Food Stamp Program:

Storeowners Seldom Pay Financial Penalties Owed for Program Violations

RCED-99-91: Published: May 11, 1999. Publicly Released: May 26, 1999.

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Pursuant to a congressional request, GAO provided information on the Food and Nutrition Service's (FNS) efforts to maintain the integrity of the Food Stamp Program, focusing on the: (1) dollar amount of the financial penalties, collections, and debt reductions (waivers, adjustments, or write-offs) affecting storeowners violating program regulations during fiscal year (FY) 1993 through FY 1998; (2) effectiveness of the FNS' procedures and practices for assessing financial penalties against storeowners for program violations; and (3) effectiveness of FNS' procedures and practices for collecting financial penalties levied against storeowners.

GAO noted that: (1) over the past 6 years, FNS and the courts have assessed or levied about $78 million in financial penalties and interest against storeowners for violating Food Stamp Program Regulations; (2) the penalties and interest are recorded as debts in FNS' accounting records; (3) during this period, FNS and the courts collected $11.5 million, or about 13 percent of the total penalties, and FNS reduced the amount owed by storeowners by about $49 million, or about 55 percent, through waivers, adjustments, or write-offs; (4) the dollar amount of penalty debt outstanding at the end of the year more than doubled, from $12.3 million in 1993 to $28.2 million in 1998; (5) in 7 FNS field offices, GAO reviewed 259 Department of Agriculture undercover investigations that identified program violations, and GAO found that FNS almost always assessed financial penalties against storeowners when warranted; (6) however, other storeowners who may have violated program regulations and could have been penalized were not identified; (7) FNS is not effectively using data on the electronic redemption of food stamp benefits to identify these storeowners; (8) FNS officials noted that the small percentage of debt collected reflected, in part, the difficulties involved in collecting this type of debt, including problems in locating debtors and their refusal to pay; (9) however, weaknesses in FNS' debt collection procedures and practices also have contributed to low collections; (10) FNS has not aggressively collected debt, consistently assessed interest on unpaid debt, and written off uncollectible debt in a timely manner; (11) FNS has not yet referred any delinquent debt to the Department of the Treasury, which could deduct the debt from any future federal payments due the storeowners; (12) FNS expects to soon be in a position to make such referrals as it completes the implementation of the provisions of the Debt Collection Improvement Act of 1996; and (13) this law makes the Treasury primarily responsible for collecting debts delinquent for over 180 days.

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

    Recommendations for Executive Action

    Recommendation: To improve the integrity of the Food Stamp Program, the Secretary of Agriculture should direct the Administrator, FNS, to develop guidance that specifies its field staff's responsibilities, duties, and guidelines in reviewing data on electronic benefits transfers to identify and assess penalties against storeowners who violate the Food Stamp Program's regulations.

    Agency Affected: Department of Agriculture

    Status: Closed - Implemented

    Comments: FNS issued in February 2000, a policy memo that provided both direction and model language for its field offices to use in charging stores that were found to be trafficking food stamp benefits. FNS also implemented in August 2002, "The Watch List" and a web-based program for listing, tracking, and reporting on stores that meet certain levels of redemption activities and have been flagged by FNS's ALERT system as having suspicious patterns of transactions. This and the Retailer Compliance Website provides the data for taking action against suspicious stores. FNS believes it has fully implemented this recommendation, but recognizes that tools and instructions regarding EBT trafficking need constant updating and improvements.

    Recommendation: To improve the integrity of the Food Stamp Program, the Secretary of Agriculture should direct the Administrator, FNS, to develop the corrective actions necessary, as required by the Federal Claims Collection Standards, to help prevent delinquencies and defaults, and determine the priority and resources it needs to assign to make debt collection more effective.

    Agency Affected: Department of Agriculture

    Status: Closed - Implemented

    Comments: FNS has developed and implemented a strategy to refer all appropriate, delinquent, retailer debt to the Department of the Treasury for collection through Treasury's debt cross-servicing program. FNS has referred over six million dollars in delinquent debt under this strategy. The debt collection services performed by Treasury to manage these accounts will be expanded to include Treasury's administrative offset program once FNS completes the administrative processing requirements necessary to permit the referral of the debt to Treasury. FNS also examined all existing retailer accounts to ensure that all were properly categorized and managed under standards appropriate to the Debt Collection Improvement Act of 1996, and the relevant Federal Claims Collection Standards.

    Recommendation: To improve the integrity of the Food Stamp Program, the Secretary of Agriculture should direct the Administrator, FNS, to complete the actions needed to refer delinquent debts with storeowner taxpayer identification numbers to Treasury electronically in a timely manner.

    Agency Affected: Department of Agriculture

    Status: Closed - Implemented

    Comments: FNS has published the Privacy Act Systems of Record notice and has revised the existing Departmental Rule on Debt Collection to allow Treasury to use its Treasury Offset Program to collect delinquent retailer debt. FNS also revised its retailer application to ensure that all newly-authorized retailers have been provided with the relevant notice on the use of their Taxpayer Identifying Number under the standards prescribed by the Debt Collection Improvement Act of 1996. FNS has implemented a system for the "electronic" transmission of the retailer debt to Treasury.

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