Food Stamp Program

In 1994, Minnesota began a five-year federally authorized welfare reform project known as the Minnesota Family Investment Program. Aimed at simplifying the welfare system, the project consolidates the food assistance and the cash benefits provided by three programs--Aid to Families With Dependent Children, the Food Stamp Program, and Minnesota's Family General Assistance Program--into a single monthly payment. The Food Stamp Act of 1977 requires that the federal government spend no more for this project's food assistance component in any fiscal year than it would have spent for the Food Stamp Program. That is, the project must be cost neutral. To ensure cost neutrality, the act requires the Agriculture Department and the state of Minnesota to agree upon methodologies for estimating what the costs of the Food Stamp Program for both benefits and administration would have been had there been no project. This report (1) describes the methodologies that Minnesota agreed to use for estimating Food Stamp Program costs that would have been incurred if the project had not been implemented; (2) determines if Minnesota implemented these methodologies; (3) assesses the reasonableness of these methodologies, as implemented, for estimating the cost of the Food Stamp Program for fiscal year 1994; and (4) compares the payments that would have been paid to Minnesota using the agreed-upon methodologies with the actual payments in fiscal year 1994.

GAO found that: (1) Minnesota agreed to use two methodologies for estimating food stamp benefit costs that would have been incurred in the absence of MFIP; (2) Minnesota randomly assigned applicant families to either traditional welfare programs or MFIP and estimated the cost of providing MFIP benefits and food stamp benefits in traditional welfare programs; (3) Minnesota excluded all costs unique to MFIP which are paid by the state to achieve cost neutrality; (4) Minnesota used the same methodology to allocate allowable administrative costs among the welfare programs; (5) Minnesota implemented the agreed-upon methodologies and generated reasonable cost estimates for FY 1994, but a data processing problem delayed results for 7 months; and (6) USDA overpaid Minnesota $115,395 in excess food stamp benefits during the first 6 months of MFIP, based on Minnesota's forecasts of what food stamp costs would have been in the absence of MFIP.