Benefit Overpayments:

Recoveries Could Be Increased in the Food Stamp and AFDC Programs

RCED-86-17: Published: Mar 14, 1986. Publicly Released: Mar 14, 1986.

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GAO reviewed the Food Stamp and Aid to Families with Dependent Children (AFDC) programs to: (1) examine how state and local collection offices use such collection methods as recoupment to recover overpayment claims; and (2) identify specific actions that would increase collections. The programs are operated by the Department of Agriculture's (USDA) Food and Nutrition Service (FNS) and the Department of Health and Human Services' (HHS) Office of Family Assistance (OFA), respectively.

GAO found that: (1) the procedures used to collect food stamp overpayment claims are generally more restrictive than those used for AFDC claims regarding when states may use recoupment; (2) while recoupment is an effective collection technique, applicable law prohibits the use of recoupment to collect overpayments caused by agency errors; (3) overpayments caused by agency errors accounted for about 34 percent of claims against Food Stamp program participants; and (4) USDA has estimated that the use of recoupment in the Food Stamp program could increase collections by $1.4 million each month. GAO also found that: (1) in many cases, overpayment recipients leave the program before claims against them are fully paid and do not repay their claims; (2) if FNS gave participants only 10 days to respond to payment demand letters, instead of 30, it could increase collections by 8 percent in the offices GAO visited; and (3) FNS could also increase collections by giving priority processing to claims against current participants and improving systems used to identify former participants who reenter the programs with outstanding claims. In addition, GAO found that: (1) claims against households no longer participating in the Food Stamp program totalled $135 million in 1984, and FNS was not receiving payments on $85 million of those claims; and (2) one possible way to improve collections on those claims would be to offset federal income tax refunds against participants' outstanding claims.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Matters for Congressional Consideration

    Matter: To further improve the efficiency and results of collection operations, Congress should amend the Food Stamp Act of 1977 to eliminate the requirement that states offer installment payments as an option in recovering overpayments from participants. This can be done by amending the first sentence of section 13(b)(1)(A) by striking out "in accordance with a schedule determined by the Secretary." Such a change would not preclude states from allowing lump sum repayments or using installments when a household is no longer participating in the program or supplementing recoupment with any additional payments the participant might wish to make.

    Status: Closed - Not Implemented

    Comments: The Senate-passed 1985 farm bill would have eliminated the requirement that states offer installment payments as an option in recovering overpayments from participants. However, the provision was deleted in conference. Congress' plans are uncertain.

    Matter: To improve collections of overpaid benefits, maximize the use of recoupment, and improve consistency between the AFDC and Food Stamp programs, Congress should amend the Food Stamp Act of 1977 to require a maximum 10-day period for participants to respond to payment demand letters. Such a change can be accomplished by changing the word "thirty" to "ten" in the second sentence of section 13(b)(1)(A).

    Status: Closed - Not Implemented

    Comments: The Senate-passed 1985 farm bill would have changed the period from 30 days to a maximum of 10 days for participants to respond to payment demand letters. However, the provision was deleted in conference. Congress' plans are uncertain.

    Matter: To improve the effectiveness of states' collection operations, Congress should amend the Food Stamp Act of 1977 to authorize states to pursue mandatory recoupment of overpayments that were caused by agency errors, as is done in the AFDC program. This can be done by amending the first sentence of section 13(b)(2)(A) by striking out "and claims arising from an error of the state agency."

    Status: Closed - Not Implemented

    Comments: The Senate-passed 1985 farm bill would have authorized states to recoup benefit overpayments caused by agency errors. However, this provision was deleted in conference. Congress' plans are uncertain.

    Matter: If the 2-year test of tax refund offsets specified by the Deficit Reduction Act of 1984 proves that such offsets are feasible, Congress should consider specifically authorizing states to submit unpaid claims against former AFDC and Food Stamp recipients for collection using offsets of federal income tax refunds through procedures similar to those employed under the Deficit Reduction Act. To initially test the cost-effectiveness of the procedure, states should be allowed to use the procedure, on a voluntary basis, closely monitored by the responsible federal program agencies to ensure that adequate data are developed to evaluate the feasibility and cost-effectiveness of using it on a programwide basis.

    Status: Closed - Not Implemented

    Comments: The Office of Management and Budget (OMB) originally designated the Food Stamp Program as one of the participants in the 2-year test of tax refund offsets authorized under the Deficit Reduction Act of 1984. However, neither the Food Stamp nor the AFDC Programs were included. The OMB test has not been completed, and no congressional action is anticipated until the test is completed.

    Recommendations for Executive Action

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, OFA, to specify that recoupment be used to recover overpayments from all participants receiving program benefits. This recommendation would not preclude installment payments being used in the AFDC program to supplement recoupment or lump sum payments to collect overpayment claims.

    Agency Affected: Department of Health and Human Services

    Status: Closed - Not Implemented

    Comments: HHS considered including the recommended change in planned regulations, but has decided not to make such a change.

    Recommendation: To improve the timeliness of state collection actions, the Secretaries of Agriculture and Health and Human Services should direct the Administrators, FNS and OFA, respectively, to require priority processing of claims involving current participants by establishing time-period criteria that would require prompt collection action on such claims.

    Agency Affected: Department of Agriculture

    Status: Closed - Implemented

    Comments: HHS issued an Action Transmittal instructing states to take the recommended action.

    Recommendation: To improve the timeliness of state collection actions, the Secretaries of Agriculture and Health and Human Services should direct the Administrators, FNS and OFA, respectively, to require priority processing of claims involving current participants by establishing time-period criteria that would require prompt collection action on such claims.

    Agency Affected: Department of Agriculture

    Status: Closed - Implemented

    Comments: On February 22, 1991, FNS distributed a memo that implemented the same-day provisions of the 1990 farm bill. That provision requires that participating households with either an inadvertent household error, or an intentional program violation claim, choose a repayment method on the day of receipt of a demand letter or be subject to recoupment.

    Recommendation: To improve the timeliness of state collection actions, the Secretaries of Agriculture and Health and Human Services should direct the Administrators, FNS and OFA, respectively, to evaluate the operations of states' systems used to start collection action on cases involving former participants with outstanding claims who reenter the programs; identify reasons why such cases are not always identified at the time of application; and assist the states to improve their operations to remedy any such problems.

    Agency Affected: Department of Health and Human Services

    Status: Closed - Implemented

    Comments: HHS revised its Financial Operations Manual to require states to take the recommended action and provided them with the necessary training.

    Recommendation: To improve the timeliness of state collection actions, the Secretaries of Agriculture and Health and Human Services should direct the Administrators, FNS and OFA, respectively, to evaluate the operations of states' systems used to start collection action on cases involving former participants with outstanding claims who reenter the programs; identify reasons why such cases are not always identified at the time of application; and assist the states to improve their operations to remedy any such problems.

    Agency Affected: Congress

    Status: Closed - Implemented

    Comments: USDA published the final rule on February 22, 1990.

    Recommendation: The Secretary of Agriculture should require states to initiate collection action on food stamp claims involving participants awaiting administrative disqualification hearings.

    Agency Affected: Department of Health and Human Services

    Status: Closed - Implemented

    Comments: USDA has completed a study on reclassification of claims, i.e., changing the category from a fraud to a non-fraud claim. The data and guidance provided by this report on how to determine actions needed in disqualification hearings will be included in a proposed rule by October 1991.

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