Benefit Overpayments: Recoveries Could Be Increased in the Food Stamp and AFDC Programs

Highlights

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.

Recommendations

Matter for Congressional Consideration

Matter	Status	Comments
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."	Closed – Not Implemented	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.
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.	Closed – Not Implemented	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.
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).	Closed – Not Implemented	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.
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.	Closed – Not Implemented	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

Agency Affected	Recommendation	Status
Department of Health and Human Services	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.	Closed – Not Implemented HHS considered including the recommended change in planned regulations, but has decided not to make such a change.
Department of Agriculture	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.	Closed – Implemented 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.
Department of Health and Human Services	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.	Closed – Implemented HHS issued an Action Transmittal instructing states to take the recommended action.
Department of Agriculture	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.	Closed – Implemented USDA published the final rule on February 22, 1990.
Department of Health and Human Services	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.	Closed – Implemented HHS revised its Financial Operations Manual to require states to take the recommended action and provided them with the necessary training.
Department of Agriculture	The Secretary of Agriculture should require states to initiate collection action on food stamp claims involving participants awaiting administrative disqualification hearings.	Closed – Implemented 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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Topics

Agriculture and Food

Errorsstate relationsGovernment collectionsOffsetting collectionsOverpaymentsProgram managementState-administered programsFood relief programsHearingsTax refunds