rate,
and the amount of benefits these households would have received is
unknown.
Food stamp payment errors are caused primarily by caseworkers, usually
when they fail to keep up with new information or make mistakes when
applying program rules, and by participants when they fail to report
needed information. These causes can be linked, in part, to how
frequently changes must be reported and the complexity of program
rules. Almost two-thirds of all payment errors occur when state food
stamp caseworkers fail to act on reported information or misapply
complex rules in calculating benefits. For example, the increase in the
number of food stamp recipients who are low-wage workers and the
changeable nature of their income has made it more difficult for
caseworkers to keep up with changes, according to state officials. They
also cited increased caseloads and state fiscal problems, which
resulted in staff reductions and competing demands on workers, as
contributing factors. In addition, caseworkers may misapply the
numerous eligibility requirements--such as allowable deductions for
shelter, utility, or child care--when calculating a household's net
monthly income. Moreover, state and local officials from 5 of the 9
states we contacted told us that it can be difficult for caseworkers
when they are responsible for multiple programs--such as TANF, food
stamps, and Medicaid--because the eligibility and reporting rules among
the programs often differ. Payment errors associated with participants
account for about one-third of all payment errors. This generally is a
result of participants not providing required information to
caseworkers, such as changes in household income and composition and
employment or of providing incomplete or incorrect information.
Participants may fail to provide this information either intentionally
or unintentionally. In 2003, states referred about 5 percent of all
errors for suspected participant fraud investigation. However, despite
these widespread challenges, states have continued to reduce their
payment error rates and remain concerned about continued improvement in
the future.
FNS and the 9 states we reviewed have taken many approaches to
increasing food stamp payment accuracy, most of which are parallel with
internal control practices known to reduce improper payments. These
approaches include practices to improve accountability, conduct risk
assessments, implement program and process changes based on those
assessments, and monitor and promote improved performance. FNS's
increased focus on the error rate and the threat of increased financial
penalties were cited by several states as the impetus for state leaders
and managers to make payment accuracy a priority. Also, some states are
holding their local managers accountable for their error rates by
setting overall local office target rates or including target rates in
the managers' contracts. FNS and the states are also actively
conducting risk assessments to identify the types and sources of
payment errors. For example, California, a state that has reduced its
error rate by over 50 percent since 2001, has increased the number of
cases sampled for its 19 largest counties as a way to assess risk and
identify the causes of errors at the county level. Once the likely
causes are identified, the states are adopting program and process
changes to address risk. For example, some localities have adopted
specialized units to respond to reported changes in case information to
address their failure to act on reported information errors. In
addition, most states we contacted have adopted a simplified reporting
option, which is designed to reduce administrative burden and promote
higher participation. The option also helps reduce errors because it
reduces the frequency with which households must report changes. In
essence, unreported changes that might have caused errors in the past
are no longer required to be reported. Overall, states put into place a
combination of approaches based upon their available resources,
priorities, the nature of their errors, and other factors, making it
difficult to tie error rate improvements to specific practices.
However, state officials point to their improved state error rates as
evidence that collectively the practices are having an impact.
Background:
The federal Food Stamp Program is intended to help low-income
individuals and families obtain a more nutritious diet by supplementing
their income with benefits to purchase food. FNS pays the full cost of
food stamp benefits and shares the states' administrative costs--with
FNS paying approximately 50 percent--and is responsible for
promulgating program regulations and ensuring that state officials
administer the program in compliance with program rules.[Footnote 3]
The states usually administer the program out of local assistance
offices that determine whether households meet the program's
eligibility requirements, calculate monthly benefits for qualified
households, and issue benefits to participants, almost always on an
Electronic Benefits Transfer (EBT) card. The local assistance offices
often administer other benefit programs as well, including TANF,
Medicaid, and child care assistance.
In fiscal year 2004, the Food Stamp Program issued almost $25 billion
in benefits, and in September 2004, almost 25 million individuals
participated in the program. As shown in figure 1, the increase in the
average monthly participation of food stamp recipients in 2004
continues a recent upward trend in the number of people receiving
benefits, with caseloads increasing over 40 percent since 2001, but
still below the level in 1996.
Figure 1: Food Stamp Recipiency Has Increased Sharply in the Last 3
Years, Following a Substantial Decline:
[See PDF for image]
[End of figure]
Eligibility Requirements:
Eligibility for participation in the Food Stamp Program is based on the
Department of Health and Human Services' poverty measures for
households. The caseworker must first determine the household's gross
income, which cannot exceed 130 percent of the poverty level for that
year (or about $1,654 per month for a family of three living in the
contiguous United States in 2003). Then the caseworker must determine
the household's net income, which cannot exceed 100 percent of the
poverty level (or about $1,272 per month for a family of three living
in the contiguous United States). Net income is determined by deducting
from gross income expenses such as dependent care costs, medical
expenses, utilities costs, and shelter expenses. In addition, there is
a limit of $2,000 in household assets, and basic program rules limit
the value of vehicles an applicant can own and still be eligible for
the program.[Footnote 4] If the household owns a vehicle worth more
than $4,650, the excess value is included in calculating the
household's assets.[Footnote 5]
After eligibility is established, households are certified to receive
for food stamps for periods ranging from 1 to 24 months depending upon
household circumstances. The average certification period is 10 months.
Once the certification period ends, households must reapply for
benefits, at which time eligibility and benefit levels are
redetermined. Between certification periods, households must report
changes in their circumstances--such as household composition, income,
and certain expenses--that food stamp agencies must consider to
determine whether the change affects their eligibility or benefit
amounts. States have the option of requiring food stamp participants to
report on their financial circumstances at various intervals and in
various ways. States can institute a type of periodic reporting system,
or they can rely on households to report changes in their household
circumstances within 10 days of occurrence.[Footnote 6] Under periodic
reporting, participants report monthly, quarterly, or under a
simplified system. The simplified reporting system, available since
early 2001, provides for an alternative reporting option that requires
households with earned income to report changes between certifications
only when their income rises above 130 percent of the poverty level.
This easing of program requirements was designed to help increase the
program access and participation of eligible working families, an FNS
goal, by making it easier for them to participate, as well as to reduce
the administrative burden on local food stamp offices.
Quality Control System:
To ensure the accuracy of food stamp payments, FNS and the states have
an extensive quality control system. In fiscal year 2003, the states
spent an estimated $80 million to administer the system, and FNS spent
and estimated $9 million.[Footnote 7] According to FNS officials, each
month a state's food stamp QC staff selects a representative sample of
the open food stamp cases for review.[Footnote 8] The QC staff reviews
each sample case to verify whether the recipient's eligibility and
benefit amount were determined correctly. If the reviewer finds the
benefit amount off by more than $25, it is counted as an error. The
statewide sample produces a valid statewide error rate, although in
most cases, it does not include sufficient cases to generate error
rates for local offices.[Footnote 9]
FNS plays a significant role in monitoring and validating the state's
review. The FNS regional offices approve the states' sampling plans;
validate the states' samples, totaling 56,557 in fiscal year 2003; and
review one-third of these sample cases to ensure accuracy. They also
handle informal arbitration of disputes resulting from differences
between the state and FNS review outcomes. Disputes that are not
resolved at the regional office can be appealed to FNS headquarters for
formal arbitration. In fiscal year 2003, regional reviews found 151
cases where the regional offices' finding or error amount was different
from the states' finding or error amount. According to FNS officials,
this constitutes less than 1 percent of the cases reviewed by the
regions, and each year between 20 and 30 of these unresolved disputes
between the state and the regional office are appealed to FNS
headquarters for formal arbitration. According to FNS officials, upon
the completion of the regional office's review and error disagreement
processes, the regional office adjusts error rates to reflect the final
results.
Once the error rates are final, FNS is required to compare each state's
performance with the national error rate and imposes penalties or
provides incentives according to specifications in law. Prior to fiscal
year 2003, penalties were levied each year a state's payment error rate
was above the national average. In addition, states with error rates
above 6 percent, other than for good cause, were required to develop
corrective action plans that are monitored by the FNS regional offices.
FNS can negotiate with the states the amount of the penalty that will
be paid to FNS, the amount that will be reinvested into the program,
and the amount of money that will be collected if the state does not
improve its error rate to an agreed-upon amount. In order to encourage
program improvement, FNS also provided enhanced funding to states that
with a payment error rate less than or equal to 5.90 percent according
to a formula set in law. During this period of time, the states were
held accountable only for their error rate and no other performance
measure.
The Farm Security and Rural Investment Act of 2002 (the 2002 Farm Bill)
made significant changes to the way penalties and incentives are
calculated and awarded.[Footnote 10] States will not be penalized until
their error rate exceeds the national error rate threshold for 2 years
in a row. The error rate threshold changed so that states are not
penalized unless there is a 95 percent statistical probability that
their error rate exceeds 105 percent of the national average for 2
consecutive years. If a state's error rate exceeds the threshold for 2
years in a row, a penalty will be established that is equal to 10
percent of the cost of errors above 6 percent.[Footnote 11] In addition
to establishing the new penalty system, the 2002 Farm Bill instructed
FNS to create new criteria for performance bonuses that award states
with high or most improved performance for actions taken to correct
errors, reduce error rates, improve eligibility determination, and
other indicators of effective program operations.
FNS and the states also conduct fraud prevention activities to detect
and prosecute food stamp fraud by retailers and participants. In fiscal
year 2002, the states spent $229 million on their fraud control
activities and reported that they completed 834,000 client
investigations resulting in 12,000 state prosecutions and 61,000
ineligibility rulings. As a result of these fraud control activities
and following up on overpayments identified through the QC process and
during regular case processing activities, the states established
almost $26 million in fraud claims, $176 million in household error
claims, and $59 million in agency error claims. States also reported
they collected $209 million on previously established claims. FNS's
payment error statistics do not account for the states' results in
recovering overpayments.
Payment errors can typically be traced to a lack of or a breakdown in
internal controls, which are an integral component of an organization's
management. Internal control is not one event, but a series of actions
and activities that occur throughout an organization on an ongoing
basis. Therefore, to guide our review of FNS and state actions taken to
reduce payment errors, we used the key components of internal control
as our framework. These components include creating a work environment
that promotes accountability and the reduction of payment error,
analyzing program operations to identify areas that present the risk of
payment error, making policy and program changes to address the
identified risks, and monitoring the results and communicating the
lessons learned to support further improvement.
The Food Stamp Error Rate, Which Combines Overpayments and
Underpayments, Has Declined by Almost One-Third over the Last 5 Years:
The national Food Stamp Program payment error rate combines
overpayments and underpayments to participants, and has declined by
about one-third in recent years from 9.86 percent in 1999 to a record
low of 6.63 percent in 2003.[Footnote 12] In dollars, this means if the
1999 error rate was in effect in 2003, the program would have made
payment errors totaling over $2.1 billion rather than the $1.4 billion
it experienced. Most states have enjoyed a recent reduction in payment
error, with error rates falling in 41 states and the District of
Columbia. However, some states continue to struggle with relatively
high payment error rates. In addition to measuring the accuracy of
benefits paid, about 8 percent of the decisions to deny, suspend, or
terminate benefits were also made in error. However, the amount of
benefits these households would have received is unknown and is not
part of a state's payment error rate.
Food Stamp Payment Error Rate Combines Benefit Overpayments and
Underpayments:
The national food stamp payment error rate combines overpayments and
underpayments made to benefit recipients in all states. Of the total
$1.4 billion in payment error in fiscal year 2003, $1.1 billion, or
about 76 percent, were overpayments, which represent a financial loss
to the federal government. Overpayments occur when eligible persons are
provided more than they are entitled to receive or when ineligible
persons are provided benefits. Underpayments, which occur when eligible
persons are paid less than they are entitled to receive, totaled $340
million, or about 24 percent of dollars paid in error, in fiscal year
2003. Underpayments represent unintentional financial savings to the
federal government.
Studies have reviewed the effects of payment errors on household
income. An analysis of fiscal year 2003 QC data conducted by
Mathematica Policy Research, Inc., for FNS found that typical overpaid
eligible households received an average of $97 too much in monthly
benefits and underpaid eligible households received an average of $78
too little in monthly benefits.[Footnote 13] As a result, overpaid
households' purchasing power, which includes household gross income and
food stamp benefits, rose by 8 percentage points, from 94 percent of
the federal poverty level to 102 percent of the federal poverty level.
Underpaid households' purchasing power decreased by 6 percentage points
from 80 percent of the federal poverty level to 74 percent of the
federal poverty level. More than 98 percent of households receiving
food stamps were eligible for the program. Ineligible households
receiving food stamp benefits saw their purchasing power rise from 118
percent of the federal poverty level to 132 percent of the federal
poverty level.
The National Error Rate Declined by One-Third in the Last 5 Years,
Driven by States Providing the Largest Amount of Food Stamp Benefits:
The national Food Stamp Program payment error rate has declined by
about one-third over the last 5 years. The rate has declined each year,
from 9.86 percent in 1999 to a record low of 6.63 percent in 2003, as
shown in figure 2. If the 1999 error rate had been in effect in 2003,
the program would have made payment errors totaling over $2.1 billion
rather than the $1.4 billion it experienced. In addition, the state-
reported error rates for fiscal year 2004 suggest that the overall
error rate has continued to decline. These error rates have not yet
been validated by FNS, which usually produces slight adjustments to
these state-reported rates.
Figure 2: National Payment Error Rate for the Food Stamp Program,
Fiscal Years 1999 to 2003:
[See PDF for image]
[End of figure]
Error rates fell in 41 states and the District of Columbia, and 18
states reduced their error rates by one-third or more, as shown in
figure 3. See appendix II for more information on individual states'
error rates over time.
Figure 3: Map of State Error Rate Changes from Fiscal Year 1999 to 2003:
[See PDF for image]
[End of figure]
Further, the 5 states that issue the most food stamp benefits reduced
their error rates by an average of 36 percent during this period, as
shown in table 1. The changes in these states have a large effect on
the national error rate because of the way the rate is
calculated.[Footnote 14]
Table 1: Changes in Payment Error Rates for States Providing the
Largest Amount in Food Stamp Benefits, Fiscal Year 2003:
State: New York;
2003 benefit payments: $1,676,508,940;
1999 error rate: 10.47;
2003 error rate: 5.88;
Percentage change in error rates between 1999 and 2003: -44%.
State: Florida;
2003 benefit payments: $987,926,276;
1999 error rate: 9.43;
2003 error rate: 8.00;
Percentage change in error rates between 1999 and 2003: -15%.
State: Illinois;
2003 benefit payments: $1,052,739,082;
1999 error rate: 14.79;
2003 error rate: 4.87;
Percentage change in error rates between 1999 and 2003: -67%.
State: Texas;
2003 benefit payments: $1,880,851,630;
1999 error rate: 4.56;
2003 error rate: 3.29;
Percentage change in error rates between 1999 and 2003: -28%.
State: California;
2003 benefit payments: $$1,807,987,279;
1999 error rate: 11.34;
2003 error rate: 7.96;
Percentage change in error rates between 1999 and 2003: -30.
Source: GAO analysis of FNS data.
[End of table]
In addition to contributing to the downward trend in the payment error
rate, an increasing number of states had error rates below 6 percent in
2003.[Footnote 15] However, payment error rates vary among states. For
example, 21 states had error rates below 6 percent in 2003 (see fig. 4
for states' error rate performance); this is an improvement from 1999,
when 7 states had error rates below 6 percent. Despite the decrease in
many states' error rates over the past few years, some states continue
to have high payment error rates. For example, 7 states had payment
error rates of 10 percent or higher in 2003. These states are also
making progress, however, and are expected to have reduced their error
rates in 2004.
Figure 4: Map of State Error Rates for Fiscal Year 2003:
[See PDF for image]
[End of figure]
Improper Denials Are Monitored Separately:
In addition to monitoring the payment error rate, FNS estimates the
rate at which eligible households are improperly denied benefits, which
is called the negative error rate. According to a FNS QC official, this
rate is not included in the national food stamp payment error rate
because it counts the number of cases affected rather than the number
of dollars given in error. In fiscal year 2003, FNS reported that about
8 percent of the decisions to deny, suspend, or terminate benefits were
made in error. However, the amount of benefits these households would
have received had this error not occurred is unknown.
Caseworkers Cause about Two-Thirds and Participants Cause about One-
Third of Payment Errors:
Almost two-thirds of the payment errors in the Food Stamp Program are
caused by caseworkers, usually when they fail to act on new information
or make mistakes when applying program rules, and one-third are caused
by participants, when they unintentionally or intentionally do not
report needed information or provide incomplete or incorrect
information (see fig. 5). Program complexity and other factors, such as
the lack of resources and staff turnover, can contribute to caseworker
mistakes. Despite the decrease in error rate in recent years, these
factors have remained the key causes of payment error over the last 5
years.
Figure 5: Caseworker-and Participant-Caused Errors in Fiscal Year 2003:
[See PDF for image]
[End of figure]
Caseworkers Failing to Act on Reported Information and Misapplying
Program Rules Cause Most Caseworker Errors:
Almost two-thirds of all payment errors are made by state food stamp
caseworkers, according to our analysis of FNS QC data.[Footnote 16]
Caseworkers Fail to Act on Changes:
Errors can occur when caseworkers have difficulty keeping up with
reported changes in household circumstances, according to officials
from all of the states we reviewed. Caseworkers are required to review
reported changes and assess their effect on a household's eligibility
and benefit levels. In addition, caseworkers regularly receive
information from data matches and other sources that should be assessed
and verified, and the failure to do so is another important cause of
error. In previous work, we have found that the risk of improper
payments increases in programs with a significant volume of
transactions. When caseworkers fail to keep up with changes, the errors
usually are reflected as incorrect household income or deductible
expenses, as shown in table 2.
Table 2: Caseworker Errors Most Often Resulted in Incorrect Household
Income or Deductions, Fiscal Year 2003:
Reason: Failure to act on reported information;
Percentage of income errors: 10.36%;
Percentage of deduction errors: 8.86%;
Percentage of nonfinancial errors[A]: 4.08%;
Percentage of other errors: .03%;
Percentage of total errors: 23.33%.
Reason: Policy incorrectly applied;
Percentage of income errors: 8.35%;
Percentage of deduction errors: 6.99%;
Percentage of nonfinancial errors[A]: 3.99%;
Percentage of other errors: .81%;
Percentage of total errors: 20.14%.
Reason: Failure to verify information or follow up;
Percentage of income errors: 6.81%;
Percentage of deduction errors: 4.65%;
Percentage of nonfinancial errors[A]: 1.54%;
Percentage of other errors: .03%;
Percentage of total errors: 13.03%.
Reason: Other agency error;
Percentage of income errors: 5.22%;
Percentage of deduction errors: 2.72%;
Percentage of nonfinancial errors[A]: .4%;
Percentage of other errors: .66%;
Percentage of total errors: 9%.
Reason: Total caseworker-caused error;
Percentage of income errors: 30.74%;
Percentage of deduction errors: 23.22%;
Percentage of nonfinancial errors[A]: 10.01%;
Percentage of other errors: 1.53%;
Percentage of total errors: 65.5%[B].
Source: GAO analysis of FNS data.
[A] Nonfinancial errors refer to factors considered in determining a
household's eligibility, such as household composition, citizenship,
and student status of household members.
[B] The caseworker errors in table 2 and participant errors in table 3
account for all errors. The two totals may not add to 100 percent
because of rounding.
[End of table]
Food stamp officials in 8 of the 9 states told us that increasing
caseloads have contributed to payment errors, making it more difficult
for caseworkers to attend to all of the reported changes. In recent
years, FNS and several states have made it a priority to reach out to
likely eligible households that are not yet participating in the
program, in addition to focusing on minimizing payment error. At the
same time, the nation experienced an economic downturn, which
contributed to an increase in the number of families who had a need for
food assistance. As a result of these and other factors, nationally,
the number of food stamp participants has increased by more than 30
percent since February of 2001.
Moreover, as states across the country have faced fiscal challenges due
to the overall slowdown in the economy, some responded by reducing
their staff, offering early retirements, or imposing hiring freezes.
This also has contributed to rising caseloads per worker. For example,
food stamp officials in Michigan said state fiscal problems resulting
in staff reductions, increased caseloads per worker, and competing
demands on workers made it difficult for caseworkers to act on all
reported changes because of high caseloads. Oregon state officials also
attribute their difficulties with payment accuracy to a 40 percent
increase in the number of food stamp cases in the state between 2001
and 2003 as well as state financial problems that led to staff cuts and
a hiring freeze. FNS officials informed us that there is no central
collection of comparable data on caseload per worker among states.
Further, the recent outreach efforts included a focus on increasing
participation among working families. State and local officials from 8
of the 9 states we interviewed said managing cases with earnings
contributes to payment error in part because caseworkers may find it
difficult to keep up with the frequent changes reported to
them.[Footnote 17] For example, Michigan food stamp officials told us
that they experienced an increase in overpayment errors because
caseworkers were failing to act on the frequent wage and salary changes
reported by working participants.
Caseworkers Incorrectly Apply Program Rules:
The complexity of the eligibility criteria for the Food Stamp Program
contributes to caseworker errors. In previous work, we found that the
risk of improper payments increases in programs with complex criteria
for computing eligibility and payments.[Footnote 18] Caseworkers may
miscalculate a household's eligibility and benefits, in part because of
the program's complex rules for determining eligible household members
and for calculating the household's financial status. Our analysis of
QC data found that caseworker mistakes often involve incorrectly
determining household income, followed by mistakes related to income
deductions, and nonfinancial issues, such as determining household
composition. Although the error rate has declined in recent years,
these three types of mistakes have remained the major sources of error
over the last 5 years.
To determine household gross income, caseworkers must decide which
types of income to include. Households may have income from a number of
different sources, and rules require that some of this income be
counted and some not. Further, the fluctuations in earnings for low-
income working participants can increase the likelihood of error simply
because they result in a higher volume of case reviews and adjustments.
Payment errors also occur when caseworkers misapply one or more of six
allowable deductions when determining net income. Caseworkers calculate
and deduct expenses such as dependent care costs, medical expenses,
utilities costs, and shelter expenses--each of which have their own set
of eligibility criteria.[Footnote 19] For example, caseworkers can
provide households an excess shelter expense deduction if their shelter
expenses exceed 50 percent of monthly household income after applying
other deductions. As part of that process, caseworkers must determine
whether the household is entitled to a standard utility
allowance.[Footnote 20]
Other common caseworker errors involve nonfinancial factors, such as
misapplying the program's complex rules for determining the members of
the household. Although individuals may be living in the same home,
they may be treated as different households for eligibility and benefit
purposes, depending on whether they customarily purchase food and
prepare meals together. However, this is sometimes difficult to
determine. Food stamp officials in Michigan told us that given the
variety of household circumstances and arrangements caseworkers face,
determining household composition can be confusing. For instance,
officials said it can be difficult to determine how to treat a youth
over age 22 who moves in and out of the parents' home or households
that contain multiple generations of family members. In addition,
officials from 5 of the 9 states we contacted told us that having
caseloads with legal noncitizens was a challenge to reducing payment
error, in part because of the numerous policy changes in recent years
that affect the eligibility of various segments of this
population.[Footnote 21]
Correctly determining food stamp eligibility and benefits can be
complicated by differences between Food Stamp Program rules and the
rules governing other assistance programs. Officials from 5 of the 9
states we interviewed told us that minimizing payment error is
difficult for caseworkers when they are responsible for multiple
programs, such as TANF, food stamps, and Medicaid, because the
eligibility and reporting rules among the programs often
differ.[Footnote 22] For example, local officials from Texas told us
that because of the way the state chose to implement the simplified
reporting option, caseworkers are held responsible for failing to act
on a change when a birth is reported to the Medicaid program, even
though participants are not required to report the change to the Food
Stamp Program, according to a recently approved policy option. Oregon
state and local officials also told us that it is challenging for
caseworkers to attend to food stamp payment accuracy when they have to
determine eligibility and recertify households for other assistance
programs.
Officials from all 9 of the states we interviewed stated that staff
turnover contributes to incorrect application of program rules. Food
stamp officials in Oregon said that half of the caseworkers in the
Portland area have less than 1 year of work experience because of high
staff turnover, which makes it difficult for the office to maintain a
workforce trained in making accurate eligibility decisions. Officials
also told us that lack of training can be a challenge in part because
it is difficult for caseworkers to learn the complex program rules and
policies.
Similar factors also affect errors where benefits are improperly
denied, suspended, or terminated, according to officials from states we
interviewed. They cited caseworkers misapplying policies or
miscalculating income. For example, Michigan food stamp officials told
us that these errors sometimes occur when caseworkers temporarily
suspend benefits because participants are not complying with certain
rules but then do not review the case to complete it correctly.
Mississippi officials told us that these errors can also occur when
caseworkers misapply a policy or fail to add up wages correctly.
Participant Error Involves Failure to Report Required, Complete, or
Correct Information to Caseworkers:
About 35 percent of all payment errors occur because participants do
not provide required, complete, or correct information to caseworkers,
either unintentionally or deliberately (see table 3).[Footnote 23]
Although applicants are required to provide a variety of personal
information to the caseworker, failure to report income is the most
common cause of participant food stamp errors.
Table 3: Participant-Caused Errors Most Often Resulted in Incorrect
Household Income Determinations, Fiscal Year 2003:
Reason: Information not reported;
Percentage of income errors: 17.46%;
Percentage of deduction errors: 4.30%;
Percentage of nonfinancial errors: 3.75%;
Percentage of other errors: .13%;
Percentage of total errors: 25.64%.
Reason: Incomplete or incorrect information reported;
Percentage of income errors: 1.63%;
Percentage of deduction errors: 1.76%;
Percentage of nonfinancial errors: .57%
Percentage of total errors: 3.96%.
Reason: Incomplete or incorrect information reported & case referred
for suspected fraud;
Percentage of income errors: 2.96%;
Percentage of deduction errors: 1.13%;
Percentage of nonfinancial errors: .83%;
Percentage of total errors: 4.92%.
Reason: Total participant-caused error;
Percentage of income errors: 22.05%;
Percentage of deduction errors: 7.19%;
Percentage of nonfinancial errors: 5.15%;
Percentage of other errors: .13%;
Percentage of total errors: 34.52%[A].
Source: GAO analysis of FNS data.
[A] The caseworker errors in table 2 and participant errors in table 3
account for all errors. The two totals may not add to 100 percent
because of rounding.
[End of table]
Program complexity may play a role in participants' failure to report
needed information because the participants may not understand the
reporting requirements, according to officials from 2 states we
interviewed. For example, California state food stamp officials told us
they believe that some participants do not report information because
they are unfamiliar with the reporting requirements or because of
language barriers. In addition, when participants receive assistance
from multiple programs, they may be confused about what to report to
whom because the requirements differ among the programs, including
those for Medicaid and TANF.[Footnote 24] When participants fail to
report information, the result is usually an incorrect determination of
household income. Further, participants may not report information to
caseworkers because of the perceived burden associated with reporting
changes. For example, a food stamp official in Wisconsin told us that
because of the lack of staff at the call center, participants calling
to report changes may wait on the line for up to 20 minutes, and as a
result, some participants will hang up.
Errors may also occur when the participant intentionally does not
report needed information or unintentionally or intentionally provides
the caseworker with false or incomplete information. Although the
percentage of payment errors that involve participants intentionally
withholding information is not known, food stamp workers from all of
the states we interviewed refer cases for investigation when they
suspect fraud. For example, Oregon food stamp officials explained that
cases are referred for suspected fraud when a participant consistently
reports no income yet seems to have the resources needed to live self-
sufficiently. In 2003, about 5 percent of all payment errors were
referred for fraud investigation. Data are not available, however, to
determine what percentage of these error cases resulted in
disqualifying participants because of fraud.
Despite the recent decrease in error rates, the program continues to
face these same causes of error over time. Over the last 5 years,
caseworker failure to act on reported information, caseworker
misapplying program policies and requirements, and participant failure
to report key information have remained the three largest causes of
error. Moreover, errors involving incorrect household income or
deductions for expenses continue to be the most common types of errors
over the same period.
FNS and States Have Taken Steps to Increase Payment Accuracy:
FNS and the states we reviewed have taken many approaches to increasing
food stamp payment accuracy, most of which are parallel with internal
control practices known to reduce improper payments.[Footnote 25] These
include practices to improve accountability, perform risk assessments,
implement changes based on such assessments, and monitor program
performance. Often, several practices are tried simultaneously, making
it difficult to determine which have been the most effective.
FNS's and States' Approaches Are Parallel with Good Internal Control
Practices:
Because payment errors can typically be traced to problems with
internal controls, we used the key components of internal control as
our framework to categorize the approaches taken to reduce payment
errors. In doing so, we found that both FNS and the states we reviewed
were employing many of the same practices recognized as being effective
in reducing payment errors.
Improving Accountability:
Both FNS and states have taken steps to ensure that program officials
recognize their responsibility for payment accuracy. FNS has long
focused its attention on states' accountability for error rates through
its QC system by assessing penalties and providing financial
incentives. The administration of the QC process and its system of
performance bonuses and sanctions is credited or faulted by many as
being the single largest motivator of program behavior, and most of the
states in our review believe the QC system has helped increase payment
accuracy. From fiscal year 1998 to fiscal year 2002, FNS has assessed
$327 million in penalties. Of these penalties, FNS waived $93 million,
approved $92 million for reinvestment into state food stamp programs,
collected almost $24 million, and designated $118 million at risk for
payment if the states did not improve their error rates to agreed-upon
targets. During this same period, FNS awarded states almost $251
million of enhanced funding because of their low error rates.
In fiscal year 2003, the first year under the 2002 Farm Bill changes to
the QC system, 11 states were found to be in jeopardy of being
penalized if their fiscal year 2004 error rates did not improve. This
was a higher number than was originally expected by some analysts
because the error rate had fallen much faster than in previous years,
leaving more states above the new error rate threshold. Some states
have expressed concern that they may improve their error rates and yet
still be penalized because the national rate continues to drop around
them. In addition, under its new performance bonus system, FNS awarded
a total of $48 million to states, including $24 million to states with
the lowest and most improved error rates and $6 million to states with
the lowest and most improved negative error rate.[Footnote 26]
In addition to using the tools available under its QC system, FNS's
leadership has actively communicated the importance of accountability.
Establishing payment accuracy as a program priority is considered by
many to be the most important strategy for achieving program
improvement. Since the arrival of the current Undersecretary for Food,
Nutrition, and Consumer Services in 2001, FNS has put increased
pressure on states to reduce error rates. For example, the
undersecretary and other FNS officials visited states with particularly
high error rates to discuss payment accuracy. FNS also began to collect
a higher percentage of penalties. From fiscal year 1992 to 2000, FNS
collected about $800,000 in penalties. Since fiscal year 2000, FNS has
collected more than $20 million in penalties. Officials from one
advocacy group active in food stamp issues credits this official's
active role as one reason for the drop in the error rates in the larger
states. The FNS regional administrators also visit high error rate
states and emphasize payment accuracy as a major management priority at
regional meetings of state commissioners.
All the states we reviewed also reported taking steps to increase the
awareness of, and the accountability for, errors in their programs.
Often, this coincided with a change in state leadership and responded
to accumulating program penalties, bad publicity, or both. For example,
* Michigan state officials said that after their new governor took
office in 2003, error reduction became an issue for the governor and
the legislature because the state had paid more than $5 million in
penalties in 2003 and 2004. In response, the Food Stamp Program began
producing weekly internal reports and issuing regular reports to the
governor and the legislature. The state's error rate has dropped from
14.1 percent in fiscal year 2002 to a state-reported error rate of 6.73
percent in fiscal year 2004. As a result of the state's progress in
reducing its error rate, the governor has publicly recognized the
program's efforts.
* Wisconsin's turnaround began in 2002 when state officials, with the
support of the governor, made it clear to local food stamp offices that
double-digit error rates and the penalties that go along with them were
no longer acceptable. Wisconsin had been assessed penalties totaling
over $8 million for 2000, 2001, and 2002. The state's error rate has
dropped from 13.14 percent in fiscal year 2001 to a state-reported
error rate of 6.57 percent in fiscal year 2004.
* Penalties totaling over $5 million for 1998, 1999, and 2000, also
spurred New Jersey's human services director to appoint a special
assistant to focus on reducing the state's error rate. The state's
error rate has dropped from 12.93 percent in fiscal year 1999 to a
state-reported error rate of 2.62 percent in fiscal year 2004.
In addition, states we reviewed understood the need to communicate the
importance of payment accuracy to individuals working at all levels of
the program. Of the states we studied, California, Michigan, New
Jersey, and Oregon have begun to set error rate targets for their local
offices and have supplemental quality assurance processes in place to
produce local error rates or error rates for their largest offices.
Oregon and Texas also include payment accuracy goals in the
expectations for their managers and workers, making payment accuracy
one of the bases for their evaluations. California, New York, and
Wisconsin have shared the accountability for poor performance by
passing on a portion of their state's financial penalties to their
largest counties. New Jersey, South Dakota, and Texas, on the other
hand, have shared the enhanced funding they have received for good
performance with their local food stamp offices.
Identifying Risks:
Both FNS and states have taken steps to analyze program operations to
identify where risks exist. For example, through its QC system, FNS
determined that working families receiving benefits were error prone
because of frequent changes in their income and deductions. In
addition, officials from our 9 review states said they analyze the QC
data to identify the sources and causes of food stamp payment error in
their states. New Jersey officials used the QC data to identify
salaries and wages as the largest sources of error in their state. In
most cases, however, the QC samples are not large enough to produce
valid error rates or to identify specific problem areas for most
counties or local offices. In order to be able to obtain this
information, California, Michigan, New Jersey, New York, and Oregon
have developed their own quality assurance systems to produce monthly
error rates for their counties or local offices. For example, in
January 2003, Oregon instituted a targeted case review process that
requires officials in local offices to review between 35 and 100 cases
per month to identify errors. State officials say the reviews provide
better information to local-level officials on the causes and sources
of payment error at their site so they can plan corrective action.
Oregon's payment error rate dropped from 13 percent in fiscal year 2003
to a state-reported error rate of 7.81 percent in fiscal year 2004.
California, New York, Wisconsin, and Michigan targeted their largest
and most error-prone offices for special risk assessments. In
Wisconsin, for example, the state focused its approaches on Milwaukee
because it is the largest metropolitan area in the state, accounting
for 47 percent of the state food stamp caseload. Because it had the
highest error rate, it had the most significant influence on the
state's error rate. The state brought in a contractor that conducted an
assessment of payment accuracy and the service delivery model used in
Milwaukee. The contractor recommended that Milwaukee adopt a number of
policy, program, and case review changes. In response, Wisconsin and
the city of Milwaukee conducted a one-time find-and-fix case sweep
between March and September 2004. State and county case readers
reviewed 14,000, or almost 25 percent of , their food stamp cases to
identify and correct potential errors. The information gained from this
exercise identified certain risks and error-prone cases that county
officials have used to implement other changes. As a result, Milwaukee
County officials said their error rate dropped from 12.2 percent in
March 2004 to 7.7 percent in June 2004.
Responding to Findings from Risk Assessments:
Once the QC review process is completed, penalties are assessed by law
to high error rate states and FNS works with the states to correct the
problems. Staff from the FNS regional offices work with the states on
the development and implementation of reinvestment and corrective
action plans that address specific threats and risks identified in risk
assessments. These plans can vary depending upon the state's systems
and characteristics. Examples of activities included in the plans
include training to address errors identified from QC and quality
assurance reviews, developing online training curricula, and correcting
errors generated by automated systems.
States have also adopted practices to prevent, minimize, and address
payment accuracy problems in response to the sources of error
identified in risk assessments. States chose their varied practices in
response to their unique characteristics, resources, and risks.
* Automated system changes. Michigan implemented changes in its
automated system to help deal with problems resulting from failure to
collect complete case information, particularly household income,
during the application and recertification processes. The state's
automated system now prompts workers to obtain complete income
documentation for cases with earned income:
* Specialized change units. In June 2002, Los Angeles established 30
specialized change units for its 30 district offices to address their
failure to act on reported information, which was one of their largest
sources of errors. FNS supports the adoption of change centers such as
these based upon their reported outcomes in other states. Los Angeles
County officials said the change unit workers now act upon reported
case changes that previously had not been acted upon by caseworkers
because of their large caseloads.
* Outreach to more stable food stamp population. New York has
implemented a program to automatically certify eligible
nonparticipating elderly Supplemental Security Income recipients for
food stamps for 4 years.[Footnote 27] In addition to reaching an
underserved population without adding undue administrative burden on
the local offices, officials believe that increasing the participation
of these recipients could help reduce the state's error rate because
this group is less error prone because of its stable income and
circumstances.
States also adopted various case review practices that would help them
address a wide range of risks and problems.
* Supervisory review of cases. Several states have begun to require
local supervisory reviews of cases to detect and correct errors caused
by misapplication of food stamp policies or workers failing to act on
reported information. Some states require that all cases be reviewed,
while others target error-prone cases or a certain number of cases per
worker.
* Targeted local office reviews. Some states have used contractors or
have established their own teams to target high error rate offices for
improvement. Michigan recently started using technical assistance teams
to observe the local office's processes and make recommendations for
improvement.
* Error review panels. Some of our review states have also established
panels to review errors discovered through the QC process. New Jersey
established such a panel, consisting of system, policy and QC staff.
This panel reviews all errors, challenges some that it believes have
been inaccurately classified and develops corrective actions to address
the root causes of the errors. The results of the reviews can then be
communicated to all local offices. For example, as a result the panel's
finding that computing utility bill deductions was a source of payment
errors, the state implemented a mandatory standard utility allowance
policy to reduce this type of error.
Many of the error reduction practices employed by the states in our
review focused primarily on agency-caused rather than client-caused
errors. Many state officials we spoke with believe that states should
not be held accountable for participant-caused errors, such as failure
to report information, because the state cannot control participants'
behavior. However, FNS officials believe that states can reduce
participant-caused errors by better using computer matching of state
data sources and other outside sources of data, improving interviewing
techniques to collect all relevant information and identify
discrepancies, and educating clients about their responsibilities.
In addition to taking the above steps focused specifically on
decreasing the error rate, FNS has made and advocated for a number of
program and policy changes designed primarily to address other issues,
such as program participation, which have also helped reduce payment
errors. FNS believes that serving eligible low-income families,
particularly working poor families, is imperative to the success of
welfare reform and the nutritional well-being of eligible persons.
However, because the income and deductions for working poor families
tend to be volatile, these households are more error prone, and their
participation could increase the error rates of states trying hardest
to serve them and thus discourage states from reaching out to these
families. In response, FNS raised the error tolerance level in fiscal
year 2000 from $5 to $25 for monthly food stamp payments for all cases.
This change exempted smaller errors that had been counted in the past.
FNS estimated that this change would have reduced the nationwide error
rate by 0.66 percentage points if it had been implemented in the
previous fiscal year.
In addition, FNS and Congress have made several options available to
the states to simplify the application and reporting process. These
simplification measures are designed, in part, to reduce the
administrative burden on both caseworkers and participants and thus
promote higher participation in the program. One option in particular
reduces the frequency with which households with earned income must
report changes. Prior to this simplified reporting option, participants
were required to frequently report changes in their circumstances.
Under the simplified reporting rule issued in November 2000, most
households need only report changes between certification periods if
their new household income exceeds 130 percent of the federal poverty
level.
This simplified reporting option can reduce a state's error rate as
well. Absent simplified reporting, certain unreported or undetected
changes between certification periods would be considered an error.
Minimizing the number of income changes that must be reported between
certifications can help reduce errors associated with caseworker
failure to act as well as participant failure to report changes, and
income-related errors account for more than half of all payment errors.
Essentially, this simplification option redefines the threshold for
what is considered an error. This type of change can result in an
increase in program benefits paid out, such as when participants
experience an increase in income between certification periods that
need not be reported until the next certification under the simplified
requirements. In 2000, FNS estimated the additional cost to the program
to be approximately $51 million in fiscal year 2004 affecting nearly
1.5 million households per month. By expanding this option in the 2002
Farm Bill beyond earned income households to any and all households
that can be asked to report periodically, an FNS official said Congress
had endorsed the idea of making the program more user friendly to
working families. Since the 2000 estimate, program participation has
grown significantly, but FNS has not completed a more recent estimate
of the additional cost. Moreover, the possible savings and efficiencies
gained in program administration have not been quantified.
Most of our review states have adopted some form of simplified
reporting to help them better serve working families, permit greater
program participation, and address the errors associated with frequent
change reporting. Nationwide, FNS reported that as of September 2004,
41 states and the Virgin Islands had adopted some form of simplified
reporting.
Monitoring and Promoting Performance:
FNS has taken many actions to track the success of improvement
initiatives and to provide the information needed to facilitate program
improvement. FNS managers use data generated from the QC system as well
as the results of their own monitoring activities to track the states'
performance over time. FNS regional offices annually review state
agency operations to, among other things, confirm that problems in
program operations are being identified, properly analyzed, and
resolved. Where applicable, the regional office also monitors the
states' implementation of corrective action plans. FNS, in turn,
requires states to perform management evaluations to monitor whether
adequate corrective action plans are in place at local offices to
address the causes of persistent errors and deficiencies. To monitor
corrective actions identified through the management evaluations, FNS
suggests that states review a sample of case records containing actions
that are error prone.
In addition, in November of 2003, FNS created a Payment Accuracy Branch
at the national level to work with FNS regions to suggest policy and
program changes and to monitor state performance. The branch
facilitates a National Payment Accuracy Workgroup with representatives
from each FNS regional office and headquarters who use QC data to
review and categorize state performance into one of three
tiers.[Footnote 28] FNS has recommended a specific level of increasing
intervention and monitoring approaches for each tier as error rates
increase, and the FNS regional offices report to headquarters on both
state actions and regional interventions quarterly.
FNS also provides and facilitates the exchange of information gleaned
from monitoring by:
* publishing a periodic guide to highlight the practices states are
using to address specific problems;[Footnote 29]
* sponsoring national and regional conferences and best practices
seminars;
* training state QC staff;
* providing state policy training and policy interpretation and
guidance; and:
* supporting adoption of program simplification options.
Once promising state practices have been identified, FNS also provides
funding to state and local food stamp officials to promote knowledge
sharing of good practices. Oregon officials said FNS provided state
exchange funds for them to visit Kentucky, Indiana, and Arizona--three
states that had effective systems for monitoring performance at the
local management and worker level. FNS also provided state exchange
funds for Oregon officials to meet several times with officials from
Idaho and Alaska to discuss common problems they faced trying to reduce
payment errors and to generate solutions. In fiscal year 2004, FNS
provided $612,000 for states to conduct state exchange visits.
Officials from most of our review states found this program to be
particularly helpful to their efforts to improve program performance.
* States are also using information generated by the QC system to track
the results of their policy and program changes over time and
communicate timely operational information to local offices.
Information gleaned from monitoring can help inform their ongoing risk
assessments. States are also promoting knowledge sharing of promising
practices. These practices include:
* preparing reports detailing causes and sources of errors for the
local offices and publishing and distributing monthly error rates for
all local offices;
* transmitting the results of statewide error review panels on the
source and causes of errors to local offices, along with suggested
corrective actions;
* sponsoring statewide QC meetings and state best practices conferences
for local offices to discuss error rate actions taken and common
problems; and:
* sponsoring local office participation in FNS regional conferences.
Despite FNS and state mechanisms used to track the initiatives and
share promising practices, there are no data available on which
initiatives are most cost-effective. FNS's primary focus has been on
monitoring progress in reducing error rates, which can help ensure
eligible households receive the correct benefits and maintain public
support for the program. Even so, from fiscal year 2001 to 2004, the
annual administrative cost per participant has fallen from $129 to $99
per participant while program participation has increased. It is
possible that some states gained efficiencies from simplified
reporting. However, FNS has not studied the cost-effectiveness of this
or other measures and thus cannot share this type of information with
the states.
States Are Using a Combination of Approaches to Address Payment Errors,
Making It Difficult to Determine the Effectiveness of Specific
Practices:
Every state we surveyed has put into place a combination of approaches
to address the key components of internal control, and the practices
states adopted under each approach varied among them. For example, in
California, state and local officials employed a combination of
practices under each internal control component over the last several
years to bring about their improved error rate (see fig. 6).
Figure 6: California Used a Combination of Internal Control Practices
to Reduce Payment Error:
[See PDF for image]
[End of figure]
Because many states have adopted multiple error reduction practices,
officials we spoke with said it is difficult to isolate the results of
individual practices, particularly when other program and economic
changes are occurring simultaneously. State officials point to their
low or dropping error rates as evidence that, collectively, their new
practices are having a positive impact. However, they have little data
to determine which practices have been most successful or cost-
effective.
Despite the lack of data, state officials citied various practices that
they believe have worked well in their state. For example, officials in
Michigan and New York believe new automated processes are their most
effective practices. Michigan food stamp officials cited targeted local
office reviews as another effective strategy for error reduction.
Mississippi food stamp officials believe their required supervisory
review of cases has been the most effective practice. California, South
Dakota, and Texas also cited supervisory reviews as one of their most
effective practices.
As a result of unique circumstances in each state, some practices that
may prove effective in one state would not be effective or feasible in
another. For example, New Jersey food stamp officials credit their 2001
implementation of the simplified reporting option for earned income
cases with being the most significant reason for the decline in their
error rates. However, officials in South Dakota continue to require
monthly reporting because they have been able to keep up with the
reported changes. They believe this requirement is primarily
responsible for its error rate, which is the lowest in the nation.
Monthly reporting requires participants to report, and caseworkers to
act, on case changes once per month, rather than relying on
participants to report key changes and workers to react to the reported
change. Monthly reporting requires significantly more work for both the
caseworkers and participants, and other states with larger caseloads
have said they do not have adequate resources to sustain this more
labor-intensive approach.
The success of new practices, however, can be undermined if the changes
do not receive adequate management attention or are not effectively
implemented. For example, Los Angeles established 30 specialized change
units. County officials said these units helped reduce one of their
largest sources of errors, caseworkers' failure to act. On the other
hand, Milwaukee's change units have not been as effective in reducing
the error rate as officials hoped because they have not been able to
staff the center appropriately, according to county officials. They
designed their change units on a model implemented in Atlanta, Georgia.
The Atlanta model calls for 10 staff per 10,000 calls, and Milwaukee
has about 7 staff per 20,000 calls. As a result, clients wait on the
phone for up to 20 minutes, and some hang up before their changes can
be reported.
Similarly, Wisconsin state and Milwaukee food stamp officials said
their find-and-fix case sweep program conducted between March and
September 2004 was a particularly effective practice for reducing
payment errors. Milwaukee officials believe the case sweep was largely
responsible for their error rate dropping from 12.2 percent in March
2004 to 7.7 percent in June 2004, and they expect to see long-term
effects as a result of their workers learning from the errors
identified using this practice. However, Michigan tried a similar
program but did not have comparable results. State officials said using
this method did not reduce their error rate because the state and
counties did not have enough staff to conduct a sufficient number of
reviews. Los Angeles County officials said they also tried and
abandoned a similar approach in 2001 because they did not have
sufficient staff to correct the errors that were identified.
Concluding Observations:
The Food Stamp Program has seen a significant decline in the national
error rate to a record low in 2003. If the 1999 error rate was in
effect in 2003, the program would have made payment errors totaling
over $2.1 billion rather than the $1.4 billion it experienced. Despite
the many challenges states identified, a number of them have
significantly lowered their error rates even while caseloads have
continued to rise. However, some states are having more difficulty
lowering their rates, and improper food stamp payments continue to
account for a large amount of money--$1.4 billion in 2003.
It is not completely clear why some states have been more successful at
lowering their error rates than others. Rather than implementing one
specific strategy, the nine states we reviewed have each implemented a
package of changes in response to the unique circumstances in the
state. Even those states we selected because of consistently high error
rates have implemented multiple strategies and expect to see error rate
decreases this year. However, although it is difficult to determine
which actions are most likely to succeed in particular circumstances,
we found examples of strategies that did not succeed because they
lacked adequate management attention or were not effectively
implemented.
Future similar error rate reductions may prove challenging. The three
major causes of errors have remained the same over time and are closely
linked to the complexity of program rules and reporting requirements.
As long as eligibility requirements remain so detailed and complex,
certain caseworker decisions will be at risk of error. Moreover,
participant-caused errors, which constitute one-third of the overall
national errors, are difficult to prevent and identify.
Attention from top USDA management as well as continued support and
assistance from FNS will likely continue to be important factors in
further reductions. In addition, if error rates continue to decrease,
this trend will continue to put pressure on states to improve because
penalties are assessed using the state's error rate as compared with
the national average. However, given the size of the Food Stamp
Program, the costs to administer it, and the current federal budget
deficit, achieving program goals more cost-effectively may become more
important. FNS and the states will continue to face a challenge in
balancing the goals of payment accuracy, increasing program
participation rates, and the need to contain program costs.
Agency Comments:
We provided a draft of this report to the U.S. Department of
Agriculture for review and comment. On April 7, 2005, we met with FNS
officials to get their comments. The officials said they agreed with
our findings and conclusions. FNS also provided us with technical
comments, which we incorporated where appropriate.
We are sending copies of this report to the Secretary of Agriculture,
appropriate congressional committees, and other interested parties. We
will also make copies available to others upon request. In addition,
the report will be available at no charge on GAO's Web site at
http://www.gao.gov. Please contact me at (202) 512-7215 if you have any
questions about this report. Other major contributors to this report
are listed in appendix III.
Signed by:
Sigurd R. Nilsen, Director:
Education, Workforce, and Income Security Issues:
[End of section]
Appendix I: Methodology for Determining the Causes of Food Stamp
Payment Errors for Fiscal Years 1999 through 2003:
To determine the causes of food stamp payment errors for fiscal years
1999 through 2003, we analyzed the Food and Nutrition Service's (FNS)
quality control (QC) system data of active cases used in error rate
calculations. State officials draw monthly samples of cases--which are
at the household level--and review them to determine the extent to
which the households received benefits to which they were entitled. The
results of these reviews are included in FNS's QC database, and
weighted analyses of these data produce nationally representative
results.
We constructed a database for each year from 1999 through 2003 that
contained a subset of the QC variables relevant to our analysis. For
the 1999-2002 databases, we included the reason for error and type of
error variables from the database we obtained directly from FNS and the
review finding, amount of error, and weight variables from an FNS QC
database maintained by Mathematica Policy Research, Inc., and made
available to the public via Mathematica's Web site. For the 2003 data,
we only used the FNS QC database maintained by Mathematica and made
available via its Web site because it contained all the variables we
needed. In addition, for each data set, we created a new variable
categorizing the numerous reasons for error in the agency-or-client (1)
variable for the most significant error to reflect, on a very general
level, whether the error was agency-or-client caused. Likewise, we
created a variable categorizing the numerous types of error in the
element (1) code variable as nonfinancial, resources, income,
deductions, or other for the most significant error. We generated
weighted frequencies for the reason, type, and review finding variables
for active cases that were used in calculating the error rate. Sampling
errors for these weighted tabulations were estimated using the
methodology provided in Appendix E of Characteristics of Food Stamp
Households: Fiscal Year 2003, FNS Report Number FSP-04-CHAR. We also
created weighted average dollar amounts of error by case review finding
(e.g., overissuance or underissuance) and weighted frequencies for the
intersection of reason for error and type of error.
To assess the reliability of the data we used, we worked with FNS staff
to obtain and understand the QC data and relied on FNS and Mathematica
documentation on the datasets, and FNS and Mathematica reports based on
these data. We ensured that we reliably downloaded the Mathematica QC
data from the Web and correctly read in FNS's raw QC data that FNS
provided to us by comparing the number of records in each database with
the number of records reported in FNS and Mathematica documentation. In
addition, to ensure the accuracy of the computer programs we used to
create and process the data, a review was made by a second GAO analyst.
Through our assessment of the reliability of these data, we found that
some variability exists in how states interpret and code the reason for
error variable (i.e., whether error was client-or agency-caused). FNS
stated that no quantitative analysis of the differences across states
has been made. In 2003, FNS implemented guidelines to ensure greater
consistency in state interpretations of the reasons for error (i.e.,
whether the reason for error was client-or agency-caused). Prior to
2003, interstate variation is believed to be greater than intrastate
variation in these interpretations. Consistency in the error amount is
expected to be a lesser problem since it is based on an established
formula. We also reviewed reports including previous GAO efforts that
studied QC processes and statistical properties. On the basis of the
collective information and findings of our reliability assessment, we
determined the data are sufficiently reliable for our analysis of the
causes of food stamp payment errors.
[End of section]
Appendix II: Food Stamp Combined Error Rates by State for Fiscal Years
1999 to 2004:
State: Alabama;
1999: 11.29;
2000: 11.37;
2001: 9.76;
2002: 8.74;
2003: 8.02;
2004[A]: 7.82.
State: Alaska;
1999: 15.94;
2000: 7.24;
2001: 9.69;
2002: 10.99;
2003: 13.88;
2004[A]: 6.71.
State: Arizona;
1999: 6.93;
2000: 5.61;
2001: 5.79;
2002: 5.27;
2003: 5.83;
2004[A]: 6.47.
State: Arkansas;
1999: 4.54;
2000: 4.03;
2001: 3.24;
2002: 4.29;
2003: 4.02;
2004[A]: 5.29.
State: California;
1999: 11.34;
2000: 13.99;
2001: 17.37;
2002: 14.84;
2003: 7.96;
2004[A]: 5.45.
State: Colorado;
1999: 9.02;
2000: 7.77;
2001: 8.53;
2002: 9.66;
2003: 7.40;
2004[A]: 2.94.
State: Connecticut;
1999: 13.90;
2000: 9.31;
2001: 9.86;
2002: 11.70;
2003: 8.77;
2004[A]: 4.60.
State: Delaware;
1999: 16.92;
2000: 12.53;
2001: 10.02;
2002: 8.46;
2003: 5.38;
2004[A]: 6.16.
State: District of Columbia;
1999: 12.12;
2000: 10.62;
2001: 11.38;
2002: 8.75;
2003: 8.97;
2004[A]: 5.51.
State: Florida;
1999: 9.43;
2000: 9.40;
2001: 9.80;
2002: 9.61;
2003: 7.93;
2004[A]: 5.54.
State: Georgia;
1999: 10.86;
2000: 8.61;
2001: 6.42;
2002: 6.73;
2003: 5.15;
2004[A]: 6.02.
State: Guam;
1999: 10.14;
2000: 10.56;
2001: 9.22;
2002: 6.05;
2003: 7.04;
2004[A]: 7.68.
State: Hawaii;
1999: 6.82;
2000: 7.74;
2001: 6.53;
2002: 5.03;
2003: 4.78;
2004[A]: 4.28.
State: Idaho;
1999: 10.94;
2000: 9.71;
2001: 7.41;
2002: 9.04;
2003: 11.31;
2004[A]: 9.19.
State: Illinois;
1999: 14.79;
2000: 9.26;
2001: 8.19;
2002: 8.75;
2003: 4.87;
2004[A]: 5.54.
State: Indiana;
1999: 8.11;
2000: 6.86;
2001: 6.83;
2002: 8.31;
2003: 10.00;
2004[A]: 5.74.
State: Iowa;
1999: 9.27;
2000: 7.14;
2001: 7.05;
2002: 6.44;
2003: 5.23;
2004[A]: 5.33.
State: Kansas;
1999: 8.98;
2000: 9.88;
2001: 10.37;
2002: 11.70;
2003: 10.45;
2004[A]: 4.65.
State: Kentucky;
1999: 7.72;
2000: 5.81;
2001: 7.53;
2002: 7.71;
2003: 6.32;
2004[A]: 5.39.
State: Louisiana;
1999: 7.35;
2000: 5.66;
2001: 5.78;
2002: 5.78;
2003: 5.79;
2004[A]: 4.74.
State: Maine;
1999: 8.79;
2000: 9.25;
2001: 8.49;
2002: 6.26;
2003: 13.29;
2004[A]: 10.38.
State: Maryland;
1999: 13.62;
2000: 11.06;
2001: 8.92;
2002: 8.80;
2003: 7.23;
2004[A]: 5.36.
State: Massachusetts;
1999: 9.34;
2000: 8.63;
2001: 8.50;
2002: 8.40;
2003: 4.99;
2004[A]: 4.58.
State: Michigan;
1999: 17.59;
2000: 13.28;
2001: 13.93;
2002: 14.10;
2003: 11.10;
2004[A]: 6.73.
State: Minnesota;
1999: 6.68;
2000: 3.58;
2001: 5.22;
2002: 5.73;
2003: 7.96;
2004[A]: 6.35.
State: Mississippi;
1999: 4.91;
2000: 4.69;
2001: 3.47;
2002: 4.39;
2003: 4.07;
2004[A]: 5.55.
State: Missouri;
1999: 8.58;
2000: 8.06;
2001: 10.21;
2002: 9.77;
2003: 6.75;
2004[A]: 7.16.
State: Montana;
1999: 8.10;
2000: 8.48;
2001: 8.15;
2002: 8.18;
2003: 5.78;
2004[A]: 4.33.
State: Nebraska;
1999: 14.22;
2000: 10.16;
2001: 8.44;
2002: 7.02;
2003: 7.24;
2004[A]: 5.48.
State: Nevada;
1999: 8.14;
2000: 5.11;
2001: 8.00;
2002: 7.59;
2003: 8.25;
2004[A]: 7.30.
State: New Hampshire;
1999: 12.86;
2000: 10.26;
2001: 10.99;
2002: 12.03;
2003: 7.52;
2004[A]: 6.98.
State: New Jersey;
1999: 12.93;
2000: 12.88;
2001: 7.97;
2002: 4.08;
2003: 2.43;
2004[A]: 2.62.
State: New Mexico;
1999: 10.39;
2000: 8.11;
2001: 6.65;
2002: 6.71;
2003: 6.16;
2004[A]: 5.41.
State: New York;
1999: 10.47;
2000: 12.35;
2001: 8.61;
2002: 7.75;
2003: 5.88;
2004[A]: 4.12.
State: North Carolina;
1999: 9.25;
2000: 6.93;
2001: 6.35;
2002: 4.70;
2003: 4.94;
2004[A]: 3.21.
State: North Dakota;
1999: 8.03;
2000: 7.04;
2001: 5.96;
2002: 6.14;
2003: 4.85;
2004[A]: 4.09.
State: Ohio;
1999: 8.44;
2000: 7.96;
2001: 8.48;
2002: 6.50;
2003: 6.61;
2004[A]: 7.74.
State: Oklahoma;
1999: 11.88;
2000: 7.05;
2001: 8.23;
2002: 7.94;
2003: 8.98;
2004[A]: 5.83.
State: Oregon;
1999: 10.50;
2000: 10.15;
2001: 9.76;
2002: 11.07;
2003: 13.00;
2004[A]: 7.81.
State: Pennsylvania;
1999: 10.79;
2000: 8.19;
2001: 8.29;
2002: 9.49;
2003: 8.21;
2004[A]: 3.93.
State: Rhode Island;
1999: 7.05;
2000: 8.74;
2001: 5.56;
2002: 10.21;
2003: 8.94;
2004[A]: 12.60.
State: South Carolina;
1999: 5.79;
2000: 4.47;
2001: 4.62;
2002: 4.40;
2003: 4.94;
2004[A]: 6.17.
State: South Dakota;
1999: 2.19;
2000: 1.18;
2001: 2.11;
2002: 2.12;
2003: 1.16;
2004[A]: 1.93.
State: Tennessee;
1999: 8.64;
2000: 5.71;
2001: 6.22;
2002: 7.02;
2003: 7.20;
2004[A]: 6.39.
State: Texas;
1999: 4.56;
2000: 4.14;
2001: 3.73;
2002: 4.85;
2003: 3.29;
2004[A]: 4.06.
State: Utah;
1999: 12.55;
2000: 14.43;
2001: 9.04;
2002: 6.60;
2003: 5.00;
2004[A]: 3.50.
State: Vermont;
1999: 12.09;
2000: 10.80;
2001: 10.95;
2002: 7.68;
2003: 8.52;
2004[A]: 4.91.
State: Virgin Islands;
1999: 5.85;
2000: 6.50;
2001: 4.70;
2002: 5.72;
2003: 6.88;
2004[A]: 3.29.
State: Virginia;
1999: 11.85;
2000: 8.66;
2001: 8.07;
2002: 6.74;
2003: 5.46;
2004[A]: 6.40.
State: Washington;
1999: 8.55;
2000: 8.20;
2001: 8.53;
2002: 8.16;
2003: 6.28;
2004[A]: 7.40.
State: West Virginia;
1999: 8.88;
2000: 5.09;
2001: 6.78;
2002: 7.13;
2003: 6.21;
2004[A]: 6.25.
State: Wisconsin;
1999: 13.42;
2000: 12.72;
2001: 13.14;
2002: 12.69;
2003: 9.32;
2004[A]: 6.57.
State: Wyoming;
1999: 2.91;
2000: 4.01;
2001: 3.04;
2002: 3.29;
2003: 4.23;
2004[A]: 4.39.
State: National average;
1999: 9.86;
2000: 8.91;
2001: 8.66;
2002: 8.26;
2003: 6.63;
2004[A]: n/a.
Source: the Food and Nutrition Service.
[A] These are state-reported rates. FNS has not yet adjusted the rates
to reflect the final results of their review.
[End of table]
[End of section]
Appendix III: GAO Contacts and Acknowledgments:
GAO Contacts:
Kay Brown, (202) 512-3674, brownke@gao.gov;
+Kevin Kumanga (202) 512-4962, kumangak@gao.gov:
Acknowledgments:
Cathy Roark and Luana Espana also made significant contributions to
this report. In addition, Carl Barden, Evan Gilman, and Kevin Jackson
produced our estimates of the causes of payment error, and Corinna
Nicolaou assisted in the message and report development.
[End of section]
Related GAO Products:
Food Stamp Program: Farm Bill Options Ease Administrative Burden, but
Opportunities Exist to Streamline Participant Reporting Rules among
Programs. GAO-04-916. Washington, D.C.: September 16, 2004.
Food Stamp Program: Steps Have Been Taken to Increase Participation of
Working Families, but Better Tracking of Efforts Is Needed. GAO-04-346.
Washington, D.C.: March 5, 2004.
Welfare Reform: Information on Changing Labor Market and State Fiscal
Conditions. GAO-03-977. Washington, D.C.: July 15, 2003.
Food Stamp Employment and Training Program: Better Data Needed to
Understand Who Is Served and What the Program Achieves. GAO-03-388.
Washington, D.C.: March 12, 2003.
Financial Management: Coordinated Approach Needed to Address the
Government's Improper Payments Problems. GAO-02-749. Washington, D.C.:
August 9, 2002.
Food Stamp Program: States' Use of Options and Waivers to Improve
Program Administration and Promote Access. GAO-02-409. Washington,
D.C.: February 22, 2002.
Means-Tested Programs: Determining Financial Eligibility Is Cumbersome
and Can Be Simplified. GAO-02-58. Washington, D.C.: November 2, 2001.
Executive Guide: Strategies to Manage Improper Payments: Learning From
Public and Private Sector Organizations. GAO-02-69G. Washington, D.C.:
October 2001:
Food Stamp Program: States Seek to Reduce Payment Errors and Program
Complexity. GAO-01-272. Washington D.C.: January 19, 2001.
Internal Control: Standards for Internal Control in the Federal
Government. GAO/AIMD-00-21.3.1. Washington, D.C.: November 1999.
Food Stamp Program: States Face Reduced Federal Reimbursements for
Administrative Costs. GAO/RCED/AIMD-99-231. Washington D.C.: July 23,
1999.
FOOTNOTES
[1] See appendix I for a detailed explanation of the methodology we
used to analyze FNS's data.
[2] See GAO, Internal Control: Standards for Internal Control in the
Federal Government, GAO/AIMD-00-21.3.1 (Washington D.C.: November
1999), and GAO, Executive Guide: Strategies to Manage Improper
Payments: Learning from Public and Private Sector Organizations, GAO-02-
69G (Washington D.C.: October 2001), for more details.
[3] Following passage of the Personal Responsibility and Work
Opportunity Reconciliation Act of 1996, reimbursements for food stamp
administrative costs in 44 states are adjusted each year to subtract
certain food stamp administrative costs that have already been factored
into these states' TANF grants. As a result, these states receive less
than 50 percent of their administrative costs. See GAO, Food Stamp
Program: States Face Reduced Federal Reimbursement for Administrative
Costs, RCED/AIMD-99-231 (Washington D.C.: July 23, 1999).
[4] Households with elderly or disabled members are exempt from the
gross income limit and may have assets valued at $3,000.
[5] If a household has no other assets, its vehicle can be worth $6,650.
[6] States can choose from a variety of change-reporting methods. They
can require households to report only when a member changes jobs,
receives a different rate of pay, or has a change in his or her work
status, such as from full-time to part-time or vice versa. States can
also require households to report only when there is a change in
earnings of $100 or more per month.
[7] FNS reimbursed the states half of the money they spend on QC. State
QC expenses include salaries for QC workers, the costs associated with
sampling and reviewing case files, office space, supplies, and travel.
[8] Sample sizes range from under 400 in smaller states to over 1,500
cases in others.
[9] The state's error rate is determined by weighting the dollars paid
in error divided by the state's total issuance of food stamp benefits.
[10] The 2002 Farm Bill also gave states the option of adopting
provisions that could simplify program administration and possibly
reduce error rates. These options include simplifying income and
resources, housing costs and deductions, reporting requirements, and
utility allowances. See GAO, Food Stamp Program: Farm Bill Options Ease
Administrative Burden, but Opportunities Exist to Streamline
Participant Reporting Rules among Programs, GAO-04-916 (Washington,
D.C.: September 2004).
[11] Of that amount, USDA may waive all or part, and/or require up to
50 percent to be reinvested in corrective action programs and/or
require up to 50 percent to be set aside for possible recovery in the
third year. If a state's error rate exceeds the threshold for 3
consecutive years, the state is responsible for paying the second year
at-risk amount, and USDA will again require up to 50 percent of the
liability amount to be reinvested in corrective action programs and up
to 50 percent be set aside for possible recovery in the following year
if the state again exceeds the threshold for that year.
[12] In contrast, USDA's strategic plan for fiscal years 2000 to 2005
set a target error rate of 9.2 percent by fiscal year 2005.
[13] Memorandum: Carole Trippe and Daisey Ewell, Size and Impact of
Food Stamp Payment Errors Based on FY 2003 FSPQC Unedited Database
(Prepared by Mathematica Policy Research, Inc., for the Food and
Nutrition Service, USDA, Alexandria, Va.: January 2005).
[14] The national food stamp payment error rate is the average of the
states' food stamp payment error rates weighted by each state's
proportion of all food stamp benefits issued during the fiscal year.
Therefore, a state issuing a higher proportion of the food stamp
benefits plays a larger part in determining the national food stamp
payment error rate compared with a state issuing a smaller proportion
of the food stamp benefits.
[15] FNS does not require states with payment error rates under 6
percent to develop and implement corrective action plans to reduce
payment errors.
[16] The percent of all errors due to caseworker mistakes is 65.5
percent. The margin of error associated with this estimate is plus or
minus 1 percent at the 95 percent level of confidence. GAO's analysis
results could differ slightly from those reported by FNS because of
small variations in the databases. FNS utilized the raw QC database for
its analysis while GAO's database omitted some cases with incomplete
case data.
[17] GAO previously reported that FNS and some states and localities
have taken several steps to help working families participate in the
program. See GAO, Food Stamp Program: Steps Have Been Taken to Increase
Participation of Working Families, but Better Tracking of Efforts Is
Needed, GAO-04-346 (Washington D.C.: March 2004) for more details.
[18] See GAO, Executive Guide: Strategies to Manage Improper Payments:
Learning from Public and Private Sector Organizations, GAO-02-69G
(Washington D.C.: October 2001).
[19] The six allowable deductions are a standard deduction, an earned
income deduction, a dependent care deduction, a medical deduction, a
child support deduction, and an excess shelter cost deduction.
[20] Not all households are eligible for the standard utility
allowance. Exceptions include households sharing a living space with
others and not eligible for the full value of the allowance and public
housing residents who were charged only for excess utility costs.
[21] The Personal Responsibility and Work Opportunity Reconciliation
Act of 1996 (P.L. 104-193, Aug. 22, 1996) tightened food stamp
eligibility requirements, in part, by disqualifying most permanent
resident aliens. Subsequently, the Agricultural Research, Extension,
and Education Reform Act of 1998 (P.L. 105-185) restored eligibility to
permanent resident aliens who were lawfully residing in the United
States as of August 22, 1996, and (1) were age 65 or older at that time
or (2) are either disabled or under age 18. The 2002 Farm Bill also
partially restored food stamp eligibility on certain dates to qualified
aliens who are otherwise eligible and meet criteria laid out in the
legislation.
[22] GAO previously reported that changes in food stamp reporting rules
aimed to reduce program complexity and payment error introduced
complications for participants and caseworkers because the rules were
not consistent with the reporting rules of other assistance programs.
See GAO, Food Stamp Program: Farm Bill Options Ease Administrative
Burden, but Opportunities Exist to Streamline Participant Reporting
Rules among Programs, GAO-04-916 (Washington D.C.: September 2004) for
more details.
[23] The percentage of all errors attributable to participant reporting
is 34.5 percent. The margin of error associated with this estimate is
plus or minus 1 percent at the 95 percent level of confidence.
[24] See GAO, Food Stamp Program: Farm Bill Options Ease Administrative
Burden, but Opportunities Exist to Streamline Participant Reporting
Rules among Programs, GAO-04-916 (Washington D.C.: September 2004) for
more details.
[25] See GAO-02-69G.
[26] The remaining $18 million was awarded for improvements not related
to error rates--the highest and most improved ratio of food stamp
participants compared with the number of persons in poverty and the
highest percentage of timely completed applications.
[27] The Supplemental Security Income Program is designed to provide
aged, blind, and disabled people who have little or no income with cash
to meet basic needs for food, clothing, and shelter.
[28] Tier 1 states have an error rate under 6 percent, and tier 2
states have an error rate of 6 percent or greater but do not fall into
tier 3. States are assigned to tier 3 when the lower limit of their
error rate estimate at the 90 percent confidence level is higher than
105 percent of the national error rate estimate.
[29] U.S. Department of Agriculture, Food and Nutrition Service,
Payment Accuracy in the Food Stamp Program (Alexandria, Va.: September
2004).
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