Food Assistance:

Observations on Reducing Fraud and Abuse in the Food Stamp Program

T-RCED-98-167: Published: Apr 23, 1998. Publicly Released: Apr 23, 1998.

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Robert A. Robinson
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GAO discussed fraud and abuse in the Food Stamp Program, focusing on the: (1) nature and extent of the problem; (2) reasons it often goes undetected; and (3) ways computerized information can be used to identify and reduce it.

GAO noted that: (1) fraud and abuse in the Food Stamp Program generally occurs in the form of either overpayments to food stamp recipients or trafficking; (2) overpayments occur when ineligible persons are provided food stamps, as well as when eligible persons are provided more than they are entitled to receive; (3) overpayments are caused by inadvertent and intentional errors made by recipients and errors made by state caseworkers; (4) the latest available information indicates that overpayments in 1996 totalled about $1.5 billion, or about 7 percent of the food stamp benefits issued that year; (5) errors also result in underpayments; in fiscal year 1996, such underpayments totalled about $518 million; (6) with regard to trafficking, the Department of Agriculture (USDA) estimated that in 1993 about $815 million in food stamps, approximately 4 percent of the food stamps issued, were traded for cash at retail stores; (7) no one knows the extent of trafficking between individuals before the food stamps are redeemed at authorized retailers; (8) participation in the Food Stamp Program by ineligible recipients occurs, and often goes undetected, because the information used to determine a household's eligibility and benefit amount for the program is not always accurate; (9) state agencies that administer the program determine household membership on the basis of unverified information provided by food stamp applicants; (10) food stamp trafficking takes place when recipients collaborate with unscrupulous retailers to convert food stamp benefits to cash or other non-food items; (11) these retailers make a profit by giving the recipients a discounted cash payment for the stamps, then redeeming the stamps at full face value to the government; (12) while USDA has reduced the overpayment rate in recent years, further reductions could result if food stamp rolls were matched against computerized information held by various sources; (13) computer matching provides a cost-effective mechanism to accurately and independently identify ineligible participants; (14) some states already conduct data matching programs; (15) by taking a leading role in promoting the use and sharing of information among federal and state agencies, USDA can enhance the states' effectiveness in identifying ineligible participants and reducing overpayments; and (16) in addition, the congressionally mandated use of electronic benefit transfers, while not the answer to eliminating all fraud, has the potential to reduce trafficking by providing an electronic trail of transactions.

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