Rate Basis for Reimbursement to States of Food Stamp Program Administrative Costs

Two states requested GAO to reconsider its decision regarding the reimbursement to states of Food Stamp Program administrative costs. The previous case addressed the question of whether the Department of Agriculture (USDA), in reimbursing states for part of their administrative costs in carrying out the Food Stamp Program, should reimburse states using a cash basis method of accounting at the rate effective when the payments were actually made by the state or at the rate effective when the administrative costs were incurred. Because the states did not have an opportunity to present their position when GAO first considered this matter, GAO agreed to reconsider. Previously, GAO concluded that the USDA decision to reimburse all states, regardless of whether they use a cash basis or accrual basis of accounting at the rate in effect when the costs were incurred, was not inconsistent with either statute or regulation. Thus, citing well established legal principles that great deference be given to the interpretation of a statute by the agency charged with its administration and that the agency's position will only be overturned if it is found to be arbitrary and capricious, GAO saw no basis to challenge the USDA interpretation. The states argue, however, that a proper reading of the regulations suggests that states using a cash basis method of accounting should be reimbursed at the rate in effect on the date the administrative costs are actually paid. In reaching this conclusion, the states contend that the regulation which provides for reimbursement at the rate in effect when the costs are incurred must be read in conjunction with several other sections of the regulations to determine when costs are considered to be incurred for a cash basis state. GAO, however, was unable to find that the Secretary of Agriculture's interpretation was arbitrary, capricious, or legally untenable. Accordingly, the previous decision was affirmed.