Summary

The Food Stamp Program is one of the nation's largest welfare programs and the largest single program administered by the Department of Agriculture (USDA). In fiscal year 1997, more than $19 billion in food stamps was provided to 23 million recipients. Any program of this magnitude is vulnerable to fraud and abuse, and the Food Stamp Program is no exception. Although the Food Stamp Program has been troubled by the participation of ineligible recipients and the improper use of benefits, USDA has succeeded in reducing the overpayment error rate in recent years and is taking steps to address food stamp trafficking--that is, the exchange of food stamps for cash or other nonfood items. This testimony (1) provides an overview of the scope of fraud and abuse in the program, (2) discusses the ways in which computerized information can be used to identify and reduce it, and (3) comments on proposed legislation to reduce fraud and abuse in the program.

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) for 1997, overpayments totalled about $1.4 billion, or about 7 percent of the food stamp benefits issued that year; (5) errors also result in underpayments; in fiscal year 1997, such underpayments totalled about $509 million; (6) with regard to trafficking, the Department of Agriculture (USDA) estimated that in 1993 (the latest year of available data) 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) while USDA has reduced the overpayment rate in recent years, further reductions could result if the food stamp rolls were matched against computerized information held by various sources in order to identify ineligible participants; (9) computer matching can provide a cost-effective mechanism to accurately and independently accomplish this; (10) some states already conduct data-matching programs, such as matches with the rolls of other states to find participants receiving duplicate benefits; (11) 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; (12) the Chairman's draft legislation would establish a computerized matching process that is intended to prevent inappropriate payments to food stamp households that include deceased individuals as members; (13) the draft legislation's objectives are in line with the intent of recommendations in GAO's February 1998 report on payments to these households; and (14) more specifically, the draft legislation requires state agencies to provide information regarding individuals who receive food stamp benefits to the Social Security Administration (SSA) and requires SSA to notify the state agencies of individuals who are deceased.