[House Hearing, 111 Congress]
[From the U.S. Government Printing Office]







                   HEARING TO REVIEW QUALITY CONTROL
                      SYSTEMS IN THE SUPPLEMENTAL
                      NUTRITION ASSISTANCE PROGRAM

=======================================================================

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON DEPARTMENT OPERATIONS,
                   OVERSIGHT, NUTRITION, AND FORESTRY

                                 OF THE

                        COMMITTEE ON AGRICULTURE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 28, 2010

                               __________

                           Serial No. 111-59









          Printed for the use of the Committee on Agriculture
                         agriculture.house.gov


                  U.S. GOVERNMENT PRINTING OFFICE
58-022 PDF                WASHINGTON : 2010
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001





                        COMMITTEE ON AGRICULTURE

                COLLIN C. PETERSON, Minnesota, Chairman

TIM HOLDEN, Pennsylvania,            FRANK D. LUCAS, Oklahoma, Ranking 
    Vice Chairman                    Minority Member
MIKE McINTYRE, North Carolina        BOB GOODLATTE, Virginia
LEONARD L. BOSWELL, Iowa             JERRY MORAN, Kansas
JOE BACA, California                 TIMOTHY V. JOHNSON, Illinois
DENNIS A. CARDOZA, California        SAM GRAVES, Missouri
DAVID SCOTT, Georgia                 MIKE ROGERS, Alabama
JIM MARSHALL, Georgia                STEVE KING, Iowa
STEPHANIE HERSETH SANDLIN, South     RANDY NEUGEBAUER, Texas
Dakota                               K. MICHAEL CONAWAY, Texas
HENRY CUELLAR, Texas                 JEFF FORTENBERRY, Nebraska
JIM COSTA, California                JEAN SCHMIDT, Ohio
BRAD ELLSWORTH, Indiana              ADRIAN SMITH, Nebraska
TIMOTHY J. WALZ, Minnesota           DAVID P. ROE, Tennessee
STEVE KAGEN, Wisconsin               BLAINE LUETKEMEYER, Missouri
KURT SCHRADER, Oregon                GLENN THOMPSON, Pennsylvania
DEBORAH L. HALVORSON, Illinois       BILL CASSIDY, Louisiana
KATHLEEN A. DAHLKEMPER,              CYNTHIA M. LUMMIS, Wyoming
Pennsylvania                         THOMAS J. ROONEY, Florida
BOBBY BRIGHT, Alabama
BETSY MARKEY, Colorado
FRANK KRATOVIL, Jr., Maryland
MARK H. SCHAUER, Michigan
LARRY KISSELL, North Carolina
JOHN A. BOCCIERI, Ohio
SCOTT MURPHY, New York
WILLIAM L. OWENS, New York
EARL POMEROY, North Dakota
TRAVIS W. CHILDERS, Mississippi
WALT MINNICK, Idaho

                                 ______

                           Professional Staff

                    Robert L. Larew, Chief of Staff

                     Andrew W. Baker, Chief Counsel

                 April Slayton, Communications Director

                 Nicole Scott, Minority Staff Director

                                 ______

   Subcommittee on Department Operations, Oversight, Nutrition, and 
                                Forestry

                     JOE BACA, California, Chairman

HENRY CUELLAR, Texas                 JEFF FORTENBERRY, Nebraska, 
STEVE KAGEN, Wisconsin               Ranking Minority Member
KURT SCHRADER, Oregon                STEVE KING, Iowa
KATHLEEN A. DAHLKEMPER,              JEAN SCHMIDT, Ohio
Pennsylvania                         CYNTHIA M. LUMMIS, Wyoming
TRAVIS W. CHILDERS, Mississippi

               Lisa Shelton, Subcommittee Staff Director

                                  (ii)








                             C O N T E N T S

                              ----------                              
                                                                   Page
Baca, Hon. Joe, a Representative in Congress from California, 
  opening statement..............................................     1
    Prepared statement...........................................     2
Fortenberry, Hon. Jeff, a Representative in Congress from 
  Nebraska, opening statement....................................     3
    Prepared statement...........................................     4
Peterson, Hon. Collin C., a Representative in Congress from 
  Minnesota, prepared statement..................................     6

                               Witnesses

Paradis, Julie, Administrator, Food and Nutrition Service, U.S. 
  Department of Agriculture, Washington, D.C.....................     6
    Prepared statement...........................................     8
Brown, Kay E., Director, Education, Workforce, and Income 
  Security Issues, U.S. Government Accountability Office, 
  Washington, D.C................................................    12
    Prepared statement...........................................    13
Fong, Hon. Phyllis K., Inspector General, Office of Inspector 
  General, U.S. Department of Agriculture, Washington, D.C.......    24
    Prepared statement...........................................    25
Winstead, Jr., Don E., Deputy Secretary, Florida Department of 
  Children and Families, Tallahassee, FL; on behalf of American 
  Public Human Services Association..............................    30
    Prepared statement...........................................    32
Weill, James D., President, Food Research and Action Center, 
  Washington, D.C................................................    47
    Prepared statement...........................................    48
Faber, Scott E., Vice President for Federal Affairs, Grocery 
  Manufacturers Association, Washington, D.C.....................    53
    Prepared statement...........................................    54
Hatcher, Jennifer, Senior Vice President, Government Relations, 
  Food Marketing Institute, Washington, D.C......................    63
    Prepared statement...........................................    65

                          Submitted Questions

Submitted questions..............................................    79

 
     HEARING TO REVIEW QUALITY CONTROL SYSTEMS IN THE SUPPLEMENTAL
                      NUTRITION ASSISTANCE PROGRAM

                              ----------                              


                        WEDNESDAY, JULY 28, 2010

                  House of Representatives,
 Subcommittee on Department Operations, Oversight, 
                           Nutrition, and Forestry,
                                  Committee on Agriculture,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 1300, Longworth House Office Building, Hon. Joe Baca 
[Chairman of the Subcommittee] presiding.
    Members present: Representatives Baca, Kagen, Schrader, 
Dahlkemper, Fortenberry, and Lummis.
    Staff present: Liz Friedlander, Tyler Jameson, John Konya, 
Clark Ogilvie, James Ryder, Lisa Shelton, Rebekah Solem, Pam 
Miller, Mary Nowak, Jamie Mitchell, and Sangina Wright.

    OPENING STATEMENT OF HON. JOE BACA, A REPRESENTATIVE IN 
                    CONGRESS FROM CALIFORNIA

    The Chairman. I would like to now call to order the 
Subcommittee on Department Operations, Oversight, Nutrition, 
and Forestry to review the quality control systems in the 
Supplemental Nutrition Assistance Program.
    I will begin with an opening statement, and then I will 
turn it over to the Ranking Member for his statement.
    Good morning. I want to thank you for being here with the 
Subcommittee to examine quality control systems within SNAP 
programs. With a record number of Americans relying on the 
vital nutritional safety net, it is important that we ensure 
SNAP is meeting the needs of those who depend on it. It is also 
important that we ensure that the program is operating 
efficiently and cost-effectively.
    As we anticipate the farm bill's reauthorization in 2012, 
what we learn here today may inform us on long-term policies or 
decisions that we have to make. These are tough economic times. 
While our economy is showing some signs of recovery, we still 
face a significant deficit and other challenges that have 
slowed the economy's growth. The truth of the matter is, we 
will most likely have no new funding available for the 
Agriculture Committee on programs for the next farm bill.
    The difficult situation only underscores the urgency of 
making careful accounting--and I state careful accounting--of 
SNAP, which is the largest program in USDA. We are very 
fortunate in the 2008 Farm Bill to have the resources to 
strengthen and modernize nutritional programs like SNAP and 
TEFAP. I am also proud of those changes, and, gratefully, they 
were in place during the recent economic crisis.
    But, again, these are very difficult times. Today, we face 
a huge challenge by serving a record number of SNAP 
beneficiaries. Over 40 million people per month depend on the 
supplemental support program, and there are many others that 
are still eligible that have not even utilized the SNAP 
program.
    On top of the individual pressure, the unprecedented number 
of enrollees places tremendous stress on USDA and the states so 
that, although we are stretched, we must take time to carefully 
examine how these programs function under duress.
    In fact, this is the ideal time to be certain every dollar 
that we spend on SNAP is getting full value--and we state full 
value--used effectively, and for the right purpose. Because, 
right now, there is simply no margin for error. We must 
adequately meet the needs of those Americans who are struggling 
to put food on the table, as we still see the unemployment very 
high in many of the states. And in my State of California, 
unemployment is still around 12.3 percent.
    But as a father and a grandfather, I also know that we must 
not leave our current budgetary mess for future generations to 
deal with. And that is why we are having this hearing, to look 
and examine ways that we can be cost-effective and still 
provide services.
    Again, I want to thank all of you for your willingness to 
participate in today's hearing. I want to thank the panelists 
for being here this morning. Thank you very much. It is 
important that you share your candid thoughts with us. We are 
here to listen and learn so that we can make the best policies, 
possible choices.
    And now I am pleased to yield to my Ranking Member, Jeff 
Fortenberry, for opening comments. And I just want to state for 
the record that there may be times where Jeff Fortenberry and I 
will have to leave, but there will be someone else who will be 
here. Because there are so many committee meetings that are 
going on right now, it is important that we be at most of those 
that we can. But we also believe that this is very important 
for us, as well.
    [The prepared statement of Mr. Baca follows:]

Prepared Statement of Hon. Joe Baca, a Representative in Congress from 
                               California
    Good morning, and thank you for being here before this 
Subcommittee--to examine quality control systems within the SNAP 
program.
    With a record number of Americans relying on this vital nutrition 
safety net, it is important that we ensure SNAP is meeting the needs of 
those who depend on it.
    It is also important that we ensure the program is operating 
efficiently and cost-effectively.
    As we anticipate farm bill reauthorization in 2012, what we learn 
here today may inform long-term policy decisions.
    These are tough economic times. While our economy is showing some 
signs of a recovery--we still face a significant deficit and other 
challenges that have slowed economic growth.
    The truth of the matter is--we will most likely have no new funding 
available for Agriculture Committee programs for the next farm bill.
    This difficult situation only underscores the urgency of making a 
careful accounting of SNAP, which is the largest program at USDA.
    We were fortunate in the 2008 Farm Bill to have the resources to 
strengthen and modernize nutrition programs like SNAP and TEFAP.
    I am proud of those changes and grateful they were in place during 
this recent economic crisis.
    But, these are different times.
    Today, we face a huge challenge by serving a record number of SNAP 
beneficiaries--over 40 million people per month depend on this 
supplemental support.
    On top of individual pressures, this unprecedented number of 
enrollees places tremendous stress on USDA and the states.
    So, although we are stretched, we must take the time to carefully 
examine how this program functions under duress.
    In fact, this is the ideal time to be certain every dollar we spend 
on SNAP is getting full value.
    Because, right now there is simply no margin for error.
    We must adequately meet the needs of those Americans who are 
struggling to put food on the table.
    But as a father and a grandfather--I also know we must not leave 
our current budgetary mess for future generations to deal with.
    Again, I thank all of you for your willingness to participate in 
today's hearing.
    It is important that you share your candid thoughts with us.
    We are here to listen and to learn so we can make the best policy 
choices possible.
    I am now pleased to yield to our Ranking Member, Rep. Jeff 
Fortenberry for his opening comments.

    The Chairman. So, at this time, I would turn it over to our 
Ranking Member.

OPENING STATEMENT OF HON. JEFF FORTENBERRY, A REPRESENTATIVE IN 
                     CONGRESS FROM NEBRASKA

    Mr. Fortenberry. Thank you, Mr. Chairman.
    The Chairman is right. We are all heading home for our 
district work periods shortly, so time has became very 
compressed. So we beg your indulgence if we have to go back and 
forth.
    But I thank you for holding the hearing today on the 
Supplemental Nutrition Assistance Program, or, as we like to 
call it, SNAP. I appreciate the witnesses' time, as well, and 
look forward to your testimony.
    The SNAP program is one of USDA's programs that enables 
vulnerable individuals to access food supplies for themselves 
and their families. Without the support of programs like SNAP, 
many families encountering a season of challenges might go 
without food. For this reason, I applaud all of you who 
participate in implementing this program for your public 
service, as you provide valuable information about this program 
to communities.
    One important aspect of SNAP is the need for careful 
allocation of Federal funds, as the Chairman emphasized. I 
raise this issue because of the Government Accountability 
Office, GAO, report which stated that, in Fiscal Year of 2009, 
$2.2 billion of SNAP funds were spent on improper payments. Of 
that amount, $1.8 billion, or 82 percent, was in the form of 
overpayments.
    According to GAO, SNAP payment errors are caused by various 
factors, such as case workers failing to act on new 
information, or the misapplication of program rules at the 
state and community level, or by beneficiaries failing to 
report required information without intervention by 
caseworkers. On this point, I am hopeful that this hearing will 
address any solutions to any future mismanagement of SNAP 
funds, and I look forward to hearing your suggestions.
    Additionally, I am interested in protecting the good health 
of our program beneficiaries. In America today, obesity is an 
epidemic, rising at almost pandemic rates, and it affects \1/3\ 
of our population. I understand this is similarly the case 
among SNAP participants. Because obesity is a forerunner to 
national killers and chronic diseases like diabetes, heart 
disease, stroke, and various cancers, I am curious to know if 
there is a possible method to protect and improve SNAP 
beneficiaries' nutrition quality while participating in these 
programs, perhaps through prevention of these lifestyle-related 
diseases, ideally through preventing obesity. Any suggestions 
or insight as to the nutritional quality of the SNAP program 
would be very interesting to hear.
    Like all of our witnesses here today, I want to maintain 
the integrity of the SNAP program. I believe we can have a 
program that serves those who are most vulnerable among us who 
temporarily need assistance, while maintaining sound program 
eligibility standards and improving efficiencies in its 
administration.
    I recognize that the use of the electronic benefit transfer 
card, the EBT card, was one very successful implementation to 
achieve these objectives. And I am impressed and pleased that 
error rates have been reduced significantly since EBT cards 
were implemented.
    I would like to hear proposals for further methods to 
reduce inefficiencies, either through electronic means or 
through improved systems of case working. Like all Federal 
programs, SNAP is paid for by the taxpayers, and we have a 
responsibility to them, as well as to those who do need food 
assistance. I look forward to hearing from you, our witnesses, 
today to learn more about how the quality control measures have 
been operating and how we can further improve the program.
    Thank you, Mr. Chairman, and I yield back.
    [The prepared statement of Mr. Fortenberry follows:]

   Prepared Statement of Hon. Jeff Fortenberry, a Representative in 
                         Congress from Nebraska
    Mr. Chairman, thank you for holding this hearing today to review 
the Supplemental Nutrition Assistance Program, or SNAP. I appreciate 
the witnesses' time and testimony on this important subject, and I look 
forward to today's discussion.
    The SNAP Program is one of the USDA programs that enables 
vulnerable individuals to access food supplies for themselves and their 
families. Without the support of programs like SNAP, many families 
encountering a season of challenges might go without food. For this 
reason, I applaud those of you who participate in implementing this 
program, and who provide valuable information about this program to 
communities.
    One important aspect of SNAP is the need for careful allocation of 
Federal funds. I raise this issue because of the Government 
Accountability Office (GAO) report which stated that in FY 2009, $2.2 
billion of SNAP funds were spent on improper payments. Of that amount, 
$1.8 billion, or 82 percent, was in the form of overpayments to SNAP 
beneficiaries. According to the GAO, SNAP payment errors are caused by 
various factors, such as caseworkers failing to act on new information, 
or the misapplication of program rules at the state and community 
levels, or by beneficiaries failing to report required information 
without intervention by caseworkers. On this point, I am hopeful this 
hearing will address solutions to any future mismanagement of SNAP 
funds, and I look forward to hearing your suggestions.
    Additionally, I am interested in protecting the good health of our 
program beneficiaries. In America today, obesity is an epidemic rising 
at almost pandemic rates, and affects at least \1/3\ of the population. 
I understand this is similarly the case among SNAP participants. 
Because obesity is a forerunner to national killers and chronic 
diseases like diabetes, heart disease, stroke, and various cancers, I 
am curious to know if there is a possible method to protect and improve 
SNAP beneficiaries' nutrition quality while participating in this 
program, perhaps through the prevention of these lifestyle-related 
diseases, ideally through preventing obesity. Any suggestions or 
insight as to the nutrition quality of the SNAP program would be very 
interesting to hear.
    Like all of our witnesses here today, I want to maintain the 
integrity of the SNAP program. I believe we can have a program that 
serves those who are most vulnerable among us, who temporarily need 
assistance, while maintaining sound program eligibility standards and 
improving efficiencies in its administration. I recognize that the use 
of the electronic benefit transfer (EBT) cards was one very successful 
implementation to this end, and I am impressed and pleased that error 
rates have been reduced since EBT cards were implemented. I would like 
to hear proposals for further methods to reduce inefficiencies, either 
through electronic means, or through improved systems of case working.
    Like all Federal programs, SNAP is paid for by the taxpayers and we 
have a responsibility to them as well as those who need food 
assistance. I look forward to hearing from our witnesses today to learn 
more about how the quality control measures have been operating and how 
we can further improve the SNAP program, and prevent waste, fraud and 
abuse.
    Again, Mr. Chairman, I thank you for holding this hearing, and I 
look forward to the insight our witnesses will provide on this topic.

    The Chairman. Thank you very much.
    At this point, I would like to recognize any other Members 
for opening statements.
    Mrs. Dahlkemper?
    Okay, at this time, I am going to turn the chair over to 
Mr. Kagen, who will conduct the rest of the meeting in order of 
the agenda here.
    And if you have an opening statement, you can begin with an 
opening statement.
    Mr. Kagen. [presiding.] Thank you, Chairman Baca. It is an 
honor to be sitting in your chair. It is good to hear your 
interest in obesity. Jeff and I have this ongoing battle of who 
is going to lose the most weight. We won't reveal the results 
yet until it is all over. So it is always a work in progress.
    Thank you for being here on this most important issue of 
the nutrition of those who need it most, those who are in need 
of our assistance.
    There has been an enormous demand for services and foods in 
the Food Stamp Program and in SNAP, an enormous increase in 
this countercyclical policy, which is probably one of the 
finest in the world in terms of guaranteeing adequate nutrition 
to people who require it.
    It really is an honor for me to say that, not just as a 
physician, not only as a Member from Wisconsin, whose state has 
had a great record of accuracy and improvements recently in the 
SNAP administration, but now is the time that we need the most 
judicious use of our tax dollars. And I can't think of a better 
way to spend the morning than listening to how we are going to 
improve an already great program.
    With that, I would ask that Members submit their opening 
statements for the record so we can begin the testimony and 
have ample time for questions.
    [The prepared statement of Mr. Peterson follows:]

  Prepared Statement of Hon. Collin C. Peterson, a Representative in 
                        Congress from Minnesota
    Thank you, Chairman Baca, for holding today's hearing to look at 
the control measures currently in place to ensure effective and 
efficient use of Federal funding for the Supplemental Nutrition 
Assistance Program quality. The economic downturn has increased the use 
of SNAP and other Federal nutrition assistance, making them more 
important than ever for the 40 million Americans who use these programs 
every month.
    Nutrition assistance programs receive the lion's share of this 
Committee's budget authority, and they are the largest programs 
administered by the U.S. Department of Agriculture.
    This Committee increased the baseline for nutrition assistance 
programs significantly in the 2008 Farm Bill. Now, I want to hear how 
implementation of these changes is proceeding and how we can continue 
to improve USDA's nutrition programs.
    Today's hearing is especially timely given our country's current 
budgetary conditions. As a nation, we no longer have the luxury of 
ignoring our deficits, and I do not expect to see any increases in the 
2012 Farm Bill baseline. Therefore, it is important to hear from our 
witnesses today about how we can better serve those using these 
programs using the money we have.
    Again I look forward to the testimony and thank the witnesses for 
taking the time to be here today.

    Mr. Kagen. And, at this time, I will recognize Ms. Paradis 
from USDA.

 STATEMENT OF JULIE PARADIS, ADMINISTRATOR, FOOD AND NUTRITION 
   SERVICE, U.S. DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C.

    Ms. Paradis. Good morning, Mr. Chairman, Ranking Member 
Fortenberry, and the other Members of the Committee. As the 
Administrator of the Food and Nutrition Service at USDA, I am 
pleased to be here to discuss our work to ensure the integrity 
of SNAP, and our commitment to reach all eligible families with 
the assistance that they need.
    SNAP is the largest program in the U.S. nutrition 
assistance safety net. It enables over 40 million low-income 
people in this country to buy nutritious food with EBT cards at 
nearly 207,000 authorized retail stores. And while SNAP is 
operated by state governments, as you know, the Federal 
Government pays the full cost of SNAP benefits, more than $50 
billion for 2009, as well as approximately half of the expenses 
incurred by states to administer the program.
    I have spent most of my career working to promote and 
improve our nation's nutrition assistance programs, including 
my work at the Department, in the nonprofit sector, and as a 
staff member in support of this Committee back in the 1990s. I 
know the critical importance of these programs to the lives of 
millions of low-income people across our country and their 
reflection of America's commitment to ensure that, whatever 
other hardships they face, our people should not have to 
experience hunger.
    I want to talk to you about program integrity in that 
context. I have long recognized that the ongoing mission of 
SNAP, and other nutrition assistance programs, is not separable 
from strong and sustained attention to program integrity and 
stewardship of Federal funds. Waste and abuse draw scarce 
program resources away from the people who need them the most, 
and we cannot afford such losses. These programs are ultimately 
unsustainable without continued public confidence that we 
manage with integrity those benefits that go to those who 
qualify for them, that they are used appropriately, and that 
they achieve their intended purposes. This matter is one of 
FNS's fundamental responsibilities, and one of my top 
priorities.
    Our discussion of these issues, as the Chairman mentioned, 
comes at a time of new challenges. There has been a substantial 
increase in participation in SNAP over the last few years. In 
April 2010, more than 40.4 million people, one in eight people 
in this country, received SNAP benefits. The number of people 
receiving SNAP benefits has grown by more than 12 million in 
the last 24 months alone, an increase of nearly 44 percent.
    The program is designed to respond to economic conditions, 
and the increase in participation reflects that it is, indeed, 
responding as intended. However, these increasing caseloads 
have made it quite challenging for our partner state agencies, 
many of whom have been coping with staffing reductions and 
dramatic budget cuts to meet the demands.
    In spite of these tremendous challenges, on June 24th 
Secretary Vilsack announced that the SNAP national payment 
accuracy rate for Fiscal Year 2009 had reached an all-time high 
of 95.64 percent. In fact, payment errors are less than half 
what they were 10 years ago, dropping from 9.86 percent in 1999 
to 4.36 percent last year. Kudos to the states for this 
historic achievement.
    It is critical that SNAP payments are correct and that 
those who are eligible for the benefits receive the proper 
amount. For the most part, resolving errors is not about 
eliminating benefits to the wrong people; it is about getting 
the amount of the benefit correct. In fact, 98 percent of those 
certified for SNAP are eligible for some level of benefit.
    When errors do occur, SNAP also has systems in place to 
aggressively recover erroneously issued benefits from SNAP 
recipients. In fact, in Fiscal Year 2009, states established a 
total of over $367 million in new claims for over-issuances to 
households. The Treasury Offset Program offers another way to 
recover over-issuances by reducing income tax refunds or other 
Federal payments to repay delinquent SNAP debt.
    Trafficking, the illegal sale of SNAP benefits for cash, 
has also decreased. It has decreased significantly over the 
past 15 years. It has decreased from $811 million in 1993 to 
$241 million in our most recent review. This dramatic decrease 
in trafficking is largely credited to the replacement of paper 
coupons with EBT cards.
    Mr. Chairman, our Department is very proud of the progress 
we have made in ensuring that SNAP benefits provide nutrition 
assistance, and are efficiently and accurately delivered to the 
nation's needy families. We appreciate our very strong working 
relationship with the Department's Office of Inspector General 
in fighting SNAP fraud and abuse. And we are also thankful for 
our relationship with GAO, which has provided useful 
recommendations on how to improve our strategies to combat 
trafficking.
    We continue to seek opportunities and strategies that 
result in improved program administration, and we look forward 
to working with you as preparations get under way for the 2012 
Farm Bill.
    And, as intended in the President's recent Executive Order 
on improper payments, USDA is doing this in a way that is 
responsive to the President's directive that emphasizes 
transparency, accountability, and strong compliance incentives, 
while also continuing to focus on removing barriers and 
increasing access for those who are eligible but not yet 
participating.
    Mr. Chairman, this concludes my remarks. Thank you so much. 
And I would be happy to answer any questions at the appropriate 
time.
    [The prepared statement of Ms. Paradis follows:]

Prepared Statement of Julie Paradis, Administrator, Food and Nutrition 
       Service, U.S. Department of Agriculture, Washington, D.C.
    Good morning, Mr. Chairman and Members of the Committee. As the 
Administrator of the Food and Nutrition Service (FNS) at the United 
States Department of Agriculture (USDA), I am pleased to be here to 
discuss our work to ensure the integrity of the Supplemental Nutrition 
Assistance Program (SNAP) and our commitment to reach all eligible 
families with the assistance that they need and to which they are 
entitled.
    SNAP is the largest program in the United States nutrition 
assistance safety net. It enables low-income families to buy nutritious 
food with electronic benefit transfer cards (or EBT cards) at 
authorized retail stores. SNAP ensures access to a more nutritious, 
healthful diet for over 40 million Americans each month. In addition, 
SNAP provides nutrition education to those eligible for and 
participating in the program. The goal of SNAP's nutrition education 
component is to improve the likelihood that persons eligible for SNAP 
will make healthy food choices within a limited budget and choose 
physically active lifestyles consistent with the Dietary Guidelines for 
Americans and MyPyramid.
    While SNAP is operated by state governments, the Federal Government 
pays the full cost of SNAP benefits, more than $50 billion for FY 2009, 
as well as approximately half of the expenses incurred by the states to 
administer the program. Given this substantial national investment, one 
of FNS's primary responsibilities is to ensure that SNAP benefits are 
accurately directed in the correct amounts to those, and only those, 
who are eligible for them. FNS manages a nationwide Quality Control 
system that measures state performance for payment accuracy, provides 
bonuses for high-performing states, and directs corrective action for 
those with accuracy problems. Through this system of performance 
measurement and incentives, as well as other ongoing payment accuracy 
initiatives, FNS works actively with states to protect and maximize the 
impact of the taxpayer investment in this program.
The Critical Role of Public Confidence
    Those of you who know me are aware that I have spent much of my 
career working to promote and improve our nation's nutrition assistance 
programs, including my work at the Department, in the private nonprofit 
sector, and in support of this Committee. I know the critical 
importance of these programs to the lives of millions of low-income 
people across our country, and their reflection of America's commitment 
to ensure that, whatever other hardships they face, our people should 
not have to experience hunger.
    I want to talk to you about program integrity in that context. For 
I have long recognized that the ongoing mission of SNAP and other 
nutrition assistance programs is not separable from strong and 
sustained attention to program integrity and stewardship of Federal 
funds. Waste and abuse draw scarce program resources away from the 
children and low-income people who need them the most--and we cannot 
afford such losses. Just as importantly, these programs are ultimately 
not sustainable without continued public confidence that their benefits 
go to those who qualify for them, are used appropriately, and achieve 
the purposes for which they are intended. My tenure as Administrator 
has only reinforced my conviction in this area. We simply cannot 
sustain the nation's commitment to these programs without honoring and 
fulfilling the expectation that we can manage them with integrity. I 
recognize this matter is one of my, and one of our Agency's, 
fundamental responsibilities.
The Challenge of Rising Caseloads
    Our discussion of these issues comes at a time of new challenges. 
There has been a substantial increase in participation in SNAP over the 
last few years. In April 2010, more than 40.4 million people received 
SNAP benefits, an increase of approximately 310,000 people from March. 
April is the seventeenth consecutive month that more people received 
SNAP benefits than at any time previously in the history of the 
program. The number of Americans receiving SNAP benefits has grown by 
more than 12 million in the last 24 months alone, an increase of nearly 
44 percent. SNAP served more than one in eight Americans in April 2010.
    The Program is designed to respond to economic conditions, and the 
increase in participation reflects that it is responding as intended. 
That is the good news; however, these increasing caseloads have made it 
quite challenging for state agencies--many of whom have been coping 
with staffing reductions and budget cuts--to meet the demands. Yet, on 
June 24, Agriculture Secretary Tom Vilsack announced the SNAP national 
payment accuracy rate for FY 2009 had reached an all time high of 95.64 
percent. The Secretary remarked that ``program integrity is critical as 
participation in SNAP continues to grow to meet the nutrition needs of 
the most vulnerable Americans, and these results deliver on President 
Obama's directive to decrease improper payments and protect taxpayer 
dollars . . . We are improving the accuracy and efficiency of program 
delivery while working to deliver on Obama Administration efforts to 
reduce hunger and improve nutrition for people across the country.''
    We are pleased to share this historic achievement with our state 
partners who are committed, along with FNS, to ensuring those who are 
eligible to participate in this critical nutrition assistance program 
receive the correct amount of benefits--not too much, not too little.
    In fact, payment errors are less than half what they were 10 years 
ago, dropping from 9.86 percent in FY 1999 to 4.36 percent in FY 2009. 
For the second straight year, SNAP's national negative error rate also 
improved. Negative error rates measure whether states correctly deny, 
suspend, or terminate benefits.
    Also on June 24, the Secretary awarded $30 million in performance 
bonuses to eleven states for exemplary achievement in payment accuracy 
in FY 2009. The eight states with the best payment accuracy rates and 
the two states with the most improved payment accuracy rates received a 
total of $24 million. An additional $6 million was provided to the four 
states with the lowest negative error rates and the two states with the 
most improved negative error rates.
    This morning, I would like to give you an overview of how FNS and 
the states work together to prevent misuse of program benefits, while 
making every effort to make them readily accessible to eligible 
households. I will begin by describing our quality control process--
this looks at how accurately states calculate the eligibility and 
benefits of households seeking SNAP help. Then, I will discuss the 
Administration's and USDA's current focus in ensuring quality control 
and payment accuracy. Finally, I will address our work with state 
partners related to intentional program violations by recipients as 
well as how we monitor retailers and guard against trafficking, the 
illegal exchange of benefits for cash or other non-allowable items.
Quality Control
    The SNAP payment accuracy rate is developed from a long-standing 
program integrity process called Quality Control (QC), a system 
mandated by the Food and Nutrition Act to determine the accuracy of the 
benefits authorized. In fact, in terms of eligibility, 98 percent of 
those certified for SNAP in FY 2009 were eligible for some level of 
benefit.
    Every year, each state conducts a QC review of a random sample of 
its participating SNAP households and reports the findings to FNS. A QC 
review consists of a detailed examination of household non-financial 
and financial circumstances, including income, resources and 
deductions, to determine whether benefits were accurately authorized 
for active cases or improperly denied or terminated for negative cases. 
Subsequent Federal subsample reviews of a subsample of the states' 
reviews verify the accuracy of the states' determinations. A 
statistical adjustment uses both the Federal and state data to 
establish the error rates for each state. The National payment error 
rate is determined by calculating the weighted average of all of the 
individual state error rates.
    FNS and organizations such as the National Association for Program 
Information and Performance Measurement (NAPIPM), an affiliate of the 
American Public Human Services Association (APHSA), work together to 
improve and enhance the QC performance measurement system.
    As I mentioned earlier, both over-issuances and under-issuances are 
important concerns to FNS. It is critical that payments are correct and 
that those who are eligible for the benefits receive the proper 
amount--not too much and not too little. So, for the most part, 
resolving errors is not about eliminating benefits to the wrong people, 
it is about getting the amount right. And that is where our payment 
accuracy initiatives come into play. The National Payment Accuracy Work 
Group, a group of subject matter experts from FNS headquarters and 
regional offices, monitor and evaluate payment accuracy progress, 
analyze error rate data, and exchange information on payment accuracy 
best practices and program improvement strategies. The group makes 
timely and useful payment accuracy-related information and tools 
available across regions and states.
    An early detection system targets states that may be experiencing a 
higher incidence of payment errors based on preliminary QC data. States 
are arrayed based on error rate performance so that FNS can effectively 
and consistently deploy limited FNS resources for intervention and 
technical assistance to specific states in most need.
    State partners must continue and renew their leadership commitment 
to excellence in payment accuracy. USDA provides leadership through 
interactions with state policy makers, including participation in 
meetings with state leaders; presentations at national, regional, and 
state conferences; and sponsoring regional meetings with state 
commissioners and SNAP directors with a direct focus on payment 
accuracy.
    The State Exchange Program provides funds for states to travel to 
see where ideas for improvement have been successfully implemented and 
to participate in conferences where such ideas are presented.
    When errors do occur, SNAP also has systems in place to 
aggressively recover erroneously issued benefits from SNAP recipients. 
Claims are established by state agencies against households which have 
received more SNAP benefits than they should have. Households may pay 
back overissued benefits through reductions in their SNAP allotments or 
in a lump sum. In Fiscal Year 2009, states established a total of over 
$367 million in new claims for over-issuances to households and 
collected just under $300 million. The Treasury Offset Program (TOP) 
offers another way to recover over-issuances by reducing income tax 
refunds or other Federal payments to repay the SNAP debt. Since the 
establishment of TOP in 1992, FNS has collected more than $1.2 billion 
in delinquent SNAP recipient claims.
Improper Payments
    On November 20, 2009, President Obama issued an Executive Order on 
Improper Payments intended to rein in improper payments while making 
sure that those who are eligible for government assistance continue to 
have access to these important Federal programs. One of the key 
messages of the Executive Order recognizes the interaction between 
program access and integrity. At USDA, we have a long standing 
commitment to these twin goals.
    In addition, the Administration is committed to improved 
communication and collaboration among Federal agencies and departments 
which ultimately benefits clients who receive multiple Federal benefits 
and state workers who administer multiple benefit programs.
    We are also working with the Office of Management and Budget, as 
well as many other Federal agencies and other stakeholders, on the 
Partnership Fund for Program Integrity Innovation (the Partnership 
Fund). The purpose of the Partnership Fund is to identify and test 
pilot projects to improve service delivery, payment accuracy and 
administrative efficiency for Federal assistance programs, including 
those administered by states or local agencies, while protecting access 
for program beneficiaries. The Partnership Fund will transfer resources 
to lead Federal agencies to execute selected pilots, and the results 
will be carefully evaluated. OMB has already set up a website called 
``Partner4Solutions.gov'' where states, organizations, and members of 
the public can submit their best practices and innovative ideas.
Intentional Program Violations
    Only a very few households engage in intentional program violations 
(IPVs), such as purposely under-reporting their income or overstating 
their household size in order to qualify for more benefits than they 
are entitled to receive. Such IPVs occur when a recipient intentionally 
makes false or misleading statements; misrepresents or withholds facts 
when applying for benefits; or commits any act that constitutes a 
violation of the Food and Nutrition Act, the SNAP regulations, or any 
state statute for the purpose of using or trafficking benefits. States 
are responsible for investigating and prosecuting IPVs. When state 
investigators find evidence of an IPV, a disqualification action 
against the accused is initiated. Individuals found to have committed 
an IPV are disqualified from participation in SNAP for a period of time 
ranging from 12 months to permanently, depending on the type of offense 
or number of offenses committed. Overpayments as a result of IPVs must 
be returned and the recipient is subject to criminal or administrative 
penalties. In Fiscal Year 2009, 50,145 recipients were disqualified 
from SNAP for IPVs. In Fiscal Year 2009, more than $60 million in 
claims associated with IPVs were collected by state agencies. To defray 
their administrative costs and as an incentive to pursue IPVs, state 
agencies are allowed to retain 35 percent of the amount they collect 
for such claims.
Trafficking
    Trafficking, the illegal sale of SNAP benefits for cash or other 
non-allowable items, has decreased significantly over the past 15 
years. The first trafficking assessment determined that $811 million in 
program benefits were trafficked during Fiscal Year 1993. The most 
recent estimate, for the period 2002-2005, determined that trafficking 
diverted $241 million in program benefits annually, or roughly, 1 cents 
of each benefit dollar. USDA is currently updating the trafficking 
study to cover the period 2006 through 2008. This study will be 
complete in Fiscal Year 2011.
    The national implementation of electronic benefit transfer (EBT) as 
the issuance system for SNAP instead of paper coupons is credited in 
large part for the decrease in trafficking. While the overall rate of 
trafficking has declined, USDA has increased the number of retailers 
disqualified for trafficking. From 2000-2009, USDA permanently 
disqualified 7,677 retailers for trafficking--a 44 percent increase 
from the previous 10 year period, 1990-1999, when 5,338 retailers were 
permanently disqualified for trafficking.
    SNAP uses a retailer fraud detection system, the Anti-Fraud Locator 
for EBT Retailer Transactions (ALERT) system, to monitor electronic 
transaction activity and identify suspicious retail grocers for 
analysis and investigation. To continue strengthening our retailer 
fraud detection capabilities, USDA has begun moving toward a next 
generation ALERT system with new, more advanced technology and 
analytical tools available in the private sector. FNS has hired a 
contractor to develop this system and engage in continuous data mining 
efforts. The first phase of the next generation system, a database 
redesign which will support all other efforts, is expected to debut in 
calendar year 2011. Eventually, higher level analytics, such as link 
analysis, predictive models, and geo-spatial analysis will be 
introduced in subsequent steps.
    The authorization of retail food stores for participating in SNAP 
and the oversight of these stores is a direct Federal function 
conducted by USDA. As of March 2010, there were close to 207,000 
authorized retailers nationwide. In addition, USDA SNAP has a team of 
investigators across the country that conduct undercover investigations 
of stores suspected of trafficking or of not complying with program 
rules. Annually, over 4,000 investigations are conducted. Over 30 
percent of these investigations result in civil monetary penalties and/
or disqualifications for the sale of ineligible items or trafficking in 
benefits. Investigators inform overall USDA retailer integrity efforts 
with intelligence gathered on the ground, thereby helping USDA to 
further gauge the types of fraud found in the universe of licensed 
retailers.
    FNS has a strong working partnership with the Department's Office 
of Inspector General (OIG) in fighting SNAP fraud and abuse. Their help 
and commitment has been and continues to be invaluable to our work 
protecting the program's integrity and public confidence in the 
program.
    In 2006, the Government Accountability Office (GAO) conducted a 
study of SNAP trafficking. In the study, GAO acknowledged FNS for 
having taken advantage of EBT and technology to detect trafficking and 
disqualify retailers. GAO recommended however, that USDA better target 
its limited compliance monitoring resources by developing criteria to 
identify stores most likely to traffic, and to use this criteria to 
conduct risk assessments and provide more targeted and earlier 
oversight of stores most likely to engage in trafficking. Since this 
report was published, USDA began implementing a risk-based approach to 
the licensing, reauthorization, and monitoring of SNAP retailers. GAO 
also recommended that USDA develop a strategy to increase the penalties 
for trafficking. The statutory penalty at the time for trafficking was 
permanent disqualification. As a result of GAO's recommendation, USDA 
pursued and received authority through Section 4132 of the 2008 Farm 
Bill to assess significant monetary penalties in addition to the 
permanent disqualification of trafficking retailers.
    Finally, GAO recommended that USDA promote state efforts to pursue 
recipients suspected of trafficking. States are required to follow up 
on all cases of suspected recipient trafficking; however, the state 
determines whether or not they can make a case against a recipient for 
trafficking. FNS field offices work with states to share suspected 
recipient trafficking information and encourage states to use the EBT 
transaction data to follow up on suspected traffickers. Many states, 
however, struggle to devote scarce resources to investigating suspected 
traffickers. FNS continues to work with state partners to emphasize the 
importance of program integrity at every opportunity.
Conclusion
    Mr. Chairman, our Department is very proud of the progress we have 
made in ensuring that SNAP benefits provide nutrition assistance and 
are well targeted and efficiently and accurately delivered to the 
nation's needy families. We appreciate our partnerships with state 
agencies and USDA's OIG to meet our goals in proper administration of 
the Program. We continue to seek opportunities and strategies that 
result in improved program administration and look forward to working 
with you as preparations get underway for the 2012 Farm Bill. We are 
committed to maintaining public confidence in our nutrition assistance 
programs by ensuring that Federal dollars are used for the purpose for 
which they were intended. And, as intended in the President's Executive 
Order, we are doing this in a way that is responsive to the President's 
directive that emphasizes transparency, accountability, and strong 
compliance incentives while also continuing to focus on removing 
barriers and increasing access for those who are eligible but not yet 
participating, especially those from underrepresented populations such 
as seniors and Latinos. Throughout the history of SNAP, USDA has been 
committed to achieving both access and integrity in the program and 
that commitment remains strong today.
    Mr. Chairman, this concludes my remarks. I would be happy to answer 
any questions at this time.

    Mr. Kagen. Thank you very much. And please do hang around. 
There will be questions in due course.
    Ms. Kay Brown, Director of the Education, Workforce, and 
Income Security Issues of the United States Government 
Accountability Office, thank you for joining us. And you have 5 
minutes.

STATEMENT OF KAY E. BROWN, DIRECTOR, EDUCATION, WORKFORCE, AND 
                  INCOME SECURITY ISSUES, U.S.
       GOVERNMENT ACCOUNTABILITY OFFICE, WASHINGTON, D.C.

    Ms. Brown. Mr. Chairman, Ranking Member, and Members of the 
Subcommittee, thank you for inviting me here today to discuss 
our work on the integrity of the Supplemental Nutrition 
Assistance Program.
    SNAP has experienced remarkable growth in recent years, 
responding to increased demand during a recession. And, true to 
its design, the program has played a critical role in assisting 
families facing hardships. Given this growth, along with the 
boost in benefit size that is funded through the Recovery Act, 
this is an important time to focus on the integrity of this $50 
billion program.
    My remarks are based on updates of three GAO reports: the 
first on erroneous payments to SNAP participants; trafficking 
of SNAP benefits; and, finally, categorical or automatic 
eligibility tied to TANF services.
    First, regarding erroneous payments: USDA and the states 
have made nearly continuous progress over the last decade in 
decreasing their rate of payments made in error. The steps they 
have taken are consistent with internal control practices that 
are known to reduce improper payments. For example, USDA has 
sent a clear message from the top that states will be held 
accountable, levied financial penalties and awarded progress, 
and also shared lessons learned about the causes and ways to 
correct errors.
    In addition, states have taken advantage of options to 
simplify the process for determining eligibility. Complex 
eligibility requirements increase the risk that caseworkers 
will make errors, so efforts to simplify the process can help 
bring down the error rate.
    However, despite this encouraging process, SNAP's rate of 
improper payments is still among the highest in the government, 
highlighting the need for continued commitment to further 
improvements.
    Next, regarding trafficking: We know that the estimated 
rate of trafficking declined from the early 1990s to 2005. In 
2007, we made multiple recommendations to USDA to improve its 
use of EBT data to detect trafficking, and the Department has 
implemented almost all of these.
    For example, it has taken steps to develop a more 
sophisticated analysis of SNAP transactions, and to assess each 
retailer's risk of trafficking. As retailers develop new 
schemes to avoid detection, these actions can help USDA more 
quickly identify them. Also, consistent with our 
recommendation, USDA received in the last farm bill authority 
to impose larger financial penalties on stores that traffic.
    USDA has not estimated the rate of trafficking since 2005, 
but when a new estimate is available, hopefully next year, it 
will be important to carefully assess progress and lessons 
learned.
    Third, regarding automatic eligibility tied to TANF 
services: States have the option to grant automatic SNAP 
eligibility to households when they are found eligible for TANF 
services. Some of these TANF services are available to a fairly 
broad population, and may simply include receipt of an 
informational brochure or toll-free number. USDA has encouraged 
states to take advantage of this option, and 39 have done so, 
so far.
    It is important to note that, even though these households 
are automatically eligible, states must still determine their 
SNAP benefit amount. Some may receive the minimum benefit 
amount or no benefit at all. However, because of the 
differences between TANF and SNAP eligibility criteria, some 
households that may not otherwise be eligible for SNAP benefits 
could receive them.
    This option is another way to simplify or streamline the 
eligibility process, and USDA believes it has resulted in 
reduced administrative burdens, increased access, and could 
potentially reduce payment errors. However, we don't yet know 
enough about the extent of these results, or how these 
automatically eligible participants compare to more traditional 
SNAP participants.
    In conclusion, at this time of fiscal stress and looming 
deficits, it is more important than ever to ensure that 
benefits are paid in the right amount, and that scarce 
resources are targeted to those most in need.
    This concludes my prepared statement. I would be happy to 
answer any questions you may have.
    [The prepared statement of Ms. Brown follows:]

Prepared Statement of Kay E. Brown, Director, Education, Workforce, and 
     Income Security Issues, U.S. Government Accountability Office,
                            Washington, D.C.
Supplemental Nutrition Assistance Program_Payment Errors and 
        Trafficking Have Declined, but Challenges Remain
Highlights
    Highlights of GAO-10-956T (http://www.gao.gov/new.items/
d10956t.pdf), a report to the House Subcommittee on Department 
Operations, Oversight, Nutrition, and Forestry, Committee on 
Agriculture.
Why GAO Did This Study
    The U.S. Department of Agriculture's (USDA) Supplemental Nutrition 
Assistance Program (SNAP) is intended to help low-income individuals 
and families obtain a better diet by supplementing their income with 
benefits to purchase food. USDA's Food and Nutrition Service (FNS) and 
the states jointly implement SNAP. Participation in the program has 
risen steadily over the last decade to an all time high of more than 33 
million in Fiscal Year 2009, providing critical assistance to families 
in need.
    This testimony discusses GAO's past work on three issues related to 
ensuring integrity of the program: (1) improper payments to SNAP 
participants, (2) trafficking of SNAP benefits, and (3) categorical 
eligibility for certain individuals or households.
    This testimony is based on prior GAO reports on categorical 
eligibility (GAO-07-465), payment errors (GAO-05-245), and food stamp 
trafficking (GAO-07-53), developed through data analyses, case file 
reviews, site visits, interviews with officials, and a 50 state survey. 
GAO also updated data where available and collected information on 
recent USDA actions and policy changes.
What GAO Recommends
    FNS generally agreed with GAO's prior recommendations to address 
SNAP trafficking and categorical eligibility issues and has taken 
action in response to most of them.
    View GAO-10-956T or key components (http://www.gao.gov/products/
GAO-10-956T).
    For more information, contact Kay Brown at [redacted].
What GAO Found
    The national payment error rate reported for SNAP, which combines 
states' overpayments and underpayments to program participants, has 
declined by 56 percent from 1999 to 2009, from 9.86 percent to a record 
low of 4.36 percent. This reduction is due, in part, to options made 
available to states that simplified certain program rules. In addition, 
FNS and the states GAO reviewed have taken several steps to improve 
SNAP payment accuracy that are consistent with internal control 
practices known to reduce improper payments such as providing financial 
incentives and penalties based on performance. Despite this progress, 
the amount of SNAP benefits paid in error is substantial, totaling 
about $2.2 billion in 2009 and necessitating continued top-level 
attention and commitment to determining the causes of improper payments 
and taking corrective actions to reduce them.
    FNS estimates indicate that the national rate of food stamp 
trafficking declined from about 3.8 cents per dollar of benefits 
redeemed in 1993 to about 1.0 cents per dollar during the years 2002 to 
2005 but that trafficking occurs more frequently in smaller stores. FNS 
has taken advantage of electronic benefit transfer to reduce fraud, and 
in response to prior GAO recommendations, has implemented new 
technology and categorized stores based on risk to improve its ability 
to detect trafficking and disqualify retailers who traffic. FNS also 
received authority to impose increased financial penalties for 
trafficking as recommended; however, it has not yet assessed higher 
penalties because implementing regulations are not yet finalized. FNS 
is considering additional steps to encourage states to pursue 
recipients suspected of trafficking but limited state resources are a 
constraint.
    Categorically eligible households do not need to meet SNAP 
eligibility requirements because their need has been established under 
the states' Temporary Assistance for Needy Families (TANF) program. As 
of June 2010, 36 states have opted to provide categorical eligibility 
for SNAP to any household found eligible for a service funded through 
TANF and, in 35 states, there is no limit on the amount of assets 
certain households may have to be determined eligible, according to 
FNS. Households can be categorically eligible for SNAP even if they 
receive no TANF funded service other than a toll-free telephone number 
or informational brochure. However, the amount of assistance eligible 
households receive is determined using the same process used for other 
SNAP recipients. According to FNS officials, increased use of 
categorical eligibility by states has reduced administrative burdens 
and increased access to SNAP benefits to households who would not 
otherwise be eligible due to asset or income limits. However, little is 
known about the extent of its impact on increased access or program 
integrity.
    SNAP has played a key role in assisting families facing hardship 
during the economic crisis, but given fiscal constraints and program 
growth, it is more important than ever to understand the impact of 
policy changes, and balance improvements in access with efforts to 
ensure accountability.

    Mr. Chairman and Members of the Subcommittee:

    Thank you for inviting me here today to discuss issues related to 
the integrity of the U.S. Department of Agriculture's (USDA) 
Supplemental Nutrition Assistance Program (SNAP), formerly the Food 
Stamp Program. SNAP is intended to help low-income individuals and 
families obtain a better diet by supplementing their income with 
benefits to purchase food. Participation in SNAP has risen steadily 
over the last decade in response to economic conditions and has played 
a critical role in assisting families facing hardship. In Fiscal Year 
2000, SNAP provided about $15 billion in benefits to about 17 million 
individuals while in Fiscal Year 2009, it provided more than $50 
billion in benefits to nearly 34 million individuals. The recent 
economic crisis has sharply increased demand for such assistance, with 
participation in SNAP increasing by 22 percent from June 2008 to June 
2009 alone. Currently, almost one in every 11 Americans participates in 
the program. Further, the American Recovery and Reinvestment Act of 
2009 provided a temporary across-the-board increase to the SNAP benefit 
amount.\1\ This recent growth highlights the importance of ensuring 
program integrity. Every year, more than $1 billion in benefits are 
paid incorrectly. Further, SNAP recipients exchange hundreds of 
millions of dollars in benefits for cash instead of food with 
authorized retailers across the country, a practice known as 
trafficking. In addition, concerns have been raised about a policy 
option allowing state to give households automatic eligibility for SNAP 
if they are eligible for minimal services financed with Temporary 
Assistance for Needy Families (TANF) funds (a type of categorical 
eligibility.
---------------------------------------------------------------------------
    \1\ Pub. L. No. 111-5,  101 (2009).
---------------------------------------------------------------------------
    The information I am presenting today is based on past work, 
updated with current information where available, on three issues 
related to ensuring integrity of the program: (1) improper payments to 
SNAP participants, (2) trafficking of SNAP benefits, and (3) 
categorical eligibility for SNAP benefits.\2\ The payment error and 
trafficking findings are based on past analyses of program quality 
control data, case file reviews, data analysis of the Food and 
Nutrition Service (FNS) retailer database, and interviews and site 
visits with program stakeholders, including Federal agency and state 
and local officials. The categorical eligibility findings are based on 
a 2007 survey of state SNAP administrators, an analysis of household 
characteristic data collected from 21 states, and interviews and site 
visits with Federal and state officials. More complete information on 
the scope and methodology for our prior work is available in each 
published report. In addition, we updated data where available, 
reviewed recent USDA policy changes and actions taken in response to 
our recommendations, and discussed the implications of these actions 
and changes with USDA officials. We also reviewed relevant Federal laws 
and regulations. We conducted this work in accordance with generally 
accepted government auditing standards. Those standards require that we 
plan and perform the audit to obtain sufficient, appropriate evidence 
to provide a reasonable basis for our findings and conclusions based on 
our audit objectives. We believe that the evidence obtained provides a 
reasonable basis for our findings and conclusions.
---------------------------------------------------------------------------
    \2\ GAO, Food Stamp Program: States Have Made Progress Reducing 
Payment Errors, and Further Challenges Remain, GAO-05-245 (http://
www.gao.gov/new.items/d05245.pdf) (Washington, D.C.: May 5, 2005); GAO, 
Food Stamp Trafficking: FNS Could Enhance Program Integrity by Better 
Targeting Stores Likely to Traffic and Increasing Penalties, GAO-07-53 
(http://www.gao.gov/new.items/d0753.pdf) (Washington, D.C.: Oct. 13, 
2006). GAO, Food Stamp Program: FNS Could Improve Guidance and 
Monitoring to Help Ensure Appropriate Use of Noncash Categorical 
Eligibility, GAO-07-465 (http://www.gao.gov/new.items/d07465.pdf) 
(Washington, D.C.: Mar. 28, 2007).
---------------------------------------------------------------------------
Background
    SNAP is jointly administered by FNS and the states. FNS pays the 
full cost of SNAP benefits, shares the states' administrative costs, 
and is responsible for promulgating program regulations and ensuring 
that state officials administer the program in compliance with program 
rules. States administer the program by determining whether households 
meet the program's eligibility requirements, calculating monthly 
benefits for qualified households, and issuing benefits to participants 
through an Electronic Benefits Transfer (EBT) system.
Program Participation
    As shown in Figure 1, program participation has increased sharply 
from Fiscal Years 1999 to 2009, and indications are that participation 
has continued to increase significantly in Fiscal Year 2010. According 
to FNS, the downturn in the U.S. economy, coupled with changes in the 
program's rules and administration, has led to an increase in the 
number of SNAP participants.
Figure 1: SNAP Participation Has Increased Over the Last Decade


Determination of Eligibility and Benefits
    Eligibility for SNAP is based primarily on a household's income and 
assets. To determine a household's eligibility, a caseworker must first 
determine the household's gross income, which cannot exceed 130 percent 
of the Federal poverty level for that year as determined by the 
Department of Health and Human Services. A household's net income 
cannot exceed 100 percent of the poverty level (or about $22,056 
annually for a family of four living in the continental United States 
in Fiscal Year 2010). Net income is determined by deducting from gross 
income a portion of expenses such as dependent care costs, medical 
expenses for elderly individuals, utilities costs, and housing 
expenses.
    A household's assets are also considered to determine SNAP 
eligibility and SNAP asset rules are complex. There is a fixed limit, 
adjusted annually for inflation, on the amount of assets a household 
may own and remain eligible for SNAP. Certain assets are not counted, 
such as a home and surrounding lot. There are also basic program rules 
that limit the value of vehicles an applicant can own and still be 
eligible for the program.
Categorical Eligibility for SNAP
    Federal regulations require states to make households categorically 
eligible for SNAP if the household receives certain cash benefits, such 
as TANF cash assistance or Supplemental Security Income. States must 
also confer categorical eligibility for certain households receiving, 
or authorized to receive, certain TANF non-cash services that are 
funded with more than 50 percent Federal or state maintenance of effort 
(MOE) funds and serve certain TANF purposes.\3\ In addition, in certain 
circumstances, states have the option to confer categorical eligibility 
using TANF non-cash services funded with less than 50 percent Federal 
TANF or state MOE funds. The intent of categorical eligibility was to 
increase program access and reduce the administrative burden on state 
agencies by streamlining the need to apply means tests for both TANF 
and SNAP.
---------------------------------------------------------------------------
    \3\ TANF funding includes both TANF block grant and state 
maintenance of effort (MOE) funds--non-Federal funds that states are 
required to spend in order to receive the entire Federal TANF block 
grant. FNS regulations state that households in which all members are 
receiving benefits or services from a program designed to meet the 
program goals of TANF and which are funded with more than 50 percent of 
Federal TANF or state maintenance of effort funds are generally 
categorically eligible for SNAP. A state may, at its discretion, in 
certain circumstances, confer categorical eligibility to households in 
which all members are receiving similar benefits or services from a 
program funded with less than 50 percent Federal TANF or state 
maintenance of effort funds.
---------------------------------------------------------------------------
FNS's Quality Control (QC) System
    Improper payments (or payment errors) occur when recipients receive 
too much or too little in SNAP benefits. FNS and the states share 
responsibility for implementing an extensive quality control system 
used to measure the accuracy of SNAP payments and from which state and 
national error rates are determined. Under FNS's quality control 
system, the states calculate their payment errors annually by drawing a 
statistical sample to determine whether participating households 
received the correct benefit amount. The state's error rate is 
determined by dividing the dollars paid in error by the state's total 
issuance of SNAP benefits. Once the error rates are final, FNS is 
required to compare each state's performance with the national error 
rate and imposes financial penalties or provides financial incentives 
according to legal specifications.\4\
---------------------------------------------------------------------------
    \4\ The SNAP error rate is calculated for the entire program, as 
well as every state, and is based on overpayments to those who are 
eligible for smaller benefits, overpayments to those who are not 
eligible for any benefit, and underpayments to those who do not get as 
much as they should.
---------------------------------------------------------------------------
Trafficking and FNS Authorization and Monitoring of Retailers
    Trafficking occurs when SNAP recipients exchange SNAP benefits for 
cash instead of food with authorized retailers.\5\ Under the EBT 
system, SNAP recipients receive an EBT card imprinted with their name 
and a personal account number, and SNAP benefits are automatically 
credited to the recipients' accounts once a month. In legitimate SNAP 
transactions, recipients run their EBT card, which works much like a 
debit card, through an electronic point-of-sale machine at the grocery 
checkout counter, and enter their secret personal identification number 
to access their SNAP accounts. This authorizes the transfer of SNAP 
benefits from a Federal account to the retailer's account to pay for 
the eligible food items. The legitimate transaction contrasts with a 
trafficking transaction in which recipients swipe their EBT card, but 
instead of buying groceries, they receive a discounted amount of cash 
and the retailer pockets the difference.
---------------------------------------------------------------------------
    \5\ In Fiscal Year 2009, about 190,000 retailers were authorized to 
accept SNAP benefits.
---------------------------------------------------------------------------
    FNS has the primary responsibility for authorizing retailers to 
participate in SNAP. To become an authorized retailer, a store must 
offer, on a continuing basis, at least three varieties of foods in each 
of the four staple food categories--meats, poultry or fish; breads or 
cereals; vegetables or fruits; and dairy products--or over 50 percent 
of its sales must be in a staple group. The store owner submits an 
application and includes relevant forms of identification such as 
copies of the owner's Social Security card, driver's license, business 
license, liquor license, and alien resident card. The FNS field office 
program specialist then checks the applicant's Social Security Number 
against FNS's database of retailers, the Store Tracking and Redemption 
System, to see if the applicant has previously been sanctioned in the 
SNAP program. The application also collects information on the type of 
business, store hours, number of employees, number of cash registers, 
the types of staple foods offered, and the estimated annual amount of 
gross sales and eligible SNAP sales.
    In addition to approving retailers to participate in the program, 
FNS has the primary responsibility for monitoring their compliance with 
requirements and administratively disqualifying those who are found to 
have trafficked SNAP benefits. FNS headquarters officials collect and 
monitor EBT transaction data to detect suspicious patterns of 
transactions by retailers. They then send any leads to FNS program 
specialists in the field office who either work the cases themselves or 
refer them to undercover investigators in the Retailer Investigations 
Branch to pursue by attempting to traffic SNAP benefits for cash.
States Have Made Significant Progress in Reducing Payment Errors
The SNAP Payment Error Rate Has Declined to a Record Low
    The national payment error rate--the percentage of SNAP benefit 
dollars overpaid or underpaid to program participants--has declined by 
about 56 percent over the last 11 years, from 9.86 percent in 1999 to 
4.36 percent in 2009, in a time of increasing participation (see Figure 
1).\6\ Of the total $2.19 billion in payment errors in Fiscal Year 
2009, $1.8 billion, or about 82 percent, were overpayments. 
Overpayments occur when eligible persons are provided more than they 
are entitled to receive or when ineligible persons are provided 
benefits. Underpayments, which occur when eligible persons are paid 
less than they are entitled to receive, totaled $412 million, or about 
18 percent of dollars paid in error, in Fiscal Year 2009.
---------------------------------------------------------------------------
    \6\ Our 2003 analysis of FNS' quality control data found that 
almost \2/3\ of SNAP payment errors are caused by caseworkers, usually 
when they fail to act on new information or when they make mistakes 
when applying program rules, and \1/3\ are caused by participants, when 
they unintentionally or intentionally do not report needed information 
or provide incomplete or incorrect information. (GAO-05-245 (http://
www.gao.gov/new.items/d05245.pdf)) We did not update this analysis for 
this testimony.
---------------------------------------------------------------------------
Figure 2: SNAP Payment Errors Have Dropped to a Record Low




    The decline in payment error rates has been widespread despite the 
significant increase in participation. Error rates fell in almost all 
states, and 36 states reduced their error rates by over 50 percent from 
Fiscal Years 1999 to 2009. In addition, 47 states had error rates below 
six percent in 2009; this is an improvement from 1999, when seven 
states had error rates below six percent. However, payment error rates 
vary among states. Despite the decrease in many states' error rates, a 
few states continue to have high payment error rates.
Program Simplification Has Been Shown to Reduce Error Rates, but the 
        Program Remains Complex
    State use of simplified reporting options has been shown to have 
contributed to the reduction in the payment error rate. Several options 
are made available to the states to simplify the application and 
reporting process, and one such option is simplified reporting.\7\ Of 
the 50 states currently using simplified reporting, 47 have expanded it 
beyond earned income households, according to a recent FNS report. Once 
a state has elected to use simplified reporting, eligible households in 
the state need only report changes occurring between certification and 
normally scheduled reporting if the changes result in income that 
exceeds 130 percent of the Federal poverty level.\8\ This simplified 
reporting option can reduce a state's error rate by minimizing the 
number of income changes that must be reported between certifications 
and thereby reducing errors associated with caseworker failure to act, 
as well as participant failure to report changes.
---------------------------------------------------------------------------
    \7\ The Farm Security and Rural Investment Act of 2002 (2002 Farm 
Bill) also gave states the option of adopting provisions that could 
simplify program administration and possibly reduce error rates. These 
options include simplifying income and resources, housing costs, 
deductions, reporting requirements, and utility allowances. Pub. L. No. 
107-171, Title IV (2002). See GAO, Food Stamp Program: Farm Bill 
Options Ease Administrative Burden, but Opportunities Exist to 
Streamline Participant Reporting Rules among Programs, GAO-04-916 
(http://www.gao.gov/new.items/d04916.pdf) (Washington, D.C.: Sept. 16, 
2004).
    \9\ Households subject to reporting on a periodic basis must submit 
reports not less often than once every 6 months.
---------------------------------------------------------------------------
    Despite these simplified reporting options, program eligibility 
requirements remain complex. This complexity increases the risk that 
caseworkers will make errors when considering all the factors needed to 
determine eligibility. Our previous work has shown that the financial 
eligibility of an applicant can be difficult to verify in means-tested 
programs, further increasing the risk of payment to an ineligible 
recipient.\9\ For example, caseworkers must verify several types of 
household assets to determine eligibility and benefit amounts, such as 
bank accounts, property, and vehicles. While additional efforts to 
simplify the program may further reduce payment error, it could also 
reduce FNS' ability to target the program to individual families' 
needs. Moreover, participant-caused errors, which we earlier reported 
constitute \1/3\ of the overall national errors, are difficult to 
prevent.
---------------------------------------------------------------------------
    \9\ See GAO, Improper Payments: Progress Made but Challenges Remain 
in Estimating and Reducing Improper Payments. GAO-09-628T (http://
www.gao.gov/new.items/d09628t.pdf). Washington, D.C.: April 22, 2009.
---------------------------------------------------------------------------
FNS and States Have Taken Steps to Increase Payment Accuracy
    We found that FNS and the states we reviewed have taken many 
approaches to increasing SNAP payment accuracy, most of which are 
consistent with internal control practices known to reduce improper 
payments.\10\ Often, several practices are tried simultaneously, making 
it difficult to determine which have been the most effective.
---------------------------------------------------------------------------
    \10\ See GAO, Strategies to Manage Improper Payments: Learning From 
Public and Private Sector Organizations, GAO-02-69G (http://
www.gao.gov/new.items/d0269g.pdf) (Washington, D.C.: October 2001).

   Tracking state performance. FNS staff use Quality Control 
        (QC) data to monitor states' performance over time; conduct 
        annual reviews of state operations; and where applicable, 
        monitor the states' implementation of corrective action 
        plans.\11\ FNS, in turn, requires states to perform management 
        evaluations to monitor whether adequate corrective action plans 
        are in place at local offices to address the causes of 
        persistent errors and deficiencies. In addition, in November 
        2003, FNS created a Payment Accuracy Branch at the national 
        level to work with FNS regional offices to suggest policy and 
        program changes and to monitor state performance. The branch 
        facilitates a National Payment Accuracy Work Group with 
        representatives from each FNS regional office and headquarters 
        who use QC data to review and categorize state performance into 
        one of three tiers.\12\ Increased intervention and monitoring 
        approaches are applied when state error rates increase and 
        states are assigned to tier 2 or tier 3.
---------------------------------------------------------------------------
    \11\ States with error rates of six percent or more are required to 
develop and implement corrective action plans to improve payment 
accuracy that are monitored by the FNS regional offices.
    \12\ Tier 1 states have an error rate under six percent, and tier 2 
states have an error rate of six percent or greater but do not fall 
into tier 3. States are assigned to tier 3 when the lower limit of 
their error rate estimate at the 90 percent confidence level is higher 
than 105 percent of the national error rate estimate.

   Penalties and incentives. FNS has long focused its attention 
        on states' accountability for error rates through its QC system 
        by assessing financial penalties and providing financial 
        incentives. However, since 2000, USDA leadership has more 
        explicitly established payment accuracy as a program priority. 
        High level USDA officials visited states with particularly high 
        error rates, and FNS has collected a higher percentage of 
        penalties from states compared with prior years. For example, 
        from Fiscal Year 1992 to 2000, FNS collected about $800,000 in 
        penalties from states. In the next 5 years, FNS collected more 
---------------------------------------------------------------------------
        than $20 million from states.

    In Fiscal Year 2009, three states (Maine, West Virginia, and New 
        Mexico) were notified that they had incurred a financial 
        liability for having a poor payment error rate for at least 2 
        consecutive years. An additional nine states and territories 
        (Connecticut, Maryland, Indiana, Wisconsin, Louisiana, Texas, 
        Iowa, Alaska, and Guam) were found to be in jeopardy of being 
        penalized if their error rates do not improve. Ten states and 
        territories received bonus payments for the best and most 
        improved payment error rates in Fiscal Year 2009 (Delaware, 
        Florida, Georgia, Guam, Maine, Nebraska, Ohio, South Dakota, 
        Washington, Wisconsin).

   Information sharing. FNS also provides and facilitates the 
        exchange of information gleaned from monitoring by training 
        state QC staff, presenting at conferences, publishing best 
        practice guides, supporting the adoption of program 
        simplification options, and providing states policy 
        interpretation and guidance.

    At the time of our 2005 study, states we reviewed adopted a 
        combination of practices to prevent, minimize, and address 
        payment accuracy problems, such as:

     Increasing the awareness of, and the accountability 
            for, payment error. For example, some states set error rate 
            targets for their local offices and hold staff accountable 
            for payment accuracy.

     Analyzing quality control data to identify causes of 
            common payment errors and developing corrective actions.

     Making automated system changes to prompt workers to 
            obtain complete documentation from clients.

     Developing specialized change units that focus on 
            acting upon reported case changes.

     Verifying the accuracy of benefit payments calculated 
            by state SNAP workers through supervisory and other types 
            of case file reviews.

    Despite this progress, the amount of SNAP benefits paid in error is 
substantial, totaling about $2.2 billion in 2009. This necessitates 
continued top-level attention from USDA management and continued 
Federal and state commitment to determining the causes of improper 
payments and taking corrective actions to reduce them.
Estimates Suggest Trafficking Has Declined, but FNS Could Further 
        Enhance Program Integrity
FNS Estimates Suggest That the Rate of SNAP Trafficking Has Declined
    The national rate of SNAP trafficking declined from about 3.8 cents 
per dollar of benefits redeemed in 1993 to about 1.0 cents per dollar 
during the years 2002 to 2005, as shown in Table 1. However, even at 
that lower rate, FNS estimates that about $241 million in SNAP benefits 
were trafficked annually in those years. FNS has not completed an 
updated estimate of trafficking since 2005.

  Table 1: FNS Estimates Suggest That the Trafficking Rate Has Declined
                           Millions of dollars
------------------------------------------------------------------------
                  Estimated                          Estimated amount of
 Calendar year   trafficking  SNAP benefits issued   benefits trafficked
    period          rate             annually             annually
                 percentage
--------------------------------------------------------------------------------1993------------3.8%-----------$21,100------------------$812----
   1996-1998             3.5          a 19,627                   657
   1999-2002             2.5          a 16,139                   393
   2002-2005             1.0          a 23,213                   241
------------------------------------------------------------------------
Source: FNS studies and GAO calculation.
a FNS reported that it annualized redemption data over the period of the
  study but did not provide the annualized figures. We calculated the 3
  and 4 year average of benefits redeemed for comparative purposes.
Note: The data from 2002-2005 are the most recent available.

    Overall, we found that the estimated rate of trafficking at small 
stores was much higher than the estimated rate for supermarkets and 
large groceries, which redeem most SNAP benefits. The rate of 
trafficking in small stores was an estimated 7.6 cents per dollar and 
an estimated 0.2 cents per dollar in large stores in 2005.
FNS Has Used EBT Data to Improve Retailer Monitoring
    With the implementation of EBT, FNS has supplemented its 
traditional undercover investigations by the Retailer Investigations 
Branch with cases developed by analyzing EBT transaction data. The 
nationwide implementation of EBT, completed in 2004, has given FNS 
powerful new tools to supplement its traditional undercover 
investigations of retailers suspected of trafficking SNAP benefits. FNS 
traditionally sent its investigators into stores numerous times over a 
period of months to attempt to traffic benefits. However, in 1996 
Congress gave FNS the authority to charge retailers with trafficking in 
cases using evidence obtained through an EBT transaction report,\13\ 
called ``paper cases.'' A major advantage of paper cases is that they 
can be prepared relatively quickly and without multiple store visits.
---------------------------------------------------------------------------
    \13\ Pub. L. No. 104-193,  841 (1996).
---------------------------------------------------------------------------
    These EBT cases now account for more than half of the permanent 
disqualifications by FNS. Although the number of trafficking 
disqualifications based on undercover investigations has declined, 
these investigations continue to play a key role in combating 
trafficking. However, as FNS's ability to detect trafficking has 
improved, the number of suspected traffickers investigated by other 
Federal entities, such as the USDA Inspector General and the U.S. 
Secret Service, declined, according to data available at the time of 
our review. These entities have focused more on a smaller number of 
high-impact investigations. As a result, retailers who traffic are less 
likely to face criminal penalties or prosecution.\14\
---------------------------------------------------------------------------
    \14\ On top of civil penalties, retailers who traffic may be 
permanently disqualified from participating in the program. A civil 
penalty may be imposed in lieu of permanent disqualification, however, 
in certain circumstances in which the store owner was not aware of and 
was not involved in the trafficking. In addition, individuals who are 
determined to have intentionally committed an act in violation of the 
SNAP statutes (such as by trafficking) lose eligibility to participate 
in the program for a specified period of time, depending on the 
circumstances. There are also potential criminal penalties (including 
fines and possible imprisonment) for knowingly trafficking.
---------------------------------------------------------------------------
FNS Has Taken Action to Improve Retailer Monitoring and Increase 
        Trafficking Penalties
    In response to our prior recommendation that FNS improves analysis 
and monitoring, FNS has implemented new technology to improve its 
ability to detect trafficking and disqualify retailers who traffic, 
which has contributed to more sophisticated analyses of SNAP 
transactions and categorization of stores based on risk. Specifically, 
FNS implemented a revised store classification system to systematically 
compare similar stores in order to better identify fraudulent 
transaction activity for investigation. FNS also increased the amount 
of data available to review and changed its monitoring of transaction 
data from reviewing monthly data to reviewing these data on a daily 
basis. FNS also implemented a new tool that assesses each retailer's 
risk of trafficking. FNS reports that these changes have assisted with 
early monitoring and identification of violating stores and allocation 
of its monitoring resources.
    Consistent with our recommendation that FNS develop a strategy to 
increase penalties for trafficking, FNS received new authority to 
impose increased financial penalties for trafficking. The Food, 
Conservation, and Energy Act of 2008 expanded FNS authority to assess 
civil money penalties in addition to or in lieu of 
disqualification.\15\ It also provided authority for FNS, in 
consultation with the Office of the Inspector General, to withhold 
funds from traffickers during the administrative process, if such 
trafficking is considered a flagrant violation. Regulations to 
implement this provision are being developed and FNS expects the 
proposed rule to be published in July 2012. According to FNS, the rule 
that will address addition of monetary sanctions to disqualification is 
targeted for publication in September 2011. Until the policy is 
implemented, the impact of this change will not be known.
---------------------------------------------------------------------------
    \15\ Pub. L. No. 110-234,  4132 (2008).
---------------------------------------------------------------------------
Despite Progress, Vulnerabilities Still Exist
    Despite the progress FNS has made in combating retailer 
trafficking, the SNAP program remains vulnerable.

   Limited inspection of stores. FNS authorizes some stores 
        with limited food supplies so that low-income participants in 
        areas with few supermarkets have access to food, but may not 
        inspect these stores again for 5 years unless there is some 
        indication of a problem.

   Varied state efforts. Some states actively pursue and 
        disqualify recipients who traffic their benefits while inaction 
        by other states allow recipients suspected of trafficking to 
        continue the practice. We recommended in our October 2006 
        report that FNS promote state efforts to pursue recipients 
        suspected of trafficking by revisiting the incentive structure 
        to incorporate additional provisions to encourage states to 
        investigate and take action against recipients who traffic. We 
        also recommended that FNS ensure that field offices report to 
        states those recipients who are suspected of trafficking with 
        disqualified retailers. However, FNS officials told us they 
        have taken few recent steps to increase state efforts to pursue 
        recipients suspected of trafficking, in part because of state 
        resource constraints, but will continue to examine the impact 
        of financial incentives in preparation for the expected 
        upcoming program reauthorization.
States Can Provide Automatic SNAP Eligibility to Individuals Authorized 
        to Receive TANF Services
Many States Confer Categorical Eligibility Using No Asset Limit and 
        Income Limits Above Regular SNAP Rules
    States that confer TANF non-cash categorical eligibility use a 
variety of TANF services to qualify participants for SNAP benefits. 
According to FNS, as of June 2010, 36 states are using broad-based 
policies that could make most, if not all, TANF non-cash households 
categorically eligible for SNAP because the households receive TANF/MOE 
funded benefits, such as brochures or information referral services. 
This is an increase from the 29 states that conferred this type of 
categorical eligibility at the time of our 2007 report. Other states 
have more narrow policies in place that could make a smaller number of 
households categorically eligible for SNAP because they receive a TANF/
MOE funded benefit such as child care or counseling.
    These categorically eligible households do not need to meet SNAP 
eligibility requirements such as the SNAP asset or gross income test 
because their general need has been established by the TANF program. 
For example, in 35 of the states that confer categorical eligibility 
for all TANF services, there is no limit on the amount of assets a 
household may have to be determined eligible, according to a FNS 
report. In addition, the gross income limit of the TANF program set by 
these states ranged from 130 to 200 percent of the Federal poverty 
level, according to a FNS report. As a result, households with 
substantial assets but low income could be deemed eligible for SNAP 
under these policies.
    Even though households may be deemed categorically eligible for 
SNAP, the amount of assistance households are eligible for is 
determined based on each household's income and other circumstances 
using the same process used for other SNAP recipients. Some families 
determined categorically eligible for the program could be found 
eligible for the minimum benefit. However, FNS noted in a recent report 
that families with incomes above 130 percent of the Federal poverty 
level and high expenses (shelter costs, dependent care expenses, and 
medical costs) could receive a significant SNAP benefit.
    Households can be categorically eligible for SNAP even if they 
receive no TANF funded service other than a toll-free telephone number 
or informational brochure. For example, one state reported to FNS that 
it included information about a pregnancy prevention hotline on the 
SNAP application to confer categorical eligibility. Other states 
reported providing households brochures with information about 
available services, such as domestic violence assistance or marriage 
classes, to confer categorical eligibility. Receipt of the information 
on the SNAP applications or on the brochures can qualify the household 
to be categorically eligible for SNAP benefits. However, the amount of 
the SNAP benefit is still determined in accordance with SNAP rules by 
the eligibility workers using information on income and expenses.
    In 2007, we reported that six states may not have been following 
program regulations because they were not using certain TANF noncash 
services to confer SNAP categorical eligibility.\16\ These services 
included child care, transportation, and substance abuse services, 
which may have been funded by more than 50 percent Federal TANF or 
state MOE funds. In addition, some states reported that they did not 
specifically determine whether an individual needs a specific TANF 
noncash service before conferring SNAP eligibility. We recommended that 
FNS provide guidance and technical assistance to states clarifying 
which TANF noncash services states must use to confer categorical 
eligibility for SNAP and monitor states' compliance with categorical 
eligibility requirements. In September 2009, USDA released a memorandum 
encouraging states to continue promoting noncash categorical 
eligibility. FNS reported that four of the six states currently are 
using the required noncash services to confer categorical eligibility.
---------------------------------------------------------------------------
    \16\ GAO-07-465 (http://www.gao.gov/new.items/d07465.pdf).
---------------------------------------------------------------------------
FNS and States Cite Several Advantages to Use of Expanded Categorical 
        Eligibility
    FNS has encouraged states to adopt categorical eligibility to 
improve program access and simplify the administration of SNAP. 
According to FNS officials, increased use of categorical eligibility by 
states has reduced administrative burdens and increased access to SNAP 
benefits to households who would not otherwise be eligible for the 
program due to SNAP income or asset limits. Adoption of this policy 
option can provide needed assistance to low-income families, simplify 
state policies, reduce the amount of time states must devote to 
verifying assets, and reduce the potential for errors, according to 
FNS. FNS recently also encouraged states that have implemented a broad-
based categorical eligibility program with an asset limit to exclude 
refundable tax credits from consideration as assets.
    In our previous work, we found that many of the states' SNAP 
officials surveyed believed eliminating TANF non-cash categorical 
eligibility would decrease participation in SNAP.\17\ Many of the 
states' SNAP officials we surveyed also believed that eliminating TANF 
non-cash categorical eligibility would increase the SNAP administrative 
workload and state administrative costs. Some common reasons state 
officials indicated for the increase in SNAP administrative workload 
were:
---------------------------------------------------------------------------
    \17\ Our analysis of data from states in 2006 showed that a vast 
majority of TANF noncash households may remain eligible for SNAP 
benefits without noncash categorical eligibility because their income 
and/or asset levels are within the regular SNAP limits. Other 
households may lose eligibility for SNAP because their income and/or 
asset levels are too high. GAO-07-465 (http://www.gao.gov/new.items/
d07465.pdf).

---------------------------------------------------------------------------
   increase in verifications needed,

   increase in error rates as required verifications increase,

   changes to data systems,

   increase in time to process applications, and

   changes to policies and related materials.

    While FNS and the states believe categorical eligibility has 
improved program access and payment accuracy, the extent of its impact 
on access and program integrity is unclear.
Concluding Observations
    Over the past few years, the size of the Supplemental Nutrition 
Assistance Program has grown substantially, both in terms of the number 
of people served and the amount paid out in benefits, at a time when 
the slow pace of the economic recovery has left many families facing 
extended hardship. At the same time, due largely to the efforts of FNS 
working with the states, payment errors have declined and mechanisms 
for detecting and reducing trafficking have improved. However, little 
is known about the extent to which increased use of categorical 
eligibility has affected the integrity of the program. Further, 
improper payments in the program continue to exceed $2 billion and 
retailer fraud remains a serious concern, highlighting the importance 
of continued vigilance in ensuring that improvements in program access 
are appropriately balanced with efforts to maintain program integrity. 
As current fiscal stress and looming deficits continue to limit the 
amount of assistance available to needy families, it is more important 
than ever that scarce Federal resources are targeted to those who are 
most in need and that the Federal Government ensure that every Federal 
dollar is spent as intended.
    Mr. Chairman, this concludes my prepared statement. I will be happy 
to answer any questions you or Members of the Subcommittee may have.
Contact and Acknowledgements
    For future contacts regarding this testimony, please contact Kay 
Brown at [redacted]. Key contributors to this testimony were Kathy 
Larin, Cathy Roark, and Alex Galuten.
Related GAO Products
    Domestic Food Assistance: Complex System Benefits Millions, but 
Additional Efforts Could Address Potential Inefficiency and Overlap 
among Smaller Programs. GAO-10-346 (http://www.gao.gov/new.items/
d10346.pdf). Washington, D.C.: April 15, 2010.
    Improper Payments: Progress Made but Challenges Remain in 
Estimating and Reducing Improper Payments. GAO-09-628T (http://
www.gao.gov/new.items/d09628t.pdf). Washington, D.C.: April 22, 2009.
    Food Stamp Program: FNS Could Improve Guidance and Monitoring to 
Help Ensure Appropriate Use of Noncash Categorical Eligibility. GAO-07-
465 (http://www.gao.gov/new.items/d07465.pdf). Washington, D.C.: March 
28, 2007.
    Food Stamp Program: Payment Errors and Trafficking Have Declined 
despite Increased Program Participation. GAO-07-422T (http://
www.gao.gov/new.items/d07422t.pdf). Washington, D.C.: January 31, 2007.
    Food Stamp Trafficking: FNS Could Enhance Program Integrity by 
Better Targeting Stores Likely to Traffic and Increasing Penalties. 
GAO-07-53 (http://www.gao.gov/new.items/d0753.pdf). Washington, D.C.: 
October 13, 2006.
    Improper Payments: Federal and State Coordination Needed to Report 
National Improper Payment Estimates on Federal Programs. GAO-06-347 
(http://www.gao.gov/new.items/d06347.pdf). Washington, D.C.: April 14, 
2006.
    Food Stamp Program: States Have Made Progress Reducing Payment 
Errors, and Further Challenges Remain. GAO-05-245 (http://www.gao.gov/
new.items/d05245.pdf). Washington, D.C.: May 5, 2005.
    Food Stamp Program: Farm Bill Options Ease Administrative Burden, 
but Opportunities Exist to Streamline Participant Reporting Rules among 
Programs. GAO-04-916 (http://www.gao.gov/new.items/d04916.pdf). 
Washington, D.C.: September 16, 2004.
    Food Stamp Program: States Have Made Progress Reducing Payment 
Errors, and Further Challenges Remain. GAO-05-245 (http://www.gao.gov/
new.items/d05245.pdf). Washington, D.C.: May 5, 2005.

    Mr. Kagen. Thank you very much.
    Next, we have the Honorable Phyllis Fong, Inspector 
General, the Office of Inspector General in the U.S. Department 
of Agriculture.
    Thank you for joining us.

        STATEMENT OF THE HON. PHYLLIS K. FONG, INSPECTOR
           GENERAL, OFFICE OF INSPECTOR GENERAL, U.S.
          DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C.

    Ms. Fong. Thank you, Mr. Chairman, and Members of the 
Subcommittee. We appreciate the opportunity to testify today 
about the OIG's oversight of the SNAP program.
    As you may know, IG investigators conduct criminal 
investigations into alleged fraud perpetrated against the 
program, while IG auditors look at reviews of SNAP that are 
intended to improve FNS overall management controls of the 
program. So let me start with a brief summary of our 
investigative work overseeing SNAP.
    As long as USDA has been providing food assistance, there 
have been individuals who have sought to exploit the program 
for their own gain. Because of the importance of ensuring the 
integrity of the program, we devote about 35 percent of our 
investigative resources to SNAP-related criminal 
investigations. Our main focus is on fraud that is committed by 
retailers; although, when we find that individual recipients 
have violated the program requirements, we do work with state 
and local prosecutors to address those violations.
    Over the past 2\1/2\ years, our investigations of the SNAP 
program have led to 472 convictions and monetary results of 
over $77 million. Some of the most significant kinds of SNAP-
related misconduct that we look at involve trafficking and 
abuse of point-of-sale equipment. In addition, we have seen 
cases that involve funneling stolen money outside the United 
States. We have seen cases involving employee abuse of SNAP, 
cases involving retailers who are involved in multiple types of 
criminal activity, and we have seen recipient fraud.
    Let me spend a moment on the trafficking and abuse of 
point-of-sale equipment.
    One of the most common abuses that we investigate involves 
the trafficking of SNAP benefits, which is the illegal exchange 
of food assistance benefits for cash. In this kind of scheme, 
retailers will pay recipients for their SNAP benefits. For 
instance, they may pay recipients $50 in cash and then charge 
the EBT card for $100 in sales. Recipients are then free to 
spend the cash any way they like, while retailers profit 
because they are reimbursed by USDA for these so-called sales. 
This kind of illegal exchange harms the program because it 
prevents FNS from accomplishing its main objective of feeding 
needy families.
    Our investigations of these schemes have led to multiple 
positive outcomes. There was a recent case in Florida involving 
some store owners who illegally trafficked SNAP benefits for 
cash. And we recently received a conviction there of 74 months' 
imprisonment for the two store owners, and an order of 
restitution of $3.2 million to be repaid to USDA.
    With respect to abuse of point-of-sale equipment, many 
times we find that store owners and others who are not 
authorized retailers may work in conspiracy, or in conjunction, 
with authorized retailers to defraud the program.
    We had a recent case in Chicago, where a store owner 
conspired with five other retailers, which involved relocating 
the point-of-sale equipment from an authorized store to an 
unauthorized location and swiping multiple transactions. As a 
result of our investigation, the store owners were sentenced to 
serve over 83 months in prison and pay $6.3 million to USDA in 
restitution.
    I want to note here that OIG is very appreciative of the 
close collaboration that we receive from our FNS colleagues, 
GAO, state and local prosecutors, and our colleagues at the 
Department of Justice in bringing these cases to fruition.
    In addition, as you may know, we conduct audits of the SNAP 
program. We have done audits in the last few years of the 
electronic systems that USDA depends on to run the program, 
namely the ALERT and the STARS systems. We are also engaged--
under the Improper Payments Act, we are required to look at 
FNS's plans to address improper payments. And we will be 
reporting to the Secretary and the Congress on those efforts 
within the next 6 months.
    Under the Recovery Act, because SNAP receives substantial 
increases in funds for that program, we are required, as the IG 
office, to oversee and look at the delivery of those benefits. 
We have a significant number of audits ongoing in that program, 
and we have produced four reports recently. We expect to 
produce numerous more reports in the next few years.
    So that concludes my remarks, and I welcome any questions.
    [The prepared statement of Ms. Fong follows:]

 Prepared Statement of Hon. Phyllis K. Fong, Inspector General, Office 
 of Inspector General, U.S. Department of Agriculture, Washington, D.C.
    Good morning, Mr. Chairman, Ranking Member Fortenberry, and Members 
of the Subcommittee. Thank you for the opportunity to testify about the 
Office of Inspector General's (OIG) work on the Supplemental Nutrition 
Assistance Program (SNAP). My testimony today will provide background 
concerning SNAP, and then summarize a number of our most significant 
audits and investigations.
Overview of the Supplemental Nutrition Assistance Program
    SNAP is USDA's largest program, both in terms of the dollars spent 
and the number of recipients who participate in the program. In Fiscal 
Year (FY) 2009, recipients redeemed close to $50 billion in benefits--
up 45 percent from 2008. The latest available data show that in April 
2010 more than 40 million people received $5.4 billion in SNAP 
benefits. SNAP is also an important part of the food safety net for 
Americans, especially during times of economic hardship. During the 
recent recession, SNAP participation increased by about 20,000 persons 
daily--the program helped feed one in eight Americans and one in four 
children.
    In order to receive SNAP benefits, potential recipients may visit 
their local SNAP office to apply, or they may apply online in 25 
states. As part of their application, they submit information regarding 
their income and resources \1\ and, if they are determined to be 
eligible, they can begin receiving food assistance. SNAP recipients can 
receive up to $200 monthly, though the average benefit a recipient 
receives is about $125 per month.\2\ Once new recipients are enrolled 
in the program, they can exchange their benefits at thousands of FNS-
authorized retailers for breads and cereals; fruits and vegetables; 
meats, fish, and poultry; and dairy products. They cannot use SNAP 
benefits to buy alcohol, tobacco, or non-food merchandise such as 
household items.
---------------------------------------------------------------------------
    \1\ Including cash in a bank account
    \2\ FNS assumes that a household should be spending 30 percent of 
its income on food, so it therefore adjusts a recipient's maximum 
benefit based on his or her income. Our calculations are based on a one 
person household.
---------------------------------------------------------------------------
    To be eligible to become an authorized retailer in SNAP, a retailer 
must sell a variety of qualifying staple food items or 50 percent of 
its sales must be in a staple group such as meat or bakery items. After 
retailers apply to participate in SNAP, FNS then visits their store to 
determine if they meet the program's requirements. About 85 percent of 
all SNAP benefits are used at supermarkets and big-box stores, though 
they make up only 20 percent of all authorized retailers. Many smaller 
stores also accept SNAP benefits, and FNS allows recipients to use 
their benefits at non-traditional authorized retailers, such as gas 
stations, convenience stores, and farmers' markets.
    FNS administers SNAP in partnership with the states. While FNS 
develops overall program policies such as eligibility thresholds for 
recipients and reviews how programs are being run in individual states, 
the states themselves administer their own programs by determining if 
households meet SNAP eligibility requirements and by calculating and 
issuing monthly benefits to recipients. Not only does the Federal 
Government pay the full cost of the benefits, but it also shares with 
the states the administrative costs of the program. FNS officials see 
this approach as providing flexibility for administering SNAP--they 
acknowledge that each state is different and has unique needs that the 
states themselves best understand. OIG agrees that FNS' decentralized 
approach is flexible, but we note that with decentralization come 
potential control problems. Even preventing a recipient from receiving 
benefits from two states can be difficult when FNS does not gather all 
recipients' information from each state.
    SNAP is still known as the ``food stamp program'' to many in the 
public, although it was officially renamed in 2008. FNS has also moved 
away from using paper food coupons to providing benefits through 
Electronic Benefits Transfer (EBT) systems. Under EBT systems, 
recipients receive a plastic card, similar to a bank card, which they 
may use at FNS-approved retailers to redeem their benefits. In addition 
to eliminating cumbersome paper food coupons, EBT creates an electronic 
record that makes it easier to identify trends that may indicate the 
potential misuse of SNAP benefits. As of July 2004, all 50 states, the 
District of Columbia, Puerto Rico, the Virgin Islands, and Guam 
operated state-wide, city-wide, and territory-wide EBT systems to issue 
food assistance benefits.
OIG Oversight of SNAP
    In providing oversight of the SNAP program, OIG employs a two-
pronged approach involving audits and criminal investigations. OIG 
Investigations staff conducts criminal investigations into alleged 
fraud perpetrated against the program, while OIG Audit staff conducts 
reviews of SNAP intended to improve FNS' overall management controls 
for the program.
OIG Investigations
    As long as USDA has been providing food assistance, there have been 
individuals who have sought to exploit the program for their own gain. 
In fact, the first retailer was caught abusing food stamps in October 
1939, just a few months after the program started. As the Food Stamp 
Program (and later SNAP) evolved over the years, there have been high-
profile cases of fraud against FNS. Concerns about food stamp abuse 
prompted movements to cut or reform the program in the 1980s and 1990s.
    Given the importance of ensuring the integrity of SNAP, OIG devotes 
about 35 percent of its investigative resources to SNAP-related 
criminal investigations--this is our largest allocation of 
investigative resources. Our main focus is on fraud committed by 
retailers, primarily because FNS is responsible for directly 
reimbursing retailers while states are responsible for ensuring that 
individual recipients are eligible to receive benefits and that they 
use those benefits appropriately. Our investigations of retailers, 
however, often disclose individual recipients who have violated SNAP 
program requirements, and we work with the states and local prosecutors 
to respond to these violations. With few exceptions, our investigations 
yield tangible and direct benefits to the government, including 
criminal prosecution, significant fines and penalties, restitution, and 
asset forfeiture. From FY 2008 to the first half FY 2010, as a result 
of SNAP investigations, OIG obtained 472 convictions and monetary 
results totaling $77.1 million. Detailed below are examples of the most 
significant types of SNAP-related misconduct that we investigate.
    Trafficking in SNAP benefits
          One of the most common abuses OIG investigates is the 
        trafficking of benefits, which is essentially the illegal 
        exchange of food assistance benefits for cash. In this scheme, 
        retailers will pay recipients for their SNAP benefits; for 
        instance, they might exchange $50 in cash for $100 in benefits. 
        Some recipients prefer to sell their benefits in this way 
        because they are then free to spend the cash however they like, 
        while retailers profit after they have been reimbursed by USDA. 
        This illegal exchange harms SNAP because it prevents FNS from 
        accomplishing its main objective of feeding needy families.
          Recent investigations of these sorts of schemes have resulted 
        in significant positive outcomes for USDA and the Federal 
        Government. In early 2008, the owner of a convenience store in 
        St. Paul, Minnesota, was sentenced in Federal court to serve 2 
        years in prison, and was ordered to pay more than $750,000 in 
        joint restitution \3\ for exchanging almost $850,000 in SNAP 
        benefits for cash--his employees also faced prison time and 
        significant penalties.\4\ Similarly, an OIG investigation in 
        Miami, Florida, revealed that two store owners illegally 
        exchanged SNAP benefits for cash at an estimated loss to USDA 
        of $3.3 million. In December 2008, a Federal court in the 
        Southern District of Florida sentenced the store owners to a 
        total of 74 months of imprisonment and ordered them to pay $3.2 
        million in restitution.\5\
---------------------------------------------------------------------------
    \3\ This penalty was shared with the store's manager.
    \4\ KC-2748-0817.
    \5\ AT-2748-1952.
---------------------------------------------------------------------------
    Abuse of EBT Point of Sale Equipment
          OIG has found that EBT systems provide an important oversight 
        tool for our investigators and auditors; however, the point of 
        sale devices used to electronically redeem benefits can also be 
        abused by criminals intent on illegally profiting from SNAP. As 
        part of our ongoing efforts to combat large-scale SNAP benefit 
        trafficking in Chicago, Illinois, we found that a store owner 
        and clerk--who were not authorized by FNS to participate in the 
        program--conspired with at least five other retailers to 
        defraud the program of approximately $6.3 million. This scheme 
        involved relocating point of sale devices from authorized 
        stores to an unauthorized store where SNAP recipients would 
        sell their benefits. The subjects of our investigation were 
        ultimately indicted on wire fraud and criminal forfeiture 
        charges, and were sentenced to serve a total of 83 months of 
        imprisonment and pay $6.3 million in restitution.\6\
---------------------------------------------------------------------------
    \6\ CH-2747-0784.
---------------------------------------------------------------------------
    Funneling Stolen SNAP Funds Outside the United States
          Retailers who abuse SNAP sometimes funnel their illegal 
        proceeds out of the United States. A joint investigation 
        between OIG and the FBI identified a small Somali-owned store 
        in Ypsilanti, Michigan, that was trafficking in SNAP and Women, 
        Infants, and Children (WIC) benefits, and then transferring 
        money overseas, generally to persons located in the Middle East 
        and the Horn of Africa. The store owners and employees pled 
        guilty to over $750,000 in SNAP and WIC fraud. In May 2010, 
        they were sentenced to spend a total of 48 months in prison and 
        pay almost $2 million in restitution.\7\
---------------------------------------------------------------------------
    \7\ CH-2748-1450.
---------------------------------------------------------------------------
    Employee Abuse of SNAP
          On occasion, state employees take advantage of their 
        positions and commit fraud against SNAP benefit programs--OIG 
        continues to investigate and seek prosecution of such persons. 
        For example, a caseworker with the Missouri Department of 
        Social Services pled guilty and was sentenced for accepting 
        bribes in exchange for authorizing ineligible persons to 
        receive SNAP and other welfare benefits. This individual was 
        sentenced to serve a year and a day in Federal prison, and was 
        ordered to pay $2,058 in restitution.\8\
---------------------------------------------------------------------------
    \8\ KC-2741-0065.
---------------------------------------------------------------------------
    Retailers Involved in Other Criminal Activities Related to SNAP 
        Trafficking
          Individuals engaged in SNAP benefit fraud often participate 
        in other criminal activities as well. For example, one 
        investigation focused on gang activity, drug activity, fencing 
        operations, and SNAP fraud in Greenville, North Carolina. The 
        investigation resulted in the arrest and indictment of six 
        individuals on Federal conspiracy charges for the interstate 
        transportation of stolen property and theft of government 
        program funds. Four of these individuals pled guilty and were 
        sentenced to prison terms of between 6 and 20 months.\9\ Also 
        as a result of our investigation, the three stores used to 
        facilitate this illegal activity were taken over temporarily by 
        the city and eventually closed permanently.\10\
---------------------------------------------------------------------------
    \9\ Legal action is pending against the fifth, and charges against 
the sixth were dropped.
    \10\ AT-2748-2015 and AT-2748-2016.
---------------------------------------------------------------------------
    Crimes Committed by SNAP Recipients
          As I have mentioned, the preponderance of OIG's investigative 
        work does not focus on recipients, although we occasionally 
        investigate recipients who illegally exchange their benefits 
        for cash. By sharing this information with the relevant state 
        law enforcement agencies, we help states pursue prosecution or 
        disqualify recipients from the program. We also sometimes 
        investigate recipients who provide false information to receive 
        benefits. As an example of this type of case, OIG found that a 
        man living in Arlington, Virginia, failed to accurately report 
        his income and therefore received thousands of dollars in SNAP, 
        Medicaid, and other Federal assistance. He was sentenced to 60 
        days in prison and ordered to pay $97,865 in restitution to 
        USDA, the U.S. Department of Housing and Urban Development, and 
        the U.S. Department of Health and Human Services.\11\
---------------------------------------------------------------------------
    \11\ HY-2749-0378.
---------------------------------------------------------------------------
          In a similar vein, OIG continues to run Operation Talon, a 
        law enforcement initiative made possible by the Personal 
        Responsibility and Work Opportunity Reconciliation Act of 
        1996.\12\ This Act includes a provision that individuals who 
        are fleeing to avoid prosecution, custody, or confinement after 
        conviction are ineligible to receive Federal program benefits, 
        including SNAP benefits. The Act authorizes state social 
        service agencies to provide addresses of SNAP recipients to any 
        Federal, state or local law enforcement officer for official 
        purposes. Operation Talon matches law enforcement agencies' 
        outstanding felony fugitive files with the social service 
        agencies' SNAP records. As a result, law enforcement officers 
        are able to locate and apprehend fugitives who may also be 
        illegally receiving SNAP benefits. As of September 20, 2009, 
        Operation Talon has resulted in 14,645 arrests of fugitive 
        felons wanted for a wide variety of offenses, including murder, 
        arson, assault, burglary, motor vehicle theft, assorted drug 
        charges, robbery, fraud, forgery, driving under the influence, 
        extortion and blackmail, sex offenses, domestic violence, 
        larceny, stolen property, and weapons violations. In the second 
        half of FY 2009, OIG agents conducted Talon operations in five 
        states, making a total of 264 arrests.
---------------------------------------------------------------------------
    \12\ Public Law 104-193, August 22, 1996.

    Criminal investigations of the sort described are OIG's ``bread and 
butter'' when it comes to overseeing SNAP. Through our collaborative 
efforts, we work cohesively to identify and resolve potential 
vulnerabilities in the processes that allow retailers to participate in 
the SNAP program. Such collaboration is often very fruitful, as when we 
worked with FNS and the Department of Justice to include language in 
the 2008 Farm Bill that would enable FNS to suspend, during an ongoing 
investigation, retailers involved in especially flagrant program abuse.
    As we look to identify potential future problems, OIG notes that 
FNS has recently changed its process for certifying retailers to 
participate in SNAP, and now allows them to complete this certification 
process online. In the past, store owners who wished to participate in 
SNAP were required to attend a training program which outlined program 
requirements and retailer responsibilities. Direct, face-to-face 
attendance also ensured that FNS verified the owners' identity and 
required the owners to certify that they understood the program's 
requirements. Since FNS now conducts these training programs online, 
store owners do not certify in person that they understand how the 
program is designed to work. This development concerns OIG because some 
prosecutors have indicated reluctance to charge retailers with fraud 
when the retailers did not certify their understanding of program 
requirements face-to-face.
    In another effort to prevent future problems, we are currently 
monitoring non-traditional retailers--such as gas stations, convenience 
stores, and farmers' markets--and their involvement in SNAP to help 
reduce the potential for illegal benefit trafficking.
OIG Audits
    OIG performs audits of FNS' management controls that are designed 
to improve how the agency delivers benefits to recipients and oversees 
authorized retailers. Prior to the American Recovery and Reinvestment 
Act of 2009 (Recovery Act),\13\ OIG had completed audits related to 
improving two of the automated systems FNS relies on to administer 
SNAP. One review found that the watch list FNS uses to monitor 
retailers could be improved to help in the detection of fraud by adding 
information such as the type of store.\14\ Another review found that 
FNS needed to strengthen the information system it uses to store data 
on retailers who redeem SNAP benefits, including improving physical 
security and updating its contingency plan for its computer 
facility.\15\ For both audits, OIG and FNS agreed on the necessary 
actions to correct these problems.
---------------------------------------------------------------------------
    \13\ Public Law 111-5, February 17, 2009.
    \14\ 27099-32-SF, ``Food and Nutrition Service Food Stamp Program--
ALERT Watch List,'' July 2006.
    \15\ 27501-02-HY, ``Application Control Review of the Food and 
Nutrition Service's Store Tracking and Redemption System II,'' March 
2008.
---------------------------------------------------------------------------
    OIG has also been actively auditing FNS and state implementation of 
EBT systems. Most states have adequately implemented EBT, but one audit 
found that Colorado did not use available management reports to monitor 
its program for improper activity, and did not establish fraud 
detection units to assist in prosecuting benefit trafficking. FNS and 
OIG reached agreement on the actions necessary to correct these 
problems.\16\
---------------------------------------------------------------------------
    \16\ 27099-68-HY, ``Electronic Benefits Transfer System, State of 
Colorado,'' June 2008.
---------------------------------------------------------------------------
    When Congress passed the Recovery Act, it provided for a 13.6 
percent increase in the maximum Thrifty Food Plan amount provided to 
SNAP recipients, which resulted in participating households of four 
receiving an increase of $80 in benefits monthly. The Recovery Act also 
required OIG to oversee how FNS uses the additional funds. The overall 
objectives of OIG's audit oversight of the Recovery Act monies have 
been to ensure that: (1) USDA Recovery Act-related programs are timely 
and effectively implemented; (2) proper internal control procedures are 
established; (3) program participants meet eligibility guidelines; (4) 
participants properly comply with program requirements; (5) agencies 
establish effective compliance operations; and (6) performance measures 
are properly established and supported to ascertain whether program 
objectives have been achieved.
    To meet these objectives, OIG has initiated four audits in the SNAP 
area. We have also established a reporting process for expeditiously 
notifying agency managers of problems identified in our audits. The 
products of this expedited reporting process are known as FAST reports.
    One of our Recovery Act audits reviewed the Thrifty Food Plan 
(TFP), which FNS uses to establish the maximum SNAP benefits families 
can receive. Essentially, TFP incorporates food consumption data, food 
price data, and dietary guidelines to establish ``market baskets''--a 
selection of foods that reflects current dietary recommendations. Our 
review of this plan found no reportable concerns with the data inputs, 
constraints, and modeling used in developing TFP. We also found that 
the Recovery Act legislative increase in SNAP benefits was not related 
to an update or an adjustment of TFP.\17\
---------------------------------------------------------------------------
    \17\ 27703-01-KC, ``SNAP Benefits and the Thrifty Food Plan,'' 
December 2009.
---------------------------------------------------------------------------
    Also as part of our Recovery Act audit work, OIG evaluated how well 
FNS is monitoring state fraud detection units to ensure that they can 
effectively prevent fraud, waste, and abuse. We found that neither 
state we visited--New Jersey and Florida--had developed a fully 
effective fraud detection unit, and that FNS had not conducted periodic 
reviews of the states' fraud detection efforts to verify their 
effectiveness. According to FNS, such reviews were not necessary 
because information collected by states for the annual State Activity 
Report was sufficient for agency officials to ensure that states were 
devoting sufficient resources to their fraud detection efforts. Since 
FNS' assessment of state fraud detection activities could be limited by 
the accuracy of the state-reported information, OIG recommended in a 
FAST report that FNS identify and implement a process for periodically 
and independently assessing the states' fraud detection units. FNS and 
OIG are working to reach agreement on this recommendation.\18\
---------------------------------------------------------------------------
    \18\ 27703-02-HY (1), ``State Fraud Detection Efforts for the 
Supplemental Nutrition Assistance Program,'' July 2010.
---------------------------------------------------------------------------
    Another audit found that FNS was not being fully transparent 
concerning the costs associated with the Recovery Act and SNAP. The 
agency did not timely report on its Recovery Act website that the 
estimated cost of the additional Recovery SNAP benefits would increase 
from $19.8 billion to $48 billion--FNS did not update its website until 
January 2010, even though the revised figure was determined in June 
2009. In our FAST report, we recommended that USDA work with the Office 
of Management and Budget and the Recovery Accountability and 
Transparency Board to establish a process for consistently and timely 
reporting changes in budget estimates for all USDA programs that 
received Recovery Act funding. USDA officials generally agreed with 
this recommendation.\19\
---------------------------------------------------------------------------
    \19\ 27703-02-AT (1), ``Recovery Act Impacts on the Supplemental 
Nutritional Assistance Program,'' March 2010.
---------------------------------------------------------------------------
    OIG is also initiating a review of FNS' compliance with the 
Improper Payments Improvement Act of 2002.\20\ Like other executive 
agencies, FNS is required to identify any of its programs that are 
susceptible to improper payments, estimate the annual amount of 
improper payments, and submit those estimates to Congress. The Office 
of Management and Budget has determined that several of FNS' largest 
programs--including SNAP and the National School Lunch Program--are at 
high risk of improper payments. Executive Order 13520 requires 
Inspectors General to assess the level of risk associated with such 
programs, determine the extent of oversight warranted, and provide the 
agency head a report with recommendations for modifying the agency's 
methodology, improper payment reduction plans, program access, and 
participation plans.\21\
---------------------------------------------------------------------------
    \20\ Public Law 107-300, November 26, 2002.
    \21\ Executive Order No. 13,520, 74 Federal Register 62201, 
November 25, 2009.
---------------------------------------------------------------------------
    In FY 2009, FNS reported improper payments totaling $3.86 billion, 
including $1.7 billion within SNAP, or a five percent improper payment 
rate. To reduce SNAP's rate of improper payment, FNS intends to require 
states that have high improper payment rates to develop a quality 
control corrective action plan addressing their deficiencies. Our 
review will determine if FNS' steps to decrease these improper payments 
are reasonable.
    On July 22, 2010, President Obama signed into law the Improper 
Payments Elimination and Recovery Act.\22\ This legislation focuses 
more attention on improving management controls and recovering 
identified improper payments. It also requires Inspectors General to 
perform an annual compliance review to ensure that agencies are in 
compliance with the Act. We anticipate that our future compliance 
reviews of FNS will assist the agency in its efforts to decrease its 
rate of improper payments.
---------------------------------------------------------------------------
    \22\ Public Law 111-204, July 22, 2010.
---------------------------------------------------------------------------
    This concludes my written statement. I want to again thank the 
Chair and the Subcommittee for the opportunity to testify today. We 
welcome any questions you may have.

    Mr. Kagen. Thank you. That was almost exactly 5 minutes. 
You must have been practicing. Either that or you have been 
doing this too long.
    Our next is Don Winstead, Deputy Secretary, Florida 
Department of Children and Families, on behalf of the American 
Public Human Services Association.
    Thank you for joining us.

 STATEMENT OF DON E. WINSTEAD, Jr., DEPUTY SECRETARY, FLORIDA 
              DEPARTMENT OF CHILDREN AND FAMILIES,
 TALLAHASSEE, FL; ON BEHALF OF AMERICAN PUBLIC HUMAN SERVICES 
                          ASSOCIATION

    Mr. Winstead. Thank you, Mr. Chairman, and Members of the 
Subcommittee. I appreciate the opportunity to testify this 
morning about the SNAP program.
    My name is John Winstead, and I am Deputy Secretary of the 
Department of Children and Families. And we are the state 
agency that administrators SNAP, as well as other programs 
serving low-income and vulnerable children, adults, and 
families.
    As you said, Mr. Chairman, I am appearing this morning on 
behalf of the American Public Human Services Association. My 
written statement includes APHSA's assessment of the current 
status of SNAP and quality control, as well as some of 
Florida's experiences in improving the performance integrity of 
this vitally important program.
    We appreciate the opportunity to make recommendations for 
reauthorization of SNAP that supports sound program integrity, 
administration, and customer service.
    In my written statement, I provide a more detailed 
discussion of recent trends in SNAP, as well as the success 
that states have had in improving payment accuracy, program 
integrity, and program performance in the face of unprecedented 
increases in participation and declines in state resources. I 
have also included a comprehensive set of recommendations from 
the people who administer this program on your behalf, the 
local and state administrators of APHSA. For the sake of time, 
I will summarize my comments with a few key points.
    SNAP has seen unprecedented growth in the number of people 
qualifying for benefits. Nationally, the number of people 
served has increased by over 50 percent in the past 3 years. In 
my state, the number of people has more than doubled, growing 
from 1.2 million people in April 2007, to over 2.7 million 
people last month.
    In spite of the growth of the program, payment accuracy is 
at an all-time high. Nationally, payment errors declined to 
4.36 percent in 2009. And I am proud to tell you that Florida 
had the highest payment accuracy in the nation for each of the 
past 2 years. And, in 2009, our payment error rate was \7/10\ 
of 1 percent.
    The positive changes in the quality control system made in 
the 2002 legislation have worked. Providing incentives for high 
performance and encouraging improvement has been a success, and 
suggests that even greater success could be achieved by 
expanding that approach.
    States take the challenge of improved performance very 
seriously. In my written testimony, I described Florida's 
automated quality management system that has been an important 
part of our success. This is but one example of the innovative 
ways that states are improving program management and program 
results. In our state, we diligently and persistently track 
performance from the individual worker level to statewide. We 
can spot error trends in real-time and quickly take action to 
correct them.
    Increased automation has improved both access and 
integrity. Over 90 percent of SNAP applications in Florida are 
submitted electronically, and we provide 24/7 access to the 
program. We have processed over 298,000 electronic data 
exchanges each month to assure that information is known and 
correctly counted.
    States are learning from one another. Through state 
exchange funds, FNS has encouraged the transfer of best 
practices. We have visited a number of other states to learn 
from them, and over 40 states have visited Florida to see our 
automated systems.
    Policy reforms have worked. States have used the policy 
options and administrative flexibility that you have provided 
to simplify, modernize, and improve the operation and 
administration of the program.
    But much more can be done. Among many steps I could name, a 
more sustained method of supporting state administrative 
investments, such as those supplied last year through the 
Recovery Act and the DOD appropriations bill, must be put in 
place. Speaking more broadly, through providing more options to 
states, we can achieve even greater levels of program access, 
program performance, and public credibility.
    The SNAP quality control program is important to our 
success, but even more critical are the continuing 
simplification of program rules, having better ways to work in 
concert with other public programs, and having a more rational 
mix of financial supports and incentives.
    Mr. Chairman, thank you for the opportunity to share our 
thoughts on these important issues. We at APHSA stand ready to 
work with you and with FNS to continue to improve the nation's 
most important nutrition assistance program.
    [The prepared statement of Mr. Winstead follows:]

 Prepared Statement of Don E. Winstead, Jr., Deputy Secretary, Florida
  Department of Children and Families, Tallahassee, FL; on Behalf of 
               American Public Human Services Association
    Chairman Baca, Ranking Member Fortenberry, and Members of the 
Subcommittee, thank you for the opportunity to testify this morning 
about the Supplemental Nutrition Assistance Program (SNAP), including 
its quality control policies. My name is Don Winstead and I am Deputy 
Secretary of the Florida Department of Children and Families, the state 
agency that administers the Supplemental Nutrition Assistance Program 
as well as other programs serving low-income and vulnerable children, 
adults, and families.
    I am appearing this morning on behalf of the American Public Human 
Services Association (APHSA). My statement includes APHSA's assessment 
of the current state of SNAP and quality control, as well as some of 
Florida's experience in improving the performance and integrity of this 
vitally important program. We appreciate the opportunity to make 
recommendations for the upcoming reauthorization of SNAP that will 
support sound program integrity, administration, and customer service.
    APHSA is an 80 year old nonprofit, bipartisan organization 
representing the nation's state and local public human service 
agencies. As those who administer and implement public human service 
programs, including SNAP, we have an important and highly relevant 
point of view we urge the Subcommittee to consider. APHSA has testified 
about SNAP before Congress on a number of occasions, but we are 
especially concerned about the 2012 reauthorization of this essential 
nutrition assistance program. We strongly believe SNAP is one of the 
most important means of supporting the well-being of low-income 
individuals and families, and that it must remain a viable way to help 
those in need. To continue this good record, SNAP law must support 
sensible and cost-effective administration and review of the program.
    SNAP (the new name for the Food Stamp Program) is supervised by the 
U.S. Department of Agriculture (USDA) and administered by the state and 
local human service agencies. In Federal Fiscal Year 2009 it served an 
annual average of 33.7 million persons, an increase of nearly 19 
percent over FY 2008. In April 2010 (the most recent month available), 
participation reached 40.4 million persons, another all-time record, 
and 42 percent higher than the FY 2008 average.
    The number of states experiencing caseload increases of 25 to 40 
percent is unprecedented, with some states more than doubling their 
caseloads since April 2007. In the past 3 years, the number of people 
served nationally grew by over 50 percent. In my state, Florida's SNAP 
served 1.2 million individuals in April 2007 and now, as of June 2010, 
is serving more than 2.7 million individuals--an extraordinary increase 
of 126 percent. At the same time states have and continue to face 
extreme pressures on finances resulting in cutbacks in human service 
staffing--hiring freezes, furloughs, and layoffs. Florida experienced a 
reduction of 43 percent of its staff between FY 2003 and 2006. 
Considering these conditions, it is a testament to the commitment of 
public human service agencies that we have achieved the highest payment 
accuracy level in the history of the program for FY 2009 at 95.64 
percent. How was this possible? It involved the joint efforts of 
Congress, the Department of Agriculture, and state and local 
administrators as well as the commitment of thousands of dedicated 
front-line staff.
    In Florida, we have worked aggressively to improve program access 
and integrity. We learned early on that technology was the key to 
reaching large numbers of people and assuring quick and accurate 
eligibility determinations. Over 90 percent of our applications are 
received electronically from customers' homes, businesses, agency 
offices and a network of over 3,000 community partners. Through a great 
partnership with USDA, we developed new policies, procedures, and 
waivers to get the right amount of benefits to people quickly, while 
saving taxpayers more than $83 million in recurring annual costs for 
program administration. We use telephone interviews in concert with 
electronic data exchanges to assure program integrity. We process over 
298,000 data exchanges each month from sources such as the Social 
Security Administration and state unemployment agency to assure income 
is known and correctly counted. We match all our customers against the 
Social Security database to confirm Social Security Numbers and 
identity, enabling us to find and validate other income and prevent 
duplicate payments. This spring, our legislature authorized expanded 
access to the Department of Motor Vehicles database, enabling 
eligibility staff to view driver's license data, signatures, and 
customer photographs. These combined uses of technology have helped us 
achieve our objectives in payment accuracy and proper stewardship of 
public funds.
Improved Payment Accuracy in SNAP
    SNAP has a remarkably successful history in reducing improper 
payments. Payment accuracy is measured through a quality control system 
operated by the states and monitored by the Food and Nutrition Service 
(FNS). Policy options, simplifications, and administrative practices 
affect payment accuracy in the program. Although states were making 
great progress in increasing payment accuracy in the decade before the 
2002 Farm Bill, the reforms made by that bill in both policy and 
performance measurement, plus its incentive bonuses for high 
performance, greatly enhanced program performance. States have reduced 
the SNAP error rate (a rather broad label for the total of over-
issuances plus under-issuances) from 6.64 percent in FY 2003 to 4.36 
percent in FY 2009. At the same time, program participation has 
increased from 60.4 percent of those eligible in 2004 to 67 percent in 
2008. This approach dramatically demonstrates that, with the right mix 
of policies, it is possible to both reduce improper payments and 
protect program access.
    My state provides an excellent example of what can be achieved. As 
a national leader in eligibility modernization, DCF turned its 
attention to accuracy and quality of service in 2006 and targeted key 
components necessary for improvement. Florida, the fourth largest state 
in the nation, achieved the best payment accuracy in the nation for the 
last 2 years, reducing the error rate from over eight percent to 0.85 
percent and then 0.70 percent. In addition to improving accuracy, each 
year we have also improved the timeliness of eligibility decisions in 
spite of rising caseloads.
    Florida's emergence as the most successful state in the nation when 
it comes to improving SNAP performance was not attained by sleight of 
hand. Rather it is due to persistent and thorough analysis of program 
performance, followed by immediate corrective action. We combined the 
Quality Control and Quality Assurance functions to enhance state 
oversight, align focus, and improve policies and casework. We believe 
case review and analysis are critical to managing program performance 
and developed an electronic web-based case reading tool, Quality 
Management System (QMS), to combat errors. This tool uses technology to 
select cases for review using an error-prone profile that can be 
adjusted based on new data and trends. It allows the state to track, in 
real time, error trends among all levels, i.e., worker, unit, circuit, 
region, and state. The data is continually analyzed at the local, 
regional, and state levels to detect problems and fix cases 
immediately--before benefits are issued incorrectly. This proactive 
approach enabled Florida to rapidly and dramatically improve program 
accuracy and maintain our standing as a national leader in program 
performance.
    The QMS case reading tool has been supported by FNS and introduced 
to and shared with several other states. Just like Florida, many states 
have discovered the direct link of case reviews to accuracy improvement 
and maintenance. Florida has recognized the increased need to keep a 
pulse on performance during stressful caseloads to avoid a breakdown in 
program integrity. The commitment to this effort statewide resulted in 
3 consecutive years of enhanced funding bonus payments. FNS has also 
actively supported the sharing of innovative practices through state 
exchange funds. Our staff have visited other states to learn their best 
practices, and over 40 states have visited Florida to learn about our 
improvements in technology and practice; in this time of rapid growth 
and sparse funding, we and other states know the necessity of fresh and 
effective new avenues to continue assuring program integrity.
Policy and Process Reforms
    The groundwork for these remarkable achievements was laid in the 
significant policy reforms of the 2002 and 2008 Farm Bills. Prior to 
the 2002 bill, the program was overburdened with requirements that 
caused some states to adopt procedures such as monthly reporting to 
capture all the detailed household information the law required about 
household circumstances. In addition, excessive Federal 
micromanagement, a lack of state flexibility, and conflicts with the 
Temporary Assistance for Needy Families (TANF) program and Medicaid 
were among the problems that contributed to a sharp decline in SNAP 
participation from 1995 to 2001, to high administrative costs, and to 
increased QC errors.
    The 2002 and 2008 laws' nutrition titles included many important 
changes designed to improve SNAP administration and enhance access for 
applicants and recipients. They reflected many of the reforms that 
APHSA had advocated for years, particularly simpler procedures and 
additional administrative options. Some of the significant changes 
included allowing states to exclude certain types of income and 
resources in conformity with TANF or Medicaid; providing for a 
simplified utility standard; providing an option for semi-annual 
reporting available to most households, with requirements to report 
only significant changes during the 6 month period; and transitional 
benefits for families moving from welfare. Several of these options 
were extended to cover additional households and circumstances in 2008. 
The USDA has augmented these and other important policy and process 
reforms through flexibility in providing waivers and through sharing 
and encouraging use of policy and administrative options such as 
categorical eligibility. Its recent support of the use of telephone 
interviews has been particularly helpful to states in handling the 
increased caseload.
    In Florida, this has been an exceptionally important process and we 
are thankful for the great relationship we have with the regional and 
national offices of the Food and Nutrition Service. We have worked 
collaboratively to understand issues and create real solutions to real 
problems. Several Federal options, waivers, and demonstrations were 
used to improve customer service and accuracy. Real and active 
communication has been vital to exceptional performance.
    As a leader of a state human service agency, I naturally take the 
greatest pride in what states have done to take advantage of the policy 
options and administrative flexibility available to us as well as to 
develop modern administrative practices. Fifty states and jurisdictions 
have adopted semi-annual reporting; 39 have implemented broad-based 
categorical eligibility; 40 have adopted a simplified utility standard; 
36 have adopted simplified definitions of income and resources; and 19 
have adopted transitional benefits with more expected following the 
recent publication of regulations that provide greater flexibility for 
the option. In addition, over half the states currently use telephone 
interviews waivers--a prime example of a policy that should be changed 
to a state option. States have also made a significant commitment to 
redesigning their business processes to take advantage of technology as 
resources permit. States are adopting both internal and external web 
applications; electronic case files through the use of document 
imaging; call centers; closer relationships with community partners 
that support the program; and business process redesign to eliminate 
redundancies, obsolete requirements, and unnecessary activities.
    Florida led the way for the now-national move to modernize program 
services, with a complete redesign of an antiquated service delivery 
model. Florida used strong technology innovations, waived old processes 
and policy constraints, and built a community partner relationship that 
has been modeled by other states. Florida created a 24/7 accessible web 
application, virtual case files via document imaging, specialized call 
centers for information, change reporting portals, and web-based 
systems for use by internal staff and community partners. Without this 
modern system and the badly needed American Recovery and Reinvestment 
Act administrative funding, we would have been unable to provide 
anywhere near timely services during the recession. With the system, we 
were able to withstand an unprecedented increase in our caseload as we 
improved accuracy and speed of determinations. Not just one option, but 
the full package of all options and opportunities, was employed to 
build this strong and effective system.
Program Performance Reforms
    Prior to the 2002 program reauthorization, the quality control 
system was the only program performance measure that received major 
attention. The QC system required precise prediction and tracking of 
participants' income and circumstances despite the volatility of those 
factors among low-income families. The system was particularly unsuited 
for fairly evaluating earned income, which often fluctuates for this 
population and is therefore difficult to forecast and report. States 
that exceeded the error tolerance were subject to significant 
penalties. Those that were below the error tolerance were rewarded with 
an enhanced administrative match. These factors drove states to adopt 
policies like monthly reporting, short certification periods, and 
strict verification of all eligibility factors, which made the program 
complex and time-consuming for both staff and households and created a 
significant barrier to participation and effective administration.
    The 2002 legislation established a program performance system that 
included several positive changes to the QC system and created a new 
system of bonuses for states with high performance in not only benefit 
accuracy but also other activities including application timeliness, 
program access, and administrative processing of ``negative actions'' 
(denials, closures, and benefit suspensions). This served to broaden 
the focus of the program to include areas of client service in addition 
to benefit accuracy. This broadened approach plus reforms made to the 
QC system have resulted in a welcome expansion of focus--at both the 
Federal and state levels--on access and customer service and not just 
the error rate. This more inclusive approach to program assessment has 
in turn reinforced much of the program's recent policy and process 
simplification.
    The most welcome QC system reform provided that only states with 
persistently high error rates would face liabilities (in general, those 
states where the error rate exceeds 105 percent of the national average 
for 2 consecutive years). Also, USDA was given the ability to waive all 
or part of a liability, and/or require up to 50 percent to be 
reinvested in the program, and/or require 50 percent to be set aside 
and either paid or forgiven depending on state performance. In 
addition, the 2002 law provides $48 million in bonuses to be awarded 
each year to the states with high performance in the established 
measures. Over half of the amount is directed to states with the best 
and most improved payment accuracy ($24 million) and correctness of 
negative actions ($6 million); the remainder is divided among the best 
states in application processing timeliness ($6 million) and program 
access ($12 million). These changes have achieved their purpose of 
sanctioning only ``outliers'' while encouraging steadily better 
performance, and are surely a major factor in the remarkably improved 
program integrity record states have turned in since then.
Current Challenges
    While the farm bills achieved substantial simplification, 
additional changes are needed if we are not only to maintain but 
enhance these remarkable achievements and keep errors low. For example, 
states could benefit greatly from optional standardization in the area 
of expense deductions. The program also needs other reforms designed to 
reach the elderly and disabled, who remain a severely underserved 
population. One of the most useful would be making the Combined 
Application Projects (CAPs), under which SSI recipients can 
automatically receive SNAP benefits, a nationally available option 
rather than the currently approved small number of demonstration 
projects. The existing CAP projects are simple, inexpensive, and far 
more accessible to the elderly and disabled than the regular SNAP 
program. Many of them have been in place for years, and this highly 
successful model should no longer be considered experimental. For 
example, Florida has been a successful CAP state for years, yet is 
still required to perform separate evaluative reviews and provide 
reports to FNS, and these cases are also subject to the Quality Control 
sample. The documented success of the program should now alleviate the 
states from persistent and ongoing excessive reviews and yearly 
reports.
    The program's continuing complexities also contribute to the fact 
that SNAP still reaches just 67 percent of eligibles despite the recent 
dramatic surge in the caseload. One of the major high performance bonus 
categories in which states now compete is the increase in their 
participation rate, yet even the best outreach efforts still run 
headlong into SNAP's numerous eligibility requirements and ongoing 
administrative burdens.
Performance Measures and Administrative Support
    The high performance bonus system is insufficiently funded; it 
provides only $48 million for all measures, an amount that is less than 
the pre-2002 enhanced funding system had been paying out for low errors 
alone. It also remains too entwined with process measures. For example, 
the $6 million for the negative error rate primarily measures paperwork 
and administrative processes rather than the true validity of denials 
to ineligible persons. States should also always be allowed to choose 
reinvestment of any sanction, rather than leaving that option to USDA.
    Further reforms in SNAP administrative requirements and performance 
measurement must be accompanied by corresponding improvements in SNAP 
administrative cost reimbursement policy. The program's overall 
administrative costs remain among the highest of any government program 
due to its complexity and stringent QC oversight. Before 1998, the 
Federal Government reimbursed states 50 percent of these costs. 
However, enactment of cost-allocation provisions that year (which were 
made permanent in the 2008 Act) have since cut the average nationwide 
reimbursement of SNAP administrative costs to about 47 percent, and 
some states receive barely above 40 percent. Since 1998, states have 
lost nearly $200 million per year--a cumulative total so far of over $2 
billion--in SNAP administrative reimbursements compared to previous 
policy. These losses have greatly exacerbated the difficulty states 
have in administering this program. The fresh infusions of 
administrative funds in ARRA and in last year's Defense Appropriations 
measure were most welcome and necessary, but only began to make up for 
this deficit.
    Another particularly important need in SNAP administrative cost 
reform is modernization of the program's automated systems. While other 
major human service programs enjoy enhanced match for automation--as 
high as 90 percent--there has been no enhanced SNAP match since the 
early 1990s. In that time, states have lost ground in their ability to 
upgrade their SNAP information systems and take full advantage of new 
technology that is far superior to the legacy systems still in place in 
many states. The most common reason states report being unable to take 
full and prompt advantage of simplification options and process 
redesign is their lack of automation capacity and funding. Another 
critically necessary step in automated system reform is a simple, 
uniform, and responsive cross-agency procedure for approving Advance 
Planning Document requests.
Our Vision for SNAP
    The combination of unprecedented demand and declining state and 
local capacity further highlights the need for program improvements 
that APHSA has advocated for many years. While Congress and the 
Department of Agriculture have made many significant SNAP reforms in 
recent years, we strongly recommend additional program simplification 
and removal of access barriers; additional administrative support, such 
as that provided last year in ARRA and the Department of Defense 
appropriations measure; a focus on accuracy in outcomes rather than 
process; additional linkages with and coordination among other Federal 
assistance programs; stronger support for nutritious food choices and 
nutrition education; and far greater encouragement of program 
innovations.
    Our recommendations for your consideration follow. While they are 
grouped into categories, many serve multiple purposes; for example, 
changes that reduce administrative barriers improve program access, 
streamline the workload for program administrators, and enhance payment 
accuracy. We also believe that simplified program rules and less red 
tape will help families access more of the benefits to which they are 
entitled and thus choose costlier but more nutritious foods, something 
that will help in the fight against childhood obesity.
    We appreciate the opportunity to provide this testimony and will be 
pleased to answer any questions you have. We look forward to working 
closely with the Subcommittee and full Committee as you develop 
legislative proposals for SNAP reauthorization, and will be pleased to 
assist you in any way to help make this critically important safety net 
program stronger, more responsive, and more manageable.
                               Attachment
Supplemental Nutrition Assistance Program_APHSA Recommendations for the 
        2012 Farm Bill
Enhancing Program Access
   Amend SNAP law and provide funding so that states can 
        conduct pilot programs to test a variety of innovative methods 
        and alternative application strategies that remove additional 
        barriers and further streamline the eligibility and benefit 
        determination process, including a single portal for accessing 
        multiple programs or a human services electronic home.

   Incorporate the Combined Application Projects into SNAP law 
        as a standard state option rather than continuing them as 
        demonstration projects; allow states to test CAP for additional 
        categories of households; and provide the funding necessary for 
        the Social Security Administration to support projects where 
        automated approval of the standardized SNAP benefit is based on 
        information shared electronically by SSA.

   Restore eligibility for legal non-citizens by reinstating 
        the non-citizen policies in effect prior to the enactment of 
        welfare reform in August 1996.

   Make permanent the state option in the American Recovery and 
        Reinvestment Act to suspend the 3 month participation limit on 
        Able-Bodied Adults without Dependents.

   Allow up to 36 month certification periods for elderly/
        disabled households with no earned income.
Reducing Program Complexity
   Authorize a significant number of new demonstration projects 
        that drastically simplify the eligibility and benefit 
        calculation, including such examples as coupling presumptive 
        eligibility to new health care reform eligibility tests; basing 
        the benefit on income with only a deduction from earned income 
        and using an altered benefit reduction rate or an additional 
        standard deduction based on household characteristics; an 
        option patterned on the Minnesota Family Investment Plan to 
        allow a standardized SNAP benefit to TANF cash assistance 
        recipients; and optional use of a standard medical expense and 
        a standard deduction for medical insurance premiums for all 
        households.

   Remove barriers in current law that prevent the exchange of 
        data among public assistance programs that would streamline 
        application processing and simplify multi-program 
        administrative requirements.

   Adjust the law to allow flexible interview requirements that 
        will support successful business process redesigns which may 
        currently be implemented only under waiver authority.

   Establish a process of regular and systematic collaboration 
        among FNS, ACF, and CMS on projects that coordinate 
        administrative processes and projects, including a project to 
        rationalize income policy in four areas: (1) definitions of 
        countable income, including what is treated as earned or 
        unearned income; (2) verification of income; (3) budgeting 
        income (prospective, retrospective, period of income to use); 
        and (4) calculation of self-employment income, including 
        agreement on self-employment disregards or establishment of a 
        standard percentage deduction for self-employment disregards.
Supporting Nutritious Food Choices and Nutrition Education
   Assure that SNAP nutrition education (SNAP-Ed) funding 
        continues to be available at current usage and projected growth 
        levels, and that no SNAP-Ed funding is used to offset increases 
        in other programs; and align nutrition education requirements 
        across all Federal nutrition programs so that they provide a 
        consistent nutrition message.

   Expand the initiatives in the 2008 Farm Bill to identify and 
        implement positive incentives for recipients to choose 
        nutritious foods, particularly those that will impact the 
        problem of childhood obesity.

   Provide strong positive incentives for health care programs 
        and providers to include nutrition counseling as a part of 
        well-child care and for persons suffering from obesity-related 
        illnesses.

   Encourage non-traditional food providers to accept SNAP 
        benefits by developing or identifying funding to provide EBT 
        equipment and by eliminating current rules that discourage 
        these types of providers from applying to be authorized 
        retailers.

   Increase the annual funding for the USDA Community Food 
        Projects Competitive Grant Program and require USDA to actively 
        solicit projects that have a plan for involving SNAP recipients 
        as both customers and project participants.
Providing Adequate Funding for Nutrition Benefits
   Retain the ARRA provision that continues the increased SNAP 
        benefit until the regular annual inflation adjustment exceeds 
        the 13.6 percent benefit increase.

   Adopt the pre-1996 inflation adjustment formula that set 
        benefits at 103 percent of the cost of the Thrifty Food Plan 
        the previous June.
Strengthening Support for Administration and Systems Improvement
   Continue annual allocations of 100 percent Federal 
        administrative funds, as has been done in 2009 ARRA and the DOD 
        appropriations legislation, as long as the present severe 
        fiscal conditions require.

   Restore the normal SNAP administrative match rate to its 
        historic 50 percent level in place prior to the 1998 Balanced 
        Budget Act cost-allocation reductions.

   Provide an increased, standard Federal match for automation 
        for SNAP and all other human service programs.

   Direct FNS, ACF, and CMS to immediately and thoroughly 
        streamline and reform the badly outdated Federal Advance 
        Planning Document requirements.

   Ensure that electronic benefit transfer and other electronic 
        payments will continue to be exempt from Regulation E 
        requirements and from any other mandates that would increase 
        costs for program recipients or for state and local agencies.

   Increase funding for SNAP performance bonuses to allow more 
        states to be rewarded for exemplary performance and to shift 
        the performance oversight system toward one based on positive 
        incentives.

   Provide a mechanism for funding state-private partnerships 
        to provide inexpensive equipment to nonprofits that assist 
        people to apply for human services benefits online.

    Mr. Kagen. Thank you very much.
    I appreciate all of your testimonies.
    Let me begin with a question to Madam Fong. You had 
mentioned in your written remarks that there was an error rate 
of about five percent of improper payments, to the tune of 
about $1.7 billion.
    And let me give you a little backdrop to this. When I 
travel around my Congressional district, if I want to check the 
pulse of the economy, I go into the grocery store and I talk to 
the manager. And I ask him or her to compare for me this year 
versus last year, what percent of your overall business is on 
food stamps through the SNAP program?
    And you just pointed out, Mr. Winstead, that in Florida it 
has gone up dramatically. Well, in my Congressional district, 
one store went from 22 percent of overall business to 50 
percent; another store, from 25 percent to 48 percent. So, more 
and more districts and rural areas, particularly in Wisconsin 
and elsewhere, people are much more dependent now on gaining 
their nutrition from this program.
    So there will always be a highlight not in how well it is 
working, but to focus--which is the oversight committee's 
responsibility--to focus on what can be improved. So can you 
make a few comments about the way in which we can improve and 
prevent the improper payments, what you are doing, what you 
think should be done?
    It is an open microphone.
    Ms. Fong. Well, we have done some audit work in the SNAP 
area, and we have focused primarily on looking at the EBT 
systems that SNAP uses to deliver the program. We have made 
some recommendations to FNS on how the ALERT system and the 
STARS system can be tightened up and improved. We are working 
with FNS to deal with those kinds of issues and are optimistic 
about that.
    We also are going to be starting a significant effort in 
the improper payments arena, as I mentioned earlier. Under 
those laws--one was just enacted last week--we have to work in 
conjunction with FNS to help make recommendations on how 
improper payments can be addressed, how they can be reduced, 
what effective ways there are going to be to really get to that 
problem. Because if we can deal with improper payments in the 
program, that just makes more money available to truly needy 
families.
    Mr. Kagen. Let me direct that same question to Ms. Paradis 
and also Mr. Winstead.
    Ms. Paradis. Thank you, Congressman.
    Well, there are a number of things that can be done and 
that we are doing. And we are very grateful to both OIG and GAO 
for giving us the kind of support and guidance and 
recommendations that can be very helpful. They have a fresh 
view and a different view from ours on occasion, and so we find 
that actually very helpful.
    But we already do things within FNS. For example, we have a 
national payment accuracy working group. They are reviewing all 
of the states. We get QC data month to month, and so this group 
actually takes a look at that. And when they see a state that 
is starting to get into trouble on payment accuracy, we can 
jump in right away with our staff to work with that state and 
make sure we can get the error rate down. And that has actually 
been quite successful.
    We have a State Exchange Program, where we actually have 
some funds, a limited amount of funds, where we can actually 
cover the costs of state officials to go to other states to see 
what they are doing, go to conferences to see what they are 
doing in the area of payment accuracy. So we have found that to 
be extraordinarily useful, as well.
    Of course, our biggest thing is the carrot and stick of our 
QC system. We give performance bonuses to those states that are 
at the very top, in terms of success. We also give bonuses to 
the two top states that are most improved. And we have the 
stick of liabilities for those states that are really 
continuing to struggle and just aren't operating up to par.
    We are actively working with states on business process 
reengineering so that they can become more effective in what 
they are doing and more efficient, and find ways to reduce 
errors. We constantly are reminding them of ways that they can 
make administrative differences, simplification policies that 
we allow, and waivers.
    And, of course, this Administration has done a number of 
things that I think are going to help us to even focus better, 
and that is the President's Executive Order on improper 
payments. There are eight working groups now very, very 
aggressively looking at these issues. FNS is on seven of those 
working groups.
    And there is also something called the Partnership Fund for 
Program Integrity, about $37 million that is going to be made 
available to various agencies. We are seeking suggestions from 
anyone in any quarter, from individuals to organizations, to 
make recommendations in terms of how we might be able to 
improve our processes.
    And so, there is a lot going on. This is something that is 
very important to FNS, and we are excited about the potential.
    Mr. Kagen. Mr. Winstead, this state and Federal 
partnership, how well is it working?
    Mr. Winstead. Thank you, Mr. Chairman.
    I think it is working very well. And, as I mentioned in my 
testimony and as the Administrator indicated, I think the state 
exchange and collaboration and partnership, both between the 
Federal agency and states as well as states helping each other, 
are important.
    But, the way that we leverage that and the way we make it 
consistent is we have to go from top to bottom and bottom to 
top.
    And to give you a quick illustration, for example, in 
quality control in Florida, we pull a little over 1,000 cases 
in the active roles, about 800 negative cases, so maybe 1,800 
cases are in an annual sample. We have 4,000 eligibility staff. 
So if I am an eligibility worker, I may or may not get a case 
pulled by quality control this year. So, in terms of my 
performance, I need something else to give me good feedback.
    And in our quality management system last year, we 
reviewed, second-party reviewed in validation, 149,205 cases. 
This year so far through June, we have reviewed 82,358. You can 
see those large numbers. That way we are able to take the 
trends that we learn about from the national trends from our 
state analysis at QC, particularize it, and make sure that it 
touches the day-to-day work of every eligibility worker and 
supervisor in our state and guides their action in the 
assessment of their performance throughout the month.
    Mr. Kagen. Thank you very much.
    Mr. Fortenberry?
    Mr. Fortenberry. Thank you.
    Ms. Fong, I would like to start with you. In fact, I like 
the phrase--it is an unfortunate reality--about the trafficking 
of SNAP benefits. You had suggested that there is money being 
funneled overseas.
    Two questions, is the trafficking of SNAP benefits more 
pronounced in a particular area of our country, or is it a 
widespread problem, geographically diverse? And which countries 
are involved in money being transferred or funneled overseas?
    Ms. Fong. I would say that we don't necessarily see 
trafficking in any particular identifiable locations. We do see 
it across the country. We have big investigations going on in 
the Midwest, in Florida, on the West Coast, up in the 
Northeast. So I don't think it is confined to any particular 
region of the country. Wherever there are stores and retailers, 
we are going to probably see those kinds of issues.
    Mr. Fortenberry. Well, I was hopeful you would say this 
doesn't happen in a place like Nebraska.
    Ms. Fong. I can't think of a big case in Nebraska.
    Mr. Fortenberry. Okay. Thank you.
    Ms. Fong. You are welcome.
    In terms of monies going overseas, we don't know exactly 
where they end up, but we do see them moving to countries in 
the Middle East, around the Horn of Africa, and some of the 
lesser-developed countries across the ocean.
    Mr. Fortenberry. Is there some different criminal process, 
other than simply selling the SNAP card for cash, as you 
suggested in your earlier testimony? Is there some other way of 
conniving the benefit to be transferred overseas?
    Ms. Fong. Well, what we have seen, the kinds of schemes we 
have seen involve trafficking, where people will bring their 
card in, swipe it for cash, and then the retailer will take 
that money, and sometimes that will get funneled overseas.
    There are also situations involving the use of Hawala, 
which are money transfer systems--it is a way of transferring 
funds from one country to another without using the formal 
banking system. And in those kinds of situations, we coordinate 
with the FBI and with the Department of Justice to work those 
cases.
    Mr. Fortenberry. So this is just another manifestation of 
the original type of theft that is going on at the retail 
level, where you have two people conniving to basically get the 
benefit for cash at some discount agreed upon by the retailer?
    Ms. Fong. Right. They are all variations on the same 
thought.
    Mr. Fortenberry. Okay.
    Mr. Winstead, you had talked about Florida having the 
highest payment accuracy rate in the nation?
    Mr. Winstead. Yes, sir.
    Mr. Fortenberry. Now, why is that?
    Mr. Winstead. I think there are multiple reasons, and the 
chief among those is the really diligent hard work of a whole 
lot of people. But, as I indicated, I think our quality 
management system is an important part of that. I think we have 
worked very closely with FNS on program simplifications.
    And another big reason is our automated system. We have 
completely retooled our automated system so that we have good 
controls and good responsiveness, and we are able to do a lot 
of electronic exchanges. We do external data checks with about 
20 other systems to verify the accuracy of the information that 
people are telling us. I think all of those are part of the 
improved accuracy.
    Mr. Fortenberry. Ms. Paradis, would you consider Florida to 
be an optimal model for state implementation, in terms of 
reducing errors?
    Ms. Paradis. Oh, yes, I absolutely do. One of the things 
that I think works so terribly well, as Mr. Winstead mentioned, 
is that we actually do have the ability to have states share 
their good news with other states around the nation. And I dare 
say state exchange has been a significant factor in terms of 
bringing the payment accuracy rate up and the improper payment 
rate down, because states have been able to get together.
    I have been at meetings with the various states when they 
get together, and there is great collaboration, respect, and 
understanding. And so, I think that Florida can, indeed, be a 
model and is a model.
    Mr. Fortenberry. Other than goodwill and people who are 
acting with integrity in their efforts at public service, what 
incentive is there for a state to implement more aggressive 
programs that ensure the integrity of the delivery of the 
benefit?
    Ms. Paradis. Well, our traditional QC system, which has 
been in existence for decades, as I mentioned earlier, does 
provide both a carrot and a stick. States get performance 
bonuses if they are among the top, if they have great success 
at the top. And even those who are most improved get bonuses.
    States who are at the very bottom, who are not as 
successful in keeping their error rates down, actually are 
assessed penalties. And over a course of time, if they are not 
able to improve, we do collect those monies. And so that is a 
very powerful incentive for states.
    Mr. Fortenberry. All right. Thank you.
    Mr. Winstead. Mr. Chairman, if I could quickly add, just as 
an illustration, in 2006 we received one of those penalty 
letters telling us if we didn't do better, that we were going 
to face stiff financial penalties. And that certainly got our 
attention.
    And then, as a result of the actions that we implemented, 
we received $5.48 million in 2007, over $7 million in bonus 
recognition in 2008, and in 2009 we received $11.5 million. 
That not only gets our attention in a very positive way, but 
also the attention of the Florida Legislature as they consider 
the job we are doing.
    Mr. Fortenberry. Good. Thank you.
    Mr. Kagen. The chair now recognizes Mr. Schrader.
    Mr. Schrader. Thank you, Mr. Chairman. I appreciate it.
    I would like to follow up on Congressman Fortenberry's line 
of inquiry. How many states now currently have the type of 
automated system that Florida does?
    I direct that to Ms. Paradis or Mr. Winstead, if he knows.
    Ms. Paradis. I am sorry, I am not able to answer that 
question. We will be happy to take a look and do a review of 
our states and get that information back to you.
    Mr. Schrader. Mr. Winstead, any----
    Mr. Winstead. I also need to check. I don't know how many 
specifically. I know that there are a number of states, over 40 
states, that have visited our state to look at our systems and 
learn. And there are a couple of states that my staff have gone 
to where they say that what they are doing is even farther 
advanced than what we are doing.
    So, there are a number of states, and the ones that don't 
have these systems are rapidly moving in that direction. As 
much as--I mean, the limitation there is, of course, many 
states are in very deep difficulty right now, financially, and 
that is a concern.
    Mr. Schrader. Well, the reason I raise that is that, 
perhaps one of the incentives, I don't know if you are 
empowered to do it now--would be to provide a bonus if one does 
go to a more automated system, so that the states might be able 
to find some money, as long as there is Federal assistance, as 
part of your bonus program. I am just trying to be thoughtful.
    With the study that is going on right now about the 2006, 
2008 errors in trafficking and stuff, what does the Department 
expect to find? I mean, I guess that is coming due next year. 
Do you have any idea? I mean, it has gone down dramatically. Do 
you have a feel for where you are going to end up?
    Ms. Paradis. We don't know yet. But we are really looking 
forward to what we can learn from that study. You know, we 
constantly are studying across a whole range of these issues, 
constantly trying to study what we can learn about them, so 
that we can better respond and improve the effectiveness and 
the efficiencies of these systems.
    Mr. Schrader. When was the EBT card system put in place? I 
don't know that. I am a new----
    Ms. Paradis. Oh, it started many years ago. It took some 
time for all of the states to come onboard. I think the final 
state came onboard in 2004. And just about a year ago, we 
disbanded any possible use of any remaining food coupons that 
are out and about.
    Mr. Schrader. Okay. So then I would optimistically assume 
that the rate would come down even further than in your more 
recent study, hopefully.
    Ms. Paradis. We are certainly hopeful.
    Mr. Schrader. Is there a tipping point, if you will? I 
mean, error rates are error rates, and errors do happen. 
Florida seems to be exceptional; having an error rate at less 
than one percent is amazing.
    Is there a point at which you get diminishing returns in 
terms of the amount of money either Congress or the state 
spends trying to reduce errors? Is there a goal that the 
Department has in mind?
    Ms. Paradis. I appreciate that question. We have for the 
entire history of the Food Stamp Program tried to find the 
proper balance between accessibility--making sure that eligible 
people are participating--and program integrity.
    I will tell you that I was absolutely stunned when I 
learned that our payment inaccuracy rate had gone down to 4.36 
percent. I never dreamed I would see it below five percent. 
When we reached that, I thought, ``We have gone about as far as 
we can go.'' So I am now wondering what might happen next year, 
if we can maintain that same level of success.
    If you look at the participation rate, which is about 66 
percent of those people who are eligible--and that is a major 
part of what we are about, is trying to make sure that every 
single eligible person in this country gets the nutritional 
benefits that they deserve--we really have a lot of work to do 
on that side of the shop, as well.
    I think we have it in pretty good balance right now. We 
have had a lot of practice at it. But it is something that we 
are constantly mindful of.
    Mr. Schrader. Last question, and I know it will come up at 
some point, but what percentage of problems do you have with 
unauthorized immigrants in this country accessing SNAP 
benefits, given the new system you have?
    Ms. Paradis. Well, of course, you know that illegal 
immigrants are not eligible. They never have been eligible for 
this program. And President Bush, working with Chairman Baca 
and the Congress in 2002, did restore eligibility to legal 
immigrants, who had been removed from the program in 1996.
    Just like when any other applicant tries to defraud the 
system, the states are empowered to investigate those cases if 
the concern comes up as the application is being looked at by a 
certification worker. It can also come up, perhaps, in a QC 
review of ongoing cases. And then those recipients can be 
prosecuted at the state level.
    Mr. Schrader. Thank you.
    I yield back.
    Mr. Kagen. Thank you very much.
    Mrs. Lummis?
    Mrs. Lummis. Thank you, Mr. Chairman.
    Ms. Brown, you mentioned that, in spite of some states like 
Florida that have extraordinary accuracy rates, that there are 
still inaccuracy rates that exceed what should be acceptable. 
Do you make recommendations on how states that are under-
performing can accelerate their level of accuracy?
    Ms. Brown. Well, first, I would like to say that one of the 
things we have noticed over time as the error rate has gone 
down is that the spread between the states in the error rate 
has become smaller. When we first started looking at this, some 
states had 10-12 percent error rates, and now I believe only 
five states have higher than six percent, and it is just a 
little above six. I think that is an important thing to note, 
as far as the progress goes.
    The recommendations that we make are typically 
recommendations to USDA, and recognizing that they then have 
the responsibility to work with the states to try to improve, 
continue to improve the error rate.
    Mrs. Lummis. Thank you.
    So, turning then to USDA, who is primarily responsible, who 
is on the front lines of accuracy in eligibility? Is it the 
states, or is it the USDA?
    Ms. Paradis. The people on the front line, of course, are 
those thousands of caseworkers across our country who have the 
responsibility of taking those applications and making those 
certification decisions.
    Mrs. Lummis. So it is the states.
    Ms. Paradis. But we have the responsibility to give every 
type of assistance that we possibly can to the states. So, we 
actually see it as a very robust partnership.
    It is important to us. The American people are our bosses, 
and we have responsibility for those Federal taxpayer dollars, 
and we take it extraordinarily seriously. And so we are very 
aggressive in working with the states, and have been for many, 
many, many years, in terms of giving them every kind of 
assistance we possibly can to get those error rates down.
    Mrs. Lummis. But is it fair to say that because the states 
are subject to carrots or sticks for under-performance or 
exceptional performance, that it is the states that are really 
on the front lines?
    Ms. Paradis. I think that is fair to say.
    Mrs. Lummis. Okay. Then I want to turn a question to Mr. 
Winstead.
    Are you familiar with the National Governors Association's 
Center for Best Practices?
    Mr. Winstead. Yes, Congresswoman, very familiar.
    Mrs. Lummis. And could you explain why you are familiar, 
and whether Florida has participated as a state that uses best 
practices with regard to this particular program to help other 
states with their compliance?
    Mr. Winstead. As your question indicates--first of all, 
there are two aspects of it that I would underscore. First of 
all, the National Governors Association does have a Center for 
Best Practices that helps bring states together and learn from 
one another and facilitate that action. Of course, my agency, 
the Department of Children and Families, we administrator 
multiple human services programs, and we have worked with the 
NGA Center on Best Practices in a number of those programs.
    The other thing I would add, too, is that the organization 
that I am a member of and represent today, the American Public 
Human Services Association, performs a similar function for 
states. This is the association of the folks who run the human 
services agencies in each state.
    We at APHSA link very closely with the National Governors 
Association because the Governors are our bosses, so we work 
hand in hand. And APHSA and through our various affiliates, 
including the directors of the SNAP programs around the 
country, all work very closely together on improving program 
performance, and including idea-sharing in that agenda.
    Mrs. Lummis. And for all the panelists, I am still a little 
baffled by the fact that expanding eligibility from TANF to 
SNAP actually improves accuracy. In some ways, that is a little 
counterintuitive because, in my mind, I am thinking maybe a 
double-check would ferret out mistakes that may have been made 
in determining, initially, eligibility for TANF. Could you help 
disabuse me of my thinking?
    Ms. Paradis. They are all looking at me, so I guess I have 
to take the first crack at that.
    The way that it can affect error rates and bring error 
rates down is because it is a significant simplification of the 
application process, both for the recipient as well as the 
caseworker. Occasionally, we will have recipients who make 
unintentional errors when they are applying for the program. 
And we have caseworkers who also unintentionally make mistakes. 
Those kinds of errors can be reduced quite dramatically by this 
categorical eligibility.
    And it also does simplify the program in a way. For years, 
we have been looking for ways to simplify the program. There 
been any number of people who have called for many years that 
we take a look at the wide range of Federal programs that we 
offer to low-income people here. And this is a way where TANF 
and the SNAP program are working very well together.
    Mrs. Lummis. Thank you, Mr. Chairman. I yield back.
    Mr. Kagen. Thank you. Mrs. Dahlkemper from Pennsylvania.
    Mrs. Dahlkemper. Thank you, Mr. Chairman. Thank you all for 
joining us today. I have a number of different questions, but I 
am very interested, as I know all of us are, in trying to 
improve the nutritional quality of the SNAP program. One of 
those things that we have been trying to do is increase access 
to farmers markets. So I want to start with Ms. Brown, because 
in your findings I know you said errors have been higher, more 
frequent in smaller stores. And nothing--I didn't really see 
anything about farmers markets. And so has there been any study 
on the farmers market issue?
    Ms. Brown. We haven't done any studies on farmers markets 
in error rates. I don't know if you have any information.
    Mrs. Dahlkemper. Does anyone else have any information on 
farmers markets?
    Ms. Paradis. I don't have that information with me this 
morning, I am sorry. I am more than happy to take a look at 
what data we do have and share that with you.
    Mrs. Dahlkemper. Because I know one of the issues obviously 
is trying to get EBT available in farmers markets. If you have 
any of that information I would be very interested.
    Ms. Paradis. I would be happy to share that with you. As 
you probably already know, in the President's proposed budget 
for 2011 we had requested $4 million for equipment for farmers 
markets. Our goal is to have every farmers market in the 
country participating.
    Mrs. Dahlkemper. Another question I wanted to ask, I have a 
number of questions, but, Mr. Winstead, you had mentioned in 
your testimony that the elderly and disabled are those who we 
are having most difficulty reaching who are currently eligible. 
And so if you can maybe expand a little bit on what you think 
could be done to try to reach them.
    Mr. Winstead. Sure. Yes, ma'am. I think, and particularly 
coming from Florida, where we have such a large elderly 
population, this is a particular concern for us.
    Mrs. Dahlkemper. I am from Pennsylvania and I think we are 
like number two after you.
    Mr. Winstead. A couple of things there. And of course we 
work very closely with our colleagues in the Florida Department 
of Elder Affairs that helps us with a lot of outreach. They 
also administer a number of feeding programs for the elderly. 
Two things that we have done that are important. First of all, 
we have the SUNCAP waivers, what we call it, a waiver so that 
individuals can get SNAP benefits as part of their application 
for SSI. I think that is a way to make it easier for people to 
be able to access the program.
    Many states use that strategy. That is also an area where 
we feel it would be a step forward, because that is a waiver 
that we have to renew periodically, and we have to meet certain 
cost neutrality requirements and all. I think if that were just 
more of an option rather than a waiver program that would be a 
step forward in improving access.
    The other thing that we do is we partner very closely with 
over 3,000 community partners who provide automated access to 
the program, including aging resource centers and programs that 
serve the elderly and disabled to try to make sure that we 
reach everybody who is potentially eligible. We want to make 
sure they understand the benefits of the program in a context 
that is familiar to them, and doesn't involve coming to another 
government office and filling out another piece of paper.
    Mrs. Dahlkemper. Thank you. I want to ask Ms. Paradis, the 
question is sort of a little bit off of what we have been 
talking about today, but it has to do with education and SNAP-
Ed. And that on the website you have a recipe finder database 
and a guide, Eat Right When Money's Tight. But I am concerned 
that not enough of our SNAP recipients would have access to 
this. I am from the Commonwealth of Pennsylvania, a state with 
a lot of elderly. Many of them do not have access to the 
Internet. Those who are low-income often do not have access to 
the Internet.
    So what I am wondering is perhaps if there could be some 
way to better reach these beneficiaries, and have you thought 
about that? Maybe offering something in the grocery stores 
where you have a large number of SNAP recipients. And so maybe 
you can let me know if there is anything going on in that 
regard.
    Ms. Paradis. I am happy to. We provide millions of dollars 
to states so that they can conduct SNAP education in various 
communities. It has been very, very successful. Every single 
state has a SNAP-Ed program. And that is the way to sort of get 
this into communities. I think some states do exactly as you 
have suggested, have things in grocery stores. I am always 
amazed when I go and meet with folks who are engaged in our 
SNAP-Ed program at the state and local level at the wide range 
of activities that they are engaged in.
    So we are very, very pleased with our SNAP-Ed efforts. It 
is a big part of what we do at FNS, it is a big part of what we 
focus on, working with those organizations that get those funds 
to make sure that the kind of activities, and the type of 
education that they are involved in and providing, are 
appropriate, follow the dietary guidelines, and follow the 
nutritional guidance. We believe that that is a powerful way to 
make sure that SNAP recipients are indeed making the most 
nutritious purchases possible.
    Mr. Kagen. Thank you very much, and your time has expired. 
And if any panel member has any other questions they can submit 
them in writing. I am sure that our guests and witnesses would 
be happy to respond. Thank you very much, panel one. You are 
hereby excused.
    I now call to the panel Mr. James Weill, Scott Faber, and 
Jennifer Hatcher. Thank you for joining us this morning. We 
will first hear from James Weill, President of Food Research 
and Action Center, Washington, D.C. Welcome, Mr. Weill.

   STATEMENT OF JAMES D. WEILL, PRESIDENT, FOOD RESEARCH AND 
                ACTION CENTER, WASHINGTON, D.C.

    Mr. Weill. Thank you. We appreciate the opportunity to 
testify here this morning. The Food Research and Action Center 
is committed to ending hunger in this country. And last year 18 
percent of households reported to Gallup that there had been 
times in the last 12 months when they didn't have enough money 
to buy the food that they or their family needed.
    So a strong SNAP program is absolutely essential to reduce 
hunger, and the role of SNAP has become even more essential as 
the recession has continued. There are now more than 40 million 
recipients, a majority of them children and seniors, and that 
is up nearly a third from 2 years ago.
    SNAP delivers benefits in a very efficient way because it 
relies on regular commerce. Recipients use EBT cards at regular 
grocery outlets. And economists report that dollar for dollar 
SNAP is almost certainly the strongest countercyclical anti-
recession program the nation has, as you alluded to earlier.
    Thus, SNAP is fundamentally a strong program. But keeping 
it strong requires that the public policymakers and 
beneficiaries have confidence in its integrity. The quality 
control system, especially with the modifications made in the 
2002 Farm Bill and since, is an effective tool to create a 
basis for any needed corrective actions, and also to assure the 
public and policymakers of SNAP's fundamental integrity.
    States partnering with USDA have made great progress in 
reducing errors. Indeed, the 2009 payment accuracy rate, as 
indicated earlier, was at an all time high. And I want to give 
you a different number, an additional number, from that 2009 
report. The percentage of benefit dollars that went to eligible 
people was 98.81 percent, almost 99 percent. And even among the 
relatively few incorrect payments, many of course are not 
overpayments but are underpayments or incorrect denials of 
eligibility. When hungry people don't receive benefits that 
they need, that hurts health and productivity and children's 
development and learning.
    There are also other quality problems that don't fall 
within the ambit of the definition of quality control, strictly 
defined, but nevertheless have an equally important impact on 
program performance and access among eligible people.
    Despite progress in recent years, SNAP still is missing \1/
3\ of eligible people. You asked, Representative Kagen, earlier 
how the program can be improved. We need continued efforts to 
address barriers to access. Earlier the question of diminishing 
returns also came up, but simplification of the program can 
produce more returns in terms of both access and integrity. 
More simple criteria and processes are essential under both 
Federal and state rules.
    States need to be more responsive in taking the many 
options they have under current law to reduce red tape and 
unnecessary steps, and simplify the program. And delays in 
making eligibility determinations are another serious problem. 
Federal rules require states to process SNAP applications 
within 30 days, 7 days for the neediest households, and states 
have to do better. But this also requires more administrative 
support, adequate numbers of case workers and adequate computer 
systems.
    Congress can help on all this in important ways now, and in 
the farm bill coming up. One key step is addressing the 
adequacy of benefits. The monthly SNAP allotment is predicated 
on the Thrifty Food Plan, which was developed in the 1930s. It 
is a restricted diet for emergency use. It typically carries 
even the most careful families only about \3/4\ of the way 
through the month. Our written testimony lays out a number of 
steps to make benefits more adequate. But among them are 
maintaining the value of the boost and benefit amounts that was 
included in the Economic Recovery Act, not letting that higher 
level erode with food cost inflation, and also certainly not 
letting the boost be rolled back, as some want to do, to use 
the money as an offset for other purposes.
    Other key steps on the benefit front include increasing the 
minimum benefit and improving earnings disregards. And there 
are also ways to get better access to healthy, reasonably 
priced food through development of supermarkets and other 
outlets in food deserts, and by equipping farmers markets with 
EBT capability.
    Our testimony also addresses a number of access problems 
that should be dealt with in the coming years, including 
several strategies. I will only mention two here. One is 
allowing all states to use the CAP model that seamlessly 
enrolls elderly and disabled SSI recipients into SNAP that 
Florida is using. All states should be allowed to use it.
    And second, providing adequate resources to states and 
community partners for outreach in nutrition education.
    So we thank the Committee for the opportunity to testify 
this morning.
    [The prepared statement of Mr. Weill follows:]

  Prepared Statement of James D. Weill, President, Food Research and 
                    Action Center, Washington, D.C.
    Chairman Baca and Members of the Subcommittee, thank you for the 
opportunity to testify here today.
    I am Jim Weill, President of the Food Research and Action Center 
(``FRAC''). The Food Research and Action Center has been working for 40 
years to reduce poverty and end hunger in this country. Through 
research, policy advocacy, outreach, public education, and training and 
technical assistance for state and local advocates, public agencies, 
officials and providers, we seek to strengthen the nation's public 
nutrition programs--have them reach many more people in need and do so 
with adequate benefits that support health and well-being.
    FRAC has been instrumental in helping to launch, improve and expand 
the Supplemental Nutrition Assistance Program (SNAP, formerly Food 
Stamps), WIC, school breakfast, after school food, summer food and 
other nutrition programs.
    We appreciate your oversight hearing today to review SNAP Quality 
Control (QC) provisions and will offer views on payment accuracy as 
well as other related indicators of SNAP effectiveness.
    Program access and integrity are important to SNAP's success in 
addressing hunger and food insecurity and promoting good nutrition and 
healthy outcomes for vulnerable Americans. We all are well-served when 
a program is not over-utilized or underutilized, and when the public, 
policymakers and beneficiaries have confidence in the integrity of the 
workings of a program.
    The SNAP QC system assesses the degree to which payments are going 
correctly to eligible people and in the correct amounts. The SNAP QC 
system--especially with the program modifications from the 2002 Farm 
Bill and since--is one effective tool Federal and state policymakers 
and administrators have to evaluate SNAP's delivery of benefits as 
intended under program rules, and on which to base corrective actions 
as warranted.
    In the 2002 Farm Bill, Congress made a series of improvements to 
the Food Stamp Program (the name changed to SNAP in 2008), including: 
improving QC tests for payment accuracy measurement; prioritizing the 
imposition of QC sanctions onto states that register persistently high 
payment error rates; directing USDA to provide a total of $48 million 
in bonus awards to states for effective program administration; and 
giving states greater options to streamline application certification 
procedures and better coordinate certification rules with those in 
other means-tested benefit programs.
    Since the 2002 Farm Bill, states, partnering with USDA, have 
continued to make considerable progress in reducing errors in benefits 
issuance and keeping error rates low, and fewer states have been in a 
liability-for-sanction status. Indeed, in June USDA announced that the 
FY 2009 SNAP rate of payment accuracy was 95.64 percent, an all-time 
high. More progress is especially needed to lower the ``negative error 
rate'' (which measures the percentage of households improperly denied 
or terminated), but the trend in that measure also is encouraging. For 
FY 2009, the negative error rate declined for the second year in a row.
Strengthening SNAP is Important for Needy Households and the Nation as 
        a Whole
    Strengthening SNAP is important because the program is so important 
to struggling households and to the nation and its economy. Hunger in 
our midst offends Americans of every party, religion, ethnicity, and 
income. But hunger also is, in its practical effect, one of the most 
fundamental problems our nation faces. It adversely affects health, 
early child development, educational opportunities, productivity and 
family dynamics. Americans can't learn, live, grow and prosper if they 
don't have adequate, healthy nutrition.
    Even before the recession began there was widespread food 
insecurity in the U.S. The recession obviously has made this situation 
far worse. According to Census Bureau/U.S. Department of Agriculture 
official data, 36 million people in the U.S. lived in ``food insecure 
households'' in 2007, before the recession, and 49 million did so in 
2008 (2009 data are not yet available)--a big jump in the first full 
year of the downturn. The government classifies households as ``food 
insecure'' when they cannot afford to purchase a minimally adequate 
diet on a consistent basis. Many, but not all, of them are skipping 
meals and frequently experience hunger.
    Moreover, there are more recent data, from Gallup polling analyzed 
by FRAC, which show that 18 percent of American households (24 percent 
of households with children) reported in 2009 that there had been times 
in the past twelve months when they did not have enough money to buy 
food that they or their family needed. This ``food hardship'' is found 
in every congressional district in America. In 311 Congressional 
Districts 15 percent or more households answered ``yes'' to Gallup's 
question. (For a breakdown of food hardship by state, metropolitan 
statistical area, and Congressional district, see http://frac.org/pdf/
food_hardship_report_2010.pdf.)
    SNAP is the largest nutrition program and the nation's best defense 
against hunger. Even before the recession the program was among the 
largest and strongest public programs that provide economic and 
nutrition support to low-income Americans. But the role of the program 
has become even more essential as the recession has deepened. In April 
2010 (the latest month for which there are data) there were more than 
40.4 million SNAP/food stamp recipients, compared to 28.2 million 2 
years earlier.
    SNAP also boosts the economy. Dollar-for-dollar, it is almost 
certainly the strongest countercyclical program the nation has. The 
money goes to very needy people who have trouble paying their food and 
other bills, and who therefore spend these funds quickly, so that they 
go immediately into the economy with very positive multiplier effects. 
Based on USDA research, every Federal SNAP dollar generates nearly 
twice that in economic activity.
    Most SNAP beneficiaries are children (49 percent) or persons 60 
years of age or older (9 percent). They are in households with very low 
incomes: Only 13 percent of all SNAP households have income above the 
Federal poverty line; nearly 41 percent have incomes at or below half 
of the poverty line.
    Many are in working families. In 2008, 40 percent of SNAP 
participants lived in households with earnings, double the percentage 
of working households in 1989.
    USDA reports that SNAP benefits comprise nearly 24 percent of the 
monthly funds available to the typical SNAP household (gross income 
plus SNAP). Less than 11 percent of all SNAP households receive cash 
benefits through the Temporary Assistance for Needy Families (TANF) 
Program; another five percent receive cash benefits through General 
Assistance (GA). Programs targeted to elderly persons and persons with 
disabilities also assist SNAP participants. Twenty-six percent receive 
Supplemental Security Income (SSI), 25 percent receive Social Security, 
and ten percent receive both of those benefits.
    SNAP delivers vital benefits in an efficient manner in large part 
because it relies on regular streams of commerce. SNAP shoppers spend 
their benefits at regular grocery stores. Moreover, their benefits are 
loaded onto Electronic Benefit Transfer (EBT) cards that operate much 
like the other debit and credit cards that other customers use to make 
their purchases at food retailers. This public-private partnership 
aspect of SNAP is valuable: relying on existing private sector 
retailers and EBT processing systems saves the government from having 
to develop and maintain separate distribution systems for getting food 
to more than 40 million needy people each month and allows SNAP 
recipients more dignity in their use of the benefits.
    These and other strengths of SNAP have earned broad bipartisan 
public and policymaker support. Indeed, a couple of years ago, the 
National Journal ran a lengthy piece on ``10 Successes [and] 10 
Challenges'' in American society--major issues in the public and 
private sectors. Alongside cleaner air, American entrepreneurship, and 
seven other successes was food stamps, described as ``A Government 
Reform That Worked.''
    SNAP is very important and very effective, but its reach is 
undermined by gaps in access and adequacy of benefits as well as by 
administrative burdens. Even with the boosts provided in the American 
Recovery and Reinvestment Act (ARRA), the average SNAP benefit per 
person per day is only about $4.50. And only two in three eligible 
people actually participate in the program.
Maintaining Low Error Rates and Getting Accurate Data to Policymakers 
        and the Public is Key to Maintaining Confidence in the Value of 
        the Program
    Public confidence in program integrity--and ultimately in the worth 
of the program--depends on maintaining low error rates and on having 
accurate facts about SNAP and its operations. QC helps lower error 
rates and publicize these facts, and shows there is a high level of 
program integrity.
    Unfortunately, there is an all-too common misimpression that even 
the relatively small number of cases in the SNAP QC error rate all 
represent ``fraud.'' This equivalence is misplaced.
    The QC payment accuracy rate measures whether SNAP payments go to 
eligible people and whether payments are in correct amounts (not too 
high, and not too low). Moreover, erroneous payments count toward the 
error rate whether they are the result of unintentional or intentional 
mistakes. And the errors do not belong to beneficiaries alone. Far from 
reflecting client mistakes, many SNAP payment errors result from 
unintentional mistakes by caseworkers. Overall, the breakdown in SNAP 
cases between agency-caused errors and client-caused errors is 70 
percent to 30 percent.
    Similarly, almost all clients who receive SNAP benefits are 
eligible for some amount, so that even many QC-countable errors that 
favor clients are simply computational errors in benefits to eligible 
people. In FY 2009 98.59 percent of SNAP cases were eligible for a 
benefit. The percentage of benefit dollars that went to eligible people 
was even higher (98.81 percent).
    Moreover, SNAP benefit overpayments can lead states to recoup the 
excess amounts by deducting benefits from clients' future allotments. 
This is so (1) even if the clients did not cause the errors 
intentionally, and (2) even if the caseworkers, not the clients, caused 
the errors. The amounts at issue can be large, and first notifications 
clients receive about the problems and the recoupments can come long 
after errors have occurred. The recoupment of past benefits can be an 
unsettling process for SNAP households struggling to make their current 
benefits last through the month.
    Finally, benefits are used overwhelmingly for the purpose for which 
they are distributed-food purchases. This has become even truer with 
the advent of EBT in place of paper coupons. That transition in 
distribution method has had positive ramifications for curtailing the 
illegal sale of SNAP benefits for cash (so called ``trafficking''). New 
technologies have given Federal and state administrators tools to 
identify unusual patterns of EBT redemptions and to target 
investigative resources for maximum impact.
Many Errors Disadvantage SNAP Clients
    As noted above, the notion that SNAP clients always or typically 
benefit from erroneous payments when errors occur is far from the case. 
A significant portion of the overall SNAP payment error rate reflects 
underpayments, Federal funds that were intended for needy eligible 
people and instead were not expended. While that result may be lower 
Federal expenditures, it is hardly a happy--or appropriate--result for 
SNAP households or the program itself. Some of those clients abandon 
the process and never receive benefits; others are forced to go through 
the application process again. In the meantime they miss out on 
benefits for weeks or months while their renewed applications are being 
processed.
    Nor are negative errors good news for states. A preliminary USDA 
review of improperly denied or terminated cases suggests that within 6 
months of denial, approximately half of the denied or terminated 
households reapply and are found eligible. This results in 1\1/2\ times 
the work for offices to process those same households, duplicative 
effort few if any SNAP agencies can afford in light of tight state 
budgets and the enormous demands for assistance driven by severe 
economic need.
    We appreciate the focus USDA and its state partners are placing on 
reducing the too high negative error rate and identifying best 
practices for making progress on this front.
Other Indicators of Program Operations
    There are other quality control problems--small ``q'' and small 
``c'', as it were--that aren't within the traditional SNAP QC 
definition per se but have important impacts on payment accuracy and 
overall program performance. They include too-complicated rules built 
into the program or maintained by some states, despite options to do 
otherwise; delays in state action; problems caused by under staffing; 
and other similar problems.
    Congress and USDA agree that we must tackle these problems as well. 
Pursuant to the 2002 Farm Bill authority, USDA's bonus payments to 
states for program performance include not only ``best'' and ``most 
improved'' in payment accuracy and ``best'' and ``most improved'' on 
negative error rate, but also ``best'' and ``most improved'' on the 
percentage of eligible low-income residents participating in SNAP, and 
best on state processing SNAP benefits in a timely manner.
    Options to simplify and streamline eligibility determinations and 
determinations of benefit amounts, such as the 2002 Farm Bill 
provisions which allow states to align various benefit program 
definitions for income and assets, help address some of the factors 
that lead to errors. States need to be more responsive in taking the 
many options they have under current law to simplify the program. But 
more simple criteria and processes are needed--a strategy to improve 
the situation for states, hungry people and taxpayers. As GAO has 
noted, ``multiple variations in approaches to identifying recipients' 
income for determining program eligibility [in different means-tested 
benefit programs] are likely contributing factors'' to payment 
errors.'' (Testimony before the Subcommittee on Federal Financial 
Management, Government Information, Federal Services, and International 
Security, Committee on Homeland Security and Governmental Affairs, U.S. 
Senate, Progress Made but Challenges Remain in Estimating and Reducing 
Improper Payments, Statement of Kay L. Daly, Director Financial 
Management and Assurance, GAO (delivered 4/22/09), GAO-09-628T, at p. 
6.)
    Correct outcomes in case processing--eligibility and benefit 
determinations that are correct and timely--also entail having 
sufficient administrative support, adequate numbers of trained 
caseworkers, and adequate computer systems. The additional 
administrative funding provided in both the American Recovery and 
Reinvestment Act and the FY 2010 Defense spending bill were important 
to assist states in processing SNAP applications at a time of acute 
economic need and rapid increases in requests for SNAP. Ensuring 
adequate supports to states for SNAP administration should remain a 
high priority for achieving goals in both the access and integrity 
areas. This is true both in the short and medium term as unemployment 
and SNAP applications are likely to remain high, and in the longer term 
since many of these problems predate the recession in many states.
    Timeliness is one key piece of this. Federal rules require states 
to process SNAP applications within 30 days (or within 7 days for 
expedited benefits for households with very few other resources to 
purchase food). These standards are in recognition of the reality that 
food is a basic need and delays in access to it spell less adequate 
health and nutrition and more hunger for vulnerable people. In recent 
months, the depth of economic need has led to record numbers of SNAP 
applications and record high enrollment, but in many areas that also 
has contributed to delays in states and counties getting SNAP benefits 
out to eligible people. Some of the delays have led USDA to work with 
the states on corrective steps; and some have led to litigation and 
court remedies.
    Processing delays leave clients without benefits for weeks or 
months when they should be receiving them, add to state and county 
administrators' workloads as increased calls about the status of 
applications stream into SNAP assistance offices and call centers, and 
deprive local economies of the immediate boosts that the missing 
Federal dollars could be providing. We encourage USDA and states to 
continue to identify and implement options and practices that reduce 
unnecessary questions on applications, reduce unnecessary verification, 
and otherwise streamline the certification process and reduce workload 
as part of the effort to achieve timeliness in processing. Moreover, we 
urge states to invest in additional staffing where needed to reduce 
backlogs in applications and to provide more adequate client service.
    Once a household is certified for SNAP, that household may become 
disconnected at recertification for what often is coded as ``procedural 
reasons.'' Unfinished or lost paperwork and difficulty in scheduling or 
making recertification interviews--not an improvement in financial 
circumstances that render the household no longer needy and eligible--
are common factors in SNAP households becoming disconnected from the 
program. As mentioned with respect to the negative error rate, a 
household that is denied or loses SNAP certification even though it is 
eligible is highly likely to reapply as a new case, leading to more 
work for the clients and the caseworkers. Investing in adequate 
staffing and procedures at recertification can help reduce case 
``churning'' (on, off, on again) that affects SNAP Program 
effectiveness, including the resources to ensure payment accuracy, and 
harms families.
    Finally, another way to measure SNAP ``qc'' is the extent to which 
SNAP overall is reaching those who are eligible, not just applicants, 
as measured by USDA. Participation rates among eligible people dropped 
precipitously in the last half of the 1990's, a trend that has 
partially been turned around. Still, despite progress in recent years, 
SNAP is missing \1/3\ of eligible people. Continued efforts to address 
barriers to access are vital. These include eliminating unnecessary 
paperwork and trips to assistance offices, eliminating arbitrary rules 
and procedures, streamlining eligibility through Categorical 
Eligibility and SSI Combined Application Projects, and supporting 
outreach and application assistance (such as through community-based 
organization partnerships).
    Congress can help in important ways now, and in the upcoming farm 
bill. One key step is addressing the adequacy of the benefit. The 
monthly SNAP allotment is predicated on a food plan (the ``Thrifty Food 
Plan'') which was developed during the Depression in the 1930s ``as a 
restricted diet for emergency use.'' The allotment typically carries 
even the most careful of families only \3/4\ or \4/5\ of the way 
through the month. The amount of the Federal Government's own Low-Cost 
Food Budget--the lowest of three government budgets for normal use--is 
approximately 25 percent higher than the Thrifty Food Plan, and should 
be the basis for SNAP allotments. That Low-Cost Food Budget is 
generally in line with what low and moderate-income families report 
that they need to spend on food, as opposed to the lower amount a food 
stamp allotment would provide. Steps to address benefit adequacy 
include:

   maintaining the value of the ARRA benefit boost and not 
        allowing that level to erode with food cost inflation; this 
        includes rejecting any effort to roll back the boost and use 
        the money--literally food taken out of the months of 
        beneficiaries--as an offset for other purposes;

   adjusting benefit amounts in a timely manner; while the 
        benefit allotment is adjusted for inflation each year, the 
        increases come only after a time lag, so the allotment reflects 
        not current prices but the prices of the (already inadequate) 
        Thrifty Food Plan from between 4 and 16 months earlier;

   increasing the minimum benefit ($16 per month under the ARRA 
        boost) so that elderly households receive at least an amount 
        that is equivalent in value to the floor set in the 1970s;

   fully allowing SNAP benefits to be adjusted when high 
        housing costs consume more of a family's income; and

   improving earnings disregards and other benefit computation 
        rules.

    In addition to steps to improve benefits, other changes are 
important to help reach more households in need. Congress should:

   extend the program to needy people now excluded from 
        benefits by arbitrary eligibility rules, including by restoring 
        eligibility to all legal immigrants, dropping the lifetime ban 
        on benefits for drug felons who are making a new start in 
        society, and removing time limits on receipt of SNAP by certain 
        jobless adults seeking work;

   allow all states to operate the SSI CAP model that 
        seamlessly enrolls SSI recipients into SNAP, and encourage 
        other data matching initiatives;

   provide adequate resources to states and community partners 
        for administration of SNAP and outreach and nutrition education 
        (these should include restoring a greater Federal share in 
        administrative expenses and enhanced Federal matches for state 
        investments in operational improvements); and

   promote increased access by low-income people to nutritious 
        food in neighborhoods, including by fostering development of 
        supermarkets and outlets in ``food deserts,'' and by equipping 
        all farmers' markets with EBT capability.

    Mr. Kagen. Thank you for your testimony. We look forward to 
partnering with you to improving the farm bill and the SNAP 
program.
    Now, Mr. Faber.

        STATEMENT OF SCOTT E. FABER, VICE PRESIDENT FOR
             FEDERAL AFFAIRS, GROCERY MANUFACTURERS
                 ASSOCIATION, WASHINGTON, D.C.

    Mr. Faber. Thank you, Mr. Kagen, and thank you for the 
opportunity to testify on the Supplemental Nutrition Assistance 
Program. GMA strongly supports SNAP and we look forward to 
working with you to ensure that SNAP meets the hunger and 
nutritional needs of low-income Americans.
    As we have heard, SNAP has never been more important than 
during the current recession. The program is currently 
supporting the nutritional needs of more than 40 million 
Americans in more than 18 million households, an all-time high. 
And the reach of the program is extraordinary. One in four 
children rely on SNAP to meet their basic food needs. And yet 
despite this rapid growth in SNAP expenditures, food stamp 
error rates are at an all-time low, and that is because SNAP 
has one of the most rigorous quality control systems of any 
public benefit program.
    As Jim has just alluded to, USDA has found that more than 
98 percent, nearly 99 percent, of benefits are issued to 
eligible households, and recently announced the national error 
rate was just 4.36 percent, which of course includes 
underpayments as well as overpayments.
    Clearly SNAP is the cornerstone of America's nutrition 
safety net, but the food industry also has an important role to 
play as we struggle to address hunger. Each year food 
manufacturers donate more than 310 million pounds of food to 
national and local food banks through the Feeding America 
network. In 2010 our members committed to increase our 
donations by 20 percent, or by 60 million pounds.
    The food industry also has an important role as we struggle 
to promote healthy diets and lifestyles, and that is why we 
share the Administration's goals of both eliminating childhood 
hunger by 2015, and ending childhood obesity within a 
generation.
    Just as we are doing our part to address hunger, our 
industry is doing our part to promote healthy diets and 
lifestyles. In recent years we have changed the ingredients in 
more than 10,000 of our products to reduce calories, fats, 
sugars and sodium without sacrificing the taste, convenience 
and affordability that consumers demand. We are also working 
with the Administration to devise new food labels that will 
make information about calories and other nutrition facts 
clearer for consumers, including low-income consumers.
    Government has an important role to play as well. For 
example, government can do much more to promote physical 
activity in school, as Chairman Baca has proposed in H.R. 4457. 
Government can also set science-based standards for the foods 
that are sold in the school environment, as has been proposed 
in child nutrition legislation. Government can do much more to 
promote nutrition education, not only in our schools, but in 
the marketplace and the workplace. And government can do much 
more to promote greater access to healthy foods by bringing 
grocery stores and farmers markets to underserved areas.
    Increasing nutrition knowledge and providing more healthy 
choices, not limiting choices, should be the focus of our 
efforts to build healthy diets and lifestyles. And SNAP can be 
an important tool in this effort. Studies have found that 
children in low-income households have a far lower risk of 
being overweight if they participate in certain Federal 
nutrition programs. However, limiting SNAP choices, as some 
have proposed, would not reduce the risk of obesity and would 
dramatically increase program cost and complexity. Instead, 
policymakers should expand SNAP education efforts and support 
incentives to encourage healthier choices such as the Healthy 
Incentives Pilot created by the 2008 Farm Bill. Studies have 
shown that a 20 percent reduction in the price of fruits and 
vegetables would reduce daily consumption to 2.2 cups.
    In conclusion, the Grocery Manufacturers Association 
strongly supports SNAP, we applaud the temporary increase in 
benefits made through the Recovery Act, and we look forward to 
working with this Committee and the Administration to ensure 
that SNAP contributes to the nutritional needs of low-income 
Americans. Thank you.
    [The prepared statement of Mr. Faber follows:]

   Prepared Statement of Scott E. Faber, Vice President for Federal 
      Affairs, Grocery Manufacturers Association, Washington, D.C.
    Thank you for the opportunity to testify on the Supplemental 
Nutrition Assistance Program.
    My name is Scott Faber and I am Vice President for Federal Affairs 
of the Grocery Manufacturers Association (GMA), which represents more 
than 300 food, beverage, and consumer product manufacturers and 
retailers. GMA strongly supports the Supplemental Nutrition Assistance 
Program (SNAP) and we look forward to working with you to ensure that 
SNAP meets the hunger and nutritional needs of low-income Americans.
    SNAP has never been more important than during the current 
recession. As you know, the program is currently supporting the 
nutritional needs of more than 40 million Americans in more than 18 
million households--an all-time high. The reach of the program is 
extraordinary--one in four children rely on SNAP to meet their basic 
food needs. Unprecedented growth in the SNAP program is not only 
meeting the nutritional needs of millions of additional Americans 
impacted by the recession but has also provided a significant stimulus 
for the economy. For every dollar spent on SNAP benefits, GDP is 
increased by nearly $2 \1\--one of the strongest economic stimulus 
provisions included in the American Recovery and Reinvestment Act.
---------------------------------------------------------------------------
    \1\ Hansen and Golan, Effects of Changes in Food Stamp Expenditures 
Across the U.S. Economy, Food Assistance and Nutrition Research Report 
26-6, USDA, August 2002.
---------------------------------------------------------------------------
    Despite rapid growth in SNAP expenditures, food stamp error rates 
are at an all-time low. SNAP has one of the most rigorous Quality 
Control systems of any public benefit program. As you know, states 
review the accuracy of the eligibility and benefits of a representative 
sample of SNAP recipients and are subject to penalties if error rates 
remain above the national average. USDA has found that more than 98 
percent of benefits are issued to eligible households and recently 
announced that the national error rate was just 4.36 percent, which 
includes underpayments as well as overpayments.
Food Stamp Error Rates
Fiscal Years 1990-2009




    In addition, the use of Electronic Benefit Transfer (EBT) cards to 
provide benefits to SNAP recipients has significantly reduced food 
stamp trafficking. Retailers or recipients who defraud the program by 
trading food stamps for money or non-food items face tough criminal 
penalties, and sophisticated programs have been established to monitor 
transactions for patterns that may suggest abuse.
    SNAP is the cornerstone of America's nutrition safety net. But, the 
food industry also has an important role to play as we struggle to meet 
nutritional needs of hungry Americans. Each year, food manufacturers 
donate more than 310 million pounds of food to national and local food 
banks through the Feeding America network--more than 80 percent of the 
donations made to Feeding America. In 2010, our members have committed 
to increase our donations by 20 percent--or by 60 million pounds.
    Food and beverage manufacturers and retailers share the President's 
goal of eliminating childhood hunger by 2015 and share the First Lady's 
goal of ending childhood obesity within a generation.
    In particular, our industry is doing our part to promote healthy 
diets and lifestyles. In recent years, we have changed the ingredients 
in more than 10,000 of our products to reduce calories, fats, sugars 
and sodium without sacrificing the taste, convenience and affordability 
that consumers demand. We are also working with the Administration to 
devise new labels that will make information about calories and other 
nutrition facts clearer for consumers. And, we have changed the 
messages we deliver to promote healthier diets and active lifestyles.
    Government also has an important role to play. Government can do 
more to promote physical activity in school and after school, as 
Chairman Baca has proposed in H.R. 4557. Government can do more to 
promote nutrition education--not only in school, but in the marketplace 
and the workplace as well. Government can set science-based standards 
for foods sold in the school environment, as has been proposed in Child 
Nutrition legislation. And, government can do more to promote greater 
access to healthy foods by bringing grocery stores to underserved 
areas.
    To end childhood obesity in a generation, we must provide parents 
and children with more healthy choices, promote healthy diets and 
provide new opportunities for physical activity. As the First Lady has 
said, ``This is not like a disease where we're still waiting for a cure 
to be discovered--we know the cure for this. We have everything we 
need, right now, to help our kids lead healthy lives.'' Everyone has a 
role to play in this fight: the public sector, private industry and 
parents. We pledge to do our part by continually changing the way we 
develop and market our products.
    Providing more healthy choices--not limiting choices--and enhancing 
nutrition knowledge should be the focus of efforts to build healthy 
diets and lifestyles. SNAP can be an important tool in this effort. 
Studies have found that children in low-income households have a lower 
risk of being overweight if they participated in certain Federal 
nutrition programs.\2\ However, limiting SNAP choices, as some have 
proposed, would not reduce the risk of obesity and would dramatically 
increase program costs and complexity.\3\ Instead, policymakers should 
expand SNAP education efforts and support incentives to encourage 
healthier choices, such as the Healthy Incentives Pilot created by the 
2008 Farm Bill.
---------------------------------------------------------------------------
    \2\ Jones S., Jahns L., Laraia B.A., Haughton B. School-aged food 
insecure children who participate in food assistance are less likely to 
be at risk of overweight: Results from the Panel Study of Income 
Dynamics Child Development Supplement. Arch. Pediatr. Adolesc. Med. 
2003; 157:780-784.
    \3\ USDA, Food and Nutrition Service, Implications of Restricting 
the Use of Food Stamp Benefits, March 2007 (attached).
---------------------------------------------------------------------------
    In conclusion, the Grocery Manufacturers Association strongly 
supports SNAP and USDA's sound oversight of taxpayer dollars through 
this programs. We applaud the temporary increase in benefits made 
through ARRA and look forward to working with this Committee and the 
Administration to ensure that SNAP continues to meet the nutritional 
needs of low-income Americans. We look forward to working with you to 
better address the nation's hunger and health needs.
                               Attachment
USDA--Food and Nutrition Service
March 1, 2007
Implications of Restricting the Use of Food Stamp Benefits_Summary
    By most standards, almost all American diets are in need of 
improvement. Given interest in using Federal nutrition assistance 
programs to promote healthy choices, some suggest that food stamp 
recipients should be prohibited from using their benefits to buy foods 
with limited nutritional value. However, there are serious problems 
with the rationale, feasibility and potential effectiveness of this 
proposal.

    No clear standards exist for defining foods as good or bad, or 
healthy or not healthy.

   Federal dietary guidance uniformly applies to the total 
        diet--there are no widely accepted standards to judge the 
        ``healthfulness'' of individual foods.

   Foods contain many components that can affect health, and 
        diets contain many foods. As a result, it is challenging to 
        determine whether--and the point at which--the presence or 
        absence of desirable nutrients outweighs the presence of 
        nutrients to be avoided in ruling a food ``in'' or ``out''.

    Implementation of food restrictions would increase program 
complexity and costs.

   There are more than 300,000 food products on the market, and 
        an average of 12,000 new products were introduced each year 
        between 1990 and 2000. The task of identifying, evaluating, and 
        tracking the nutritional profile of every food available for 
        purchase would be substantial. The burden of identifying which 
        products met Federal standards would most likely fall on an 
        expanded bureaucracy or on manufacturers and producers asked to 
        certify that their products meet Federal standards.

   Responsibility for enforcing compliance would rest in the 
        hands of employees at check-out counters in 160,000 stores 
        across the nation. While many have modern scanning and 
        inventory control systems, others--especially small stores and 
        specialty markets--do not.

   New effort would be needed to help participants avoid the 
        rejection of purchases at the check-out counter, an event with 
        the potential to reduce productivity at the register and 
        stigmatize participants.

    Restrictions may be ineffective in changing the purchases of food 
stamp participants.

   About 70 percent of all food stamp participants--those who 
        receive less than the maximum benefit--are expected to purchase 
        a portion of their food with their own money. There is no 
        guarantee that restricting the use of food stamps would affect 
        food purchases--other than substituting one form of payment 
        (cash) for another (food stamps).

    No evidence exists that food stamp participation contributes to 
poor diet quality or obesity.

   There is no strong research-based evidence to support 
        restricting food stamp benefits. Food stamp recipients are no 
        more likely than higher income consumers to choose foods with 
        little nutritional value; thus the basis for singling out low-
        income food stamp recipients and restricting their food choices 
        is not clear.

    There are better ways to work towards the goal of healthier diets 
that do not require such restrictions. Incentives--rather than 
restrictions--that encourage purchases of certain foods or expanded 
nutrition education to enable participants to make healthy choices are 
more practical options and likely to be more effective in achieving the 
dietary improvements that promote good health.
Implications of Restricting the Use of Food Stamp Benefits
Introduction
    By most standards, almost all American diets are in need of 
improvement, and obesity has emerged as the nation's most pressing 
health and nutrition issue. Because of concerns about poor diet, 
overweight, and obesity among low-income Americans, there is 
considerable interest in using Federal nutrition assistance programs to 
promote healthy choices. Some argue that food stamp recipients should 
be prohibited from using their benefits to buy foods with limited 
nutritional value (commonly described as ``junk'' foods).\1\ The Food 
Stamp Act currently places few limits on the use of food stamp 
benefits, as long as they are used to buy food to eat at home.
---------------------------------------------------------------------------
    \1\ This suggestion actually has a rather long history. The House 
Committee on Agriculture considered and rejected an amendment to 
eliminate foods with negligible or little nutritional value in its 
deliberations that led to the Food Stamp Act of 1977, saying that the 
amendment was ``a cure worse than the disease of so-called `junk food' 
'' (House Report No. 95-464, page 333, June 24, 1977).
---------------------------------------------------------------------------
    The idea of restricting the use of food stamp benefits may be 
appealing on its face. However, upon closer examination, serious 
concerns emerge regarding the feasibility and rationale for the 
proposed restriction.

   No clear standards exist to define foods as good or bad, or 
        healthy or not healthy;

   Food restrictions would pose major implementation challenges 
        and increase program complexity and costs;

   Restrictions may not change the nature of participants' food 
        purchases;

   No evidence exists which indicates that food stamp benefits 
        directly contribute to poor food choices and negative dietary 
        outcomes, such as obesity.
Making Distinctions among Foods
    It is not a simple task to draw a bright line between foods that 
contribute to a healthy diet and those that do not. Common sense 
suggests avoiding foods that are low in nutrients but high in some 
combination of calories, fats, added sugars, and salt. In practice, 
however, drawing the distinction between healthy and unhealthy foods is 
far more difficult.
    The Dietary Guidelines for Americans, MyPyramid, the American 
Dietetic Association, and most nutritionists take a total diet approach 
to communicate healthful eating advice, placing emphasis on the overall 
pattern of food eaten, rather than any one food or meal. Mainstream 
nutrition guidance embodies the concept that ``there are no bad foods, 
only bad diets.'' Thus, the most common advice is to ``go easy'' on or 
limit foods with limited nutritional value and stay physically active 
to maintain a healthy weight.\2\ If food stamp policy is to move away 
from the consensus of the nutrition community and instead draw a line 
between good foods and bad foods, decisions are needed on several 
difficult issues. For example:
---------------------------------------------------------------------------
    \2\ Specifically, the Dietary Guidelines for Americans urge 
consumption of a variety of nutrient-dense foods and beverages within 
and among the basic food groups while choosing foods that limit the 
intake of saturated and trans fats, cholesterol, added sugars, salt, 
and alcohol.

   Should standards for a healthy diet be applied to individual 
        foods? The Dietary Guidelines for Americans and the Dietary 
        Reference Intakes provide benchmarks for determining 
        nutritional adequacy in the United States. All of these 
        standards apply to the total diet, however. It is not clear 
        that the same standards should apply to individual foods, nor 
        how such a thing could be done. There are recommended limits, 
        for example, on the amount of fat in a healthy diet. Yet there 
        are individual foods--such as some meats and nuts--that are 
        generally recognized as making positive contributions to a 
        balanced diet, but which have a high proportion of fat. To 
        simply eliminate such foods would not necessarily result in a 
        net improvement in a person's diet.\3\
---------------------------------------------------------------------------
    \3\ Various local, state, and national organizations have 
established criteria to control individual foods sold in competition 
with meals provided through the National School Lunch and Breakfast 
Programs. However, there are some fundamental differences between 
voluntary guidelines that limit foods in school and statutory limits on 
food stamp purchases. Most importantly, the number and range of 
``competitive'' foods available in schools is much smaller than the 
variety of foods in grocery stores.

   If the standards for individual foods are different than the 
        standards for the total diet, how does one determine the 
---------------------------------------------------------------------------
        appropriate benchmarks? Key issues to be resolved include:

     Which nutrients or ingredients should be considered? 
            Scientists have identified dozens of vitamins, minerals, 
            amino acids, fatty acids, and other nutrients that play an 
            essential role in human nutrition. The larger the number of 
            ingredients or nutrients considered, the more difficult it 
            may be to find foods that simultaneously satisfy multiple 
            criteria for ``healthfulness''. Although it may be more 
            practical to limit consideration to a handful of nutrients 
            of public health concern--assuming a consensus on which 
            nutrients qualify as public health concerns--such limits 
            may unintentionally exclude foods high in nutrients not 
            considered.

     Are ``healthy'' foods characterized by the absence of 
            nutrients to be avoided, the presence of desirable 
            nutrients, or a combination of both? The choice here is not 
            straightforward. Diet sodas, for example, may pass a test 
            based only on the absence of undesirable nutrients: they 
            have no fat or sugars, are low in calories, and contain 
            little sodium. Based on these criteria alone, they would 
            appear preferable to orange juice. Similarly, some brands 
            of potato chips have less sodium per serving than some 
            popular brands of breakfast cereal. Characterizing foods 
            based on the presence of desirable nutrients can be 
            similarly problematic. Doughnuts are not often a source of 
            desirable nutrients, but at least one manufacturer offers a 
            ``SuperDonut'' fortified with protein, vitamins, and 
            minerals--along with significant calories, fat, and added 
            sugars. Finally, if both characteristics are important, one 
            needs to determine the point at which the benefit of 
            desirable nutrients outweighs the presence of nutrients to 
            be avoided or consumed in moderation. Some fortified 
            breakfast cereals, for example, contain relatively high 
            levels of added vitamins and minerals, but are also high in 
            added sugars and sodium. (See Appendix A for more 
            examples). The question then becomes which foods should be 
            permitted, and which should not?

     What is the most appropriate means of assessing the 
            nutritional value of any given food? In general, the basis 
            for classifying foods must be sufficiently sophisticated to 
            make objective distinctions based on the nutritional value 
            of the vast number of foods available for sale. It must 
            also be sufficiently simple to be workable. A number of 
            options are available: common sense, expert or stakeholder 
            opinion, and formula-driven assessments of ingredients or 
            nutrient content (see Appendix B for more detail). None is 
            without significant shortcomings.

    Some have suggested giving each state the option to develop its own 
definition of allowable foods. This option is problematic for several 
reasons. First, there is no scientific basis for allowing nutrition 
standards to vary from place to place within the United States. Second, 
a state option does not eliminate special-interest pressures; it simply 
shifts the location of the debate and gives greater weight to local--
sometimes parochial--interests. And third, variation in state 
requirements will complicate retail industry compliance and increase 
the cost of doing business.
Implementation Challenges
    Even if decisions could be made that distinguish allowable foods 
from restricted foods, there are still difficult implementation 
challenges. Part of the difficulty stems from the enormous variety and 
scale of the American food sector. The typical supermarket carries 
about 40,000 products on its shelves. There are more than 300,000 food 
products available in the marketplace nationwide; an average of about 
12,000 new food items were introduced each year between 1990 and 
2000.\4\ Program participants make roughly one billion food purchase 
transactions each year.\5\
---------------------------------------------------------------------------
    \4\ Harris, J. Michael. ``Food Product Introductions Continue to 
Decline in 2000.'' FoodReview, Volume 25, Issue 1, 24-27, Spring 2002.
    \5\ Olander, Carol, Erika Jones, and Steven Carlson. An Analysis of 
Food Stamp Benefit Redemption Patterns. Report prepared by the Food and 
Nutrition Service, USDA, June 2006. Available at www.fns.usda.gov/oane.
---------------------------------------------------------------------------
    The scale of the food sector creates three types of administrative 
and implementation problems: identifying the specific foods (or food 
categories) that are allowed or excluded, supplying current information 
on allowable foods to retailers and participants in a form that enables 
them to comply with the rule, and monitoring and enforcing compliance.

   Identifying, evaluating, and tracking the nutritional 
        profile of every food product available for purchase in the 
        constantly changing market would be an enormous undertaking. 
        Taken literally, the task would require judgments about the 
        nutritional quality of every existing and new food product. 
        There is no existing data base--one that uniquely identifies 
        every food product and links it to a nutritional profile 
        (through the Nutrition Facts panel, for example)--that could 
        support this operation; new data--and the resources and 
        capacity to process these data--would be needed. This implies a 
        significant expansion of government responsibility and 
        associated bureaucracy, at a significant cost.

    The burden and cost for the Federal Government could be reduced, 
        but only by shifting it to private business and, ultimately, 
        consumers. For example, food manufacturers and producers could 
        be required to certify that their product meets the Federal 
        standard for food stamp purchases. These entities would be 
        expected to pass the cost of complying with this requirement on 
        to consumers in the form of higher prices. It also raises the 
        question of whether--and if so, how--the Federal Government 
        should monitor and verify such certifications. And unless 
        certified products are labeled as such, there is still need to 
        inform authorized retailers in a manner that enables them to 
        update their point-of-sale systems.

    In addition, one could choose to declare entire food categories--
        such as carbonated beverages, candy and gum, salty snack 
        foods--as unallowable rather than individual foods.\6\ Unless 
        the boundaries between categories are sharply drawn, however, 
        this approach would simply shift the burden and responsibility 
        of determining which products fall into the broad categories 
        and which do not to retailers and their employees. Some 
        boundaries--the distinctions between some candy bars and 
        fortified energy bars, or between carbonated soft drinks and 
        flavored sports drinks, for example--may never be as sharp as 
        they need to be.
---------------------------------------------------------------------------
    \6\ National School Lunch Program regulations, for example, 
prohibit the sale of food of minimal nutritional value (FMNV) in 
competition with school meals. Foods are prohibited by category: soda 
water (carbonated beverages), water ices, chewing gum, and certain 
candies. The definition of FMNV focuses on eight nutrients: protein, 
vitamin A, vitamin C, niacin, riboflavin, thiamine, calcium, and iron. 
FMNV can be exempted from the prohibition if they provide more than 
five percent of the Reference Daily Intakes per serving and per 100 
calories (foods that are artificially sweetened are assessed only on 
nutrients per serving).

   New restrictions on the use of food stamps place the burden 
        of enforcing compliance in the hands of store employees at 
        check-out counters across the nation. This may be feasible in 
        stores with modern scanning and inventory control systems. 
        However, some of the 160,000 stores authorized to accept food 
        stamps--especially small stores and specialty markets--do not 
        have such system, posing a major employee training challenge 
        for those entities. Even in those stores with modern scanning 
        equipment, implementation would require development of means to 
        periodically notify retailers of allowable foods and 
        modification of in-store systems to implement the distinctions. 
        Moreover, confusion at the register about allowable items (by 
        either employees or recipients) would reduce productivity at 
---------------------------------------------------------------------------
        the register.

   Food stamp recipients would face increased complexity and 
        potential for embarrassment if restrictions on the use of 
        benefits are substantially expanded. The imposition of new food 
        restrictions would require more effort by recipients to 
        understand which foods are allowed and which are not--
        suggesting that substantial resources would be needed to 
        educate participants on allowable food choices. Even with such 
        efforts, however, it is likely that some recipients will not 
        always be able to keep track of which foods are allowed, thus 
        increasing the chances that some purchase transactions will be 
        rejected at the check-out counter. This has the potential to 
        stigmatize participants by singling them out as food stamp 
        recipients, and may discourage some eligible low-income persons 
        from participating in the program.

   Finally, a new definition of ineligible items increases the 
        likelihood of compliance violations. Retailers that sell 
        ineligible items can be disqualified from the program or 
        assessed a monetary penalty. Recipients that purchase 
        ineligible items may be sanctioned. Expanding the pool of 
        ineligible items increases opportunities for non-compliance, 
        expands the need for oversight, and may increase the number of 
        retailers or recipients found in violation of program rules.
Effects of Restricting Food Stamp Benefits on Food Purchases
    It is not clear that a limit on the acceptable uses of food stamp 
benefits would actually change the nutrition profile of food purchases. 
Restricting the use of food stamps would not limit consumer choice at 
all if food stamp recipients continue to purchase any food they want 
using their own money. While food stamp benefits make up a substantial 
share of the food budget in most food stamp households, they do not 
necessarily provide the entire food budget, nor are they expected to do 
so.\7\ There is no way to know--other than through carefully designed 
and evaluated pilot tests--to what extent the proposed restriction 
would have the desired effect of reducing purchases of foods with 
limited nutritional value. But it is difficult to justify the 
substantial cost and other burdens associated with identifying and 
enforcing new food restrictions given the very real possibility that 
individuals would simply substitute one form of payment (cash) for 
another (food stamps) in order to purchase unallowable foods.
---------------------------------------------------------------------------
    \7\ Roughly 70 percent of all food stamp households receive less 
than the maximum food stamp benefit, and so are expected to contribute 
a portion of their cash income to food purchases (see Table A-1 in 
Characteristics of Food Stamp Households: Fiscal Year 2005). According 
to the Consumer Expenditure Survey, average food expenditures by low-
income households (for both food at home and away from home) exceeded 
the average food stamp benefit by about 40% in FY 2004. While not all 
low income households are necessarily food stamp recipients, this data 
does suggests that some food stamp households have money for food 
expenditures which could be used for purchase of prohibited items.
---------------------------------------------------------------------------
    One should also be wary of the possibility of unanticipated or 
unintended consequences. Limits on the definition of allowable foods 
may create incentives for manufacturers to reformulate products to 
satisfy the new rule. This may be a positive development if the 
industry finds ways to improve the nutritional profile of the American 
food supply. It is not clear, however, that simply fortifying more 
foods is a desirable response to the obesity epidemic.\8\ Similarly, 
blanket restrictions on the purchase of higher fat foods may not serve 
the needs of families with young children. Dietary advice to reduce the 
level of fat in food consumed does not apply to very young children 
(who need fat for healthy development).
---------------------------------------------------------------------------
    \8\ There are instances when fortified foods may be advantageous. 
These include providing additional sources of certain nutrients that 
might otherwise be present only in low amounts in some food sources, 
providing nutrients in highly bioavailable forms, and where the 
fortification addresses a documented public health need.
---------------------------------------------------------------------------
Relationship between Food Stamps, Food Consumption, and Dietary 
        Outcomes
    The body of research on the Food Stamp Program does not support the 
view that restricting food choices will result in more healthful food 
purchases and consumption or improved dietary outcomes. Research 
clearly indicates that participation in the program increases household 
spending on food. Food stamp recipients shop frequently and use careful 
shopping practices--such as comparing prices across stores, looking for 
store specials and stocking up on bargains--in order to stretch their 
food buying resources. A majority of benefits are spent on basic food 
items: vegetables, fruits, grain products, meat and meat alternatives 
account for nearly \3/4\ of the money value of food used by food stamp 
households.\9\
---------------------------------------------------------------------------
    \9\ U.S. Department of Agriculture, Food and Nutrition Service. 
Making America Stronger: A Profile of the Food Stamp Program. September 
2005. Available at www.fns.usda.gov/oane.
---------------------------------------------------------------------------
    Preliminary findings from a forthcoming USDA analysis of national 
food consumption data indicate that food stamp recipients are somewhat 
less likely to have adequate intakes of many key nutrients--including 
Vitamins A, B6, C, and E; thiamin; riboflavin; folate; 
magnesium; iron, and zinc--than are higher-income individuals. But 
these differences are not the result of greater consumption of foods 
which would be likely targets for restrictions. For example, food stamp 
recipients are no more likely to consume soft drinks than are higher-
income individuals, and are less likely to consume sweets and salty 
snacks.\10\
---------------------------------------------------------------------------
    \10\ Special preliminary tabulations of 1999-2002 data from the 
National Health and Nutrition Examination Survey prepared for the Food 
and Nutrition Service by Abt Associates.

------------------------------------------------------------------------
                                                     Percent of Persons
                             Percent of Food Stamp    with Income over
       Food Category          Program Participants     130% of Poverty
                               Consuming at Least    Consuming at Least
                                  Once per Day          Once per Day
------------------------------------------------------------------------
Soft Drinks (Regular and                 61.0                   59.2
          Sugar-Free) *
                Sweets                   61.6                   72.1
          Salty Snacks                   29.6                   36.5
------------------------------------------------------------------------
Sweets include jello, candy, ice cream, pudding, Ice/popsicles, muffins,
  sweet rolls, cake/cupcakes, cookies, pies/cobblers, pastries and
  doughnuts. Salty snacks include corn-based salty snacks, pretzels/
  party mix, popcorn, and potato chips.
* Difference is not statistically significant.

    Finally, no evidence exists that Food Stamp Program participation 
causes obesity. While poverty is associated with obesity in some 
population groups and Food Stamp Program participation is closely 
linked with poverty, the independent effect of program participation on 
obesity is unknown.\11\
---------------------------------------------------------------------------
    \11\ Linz, Paul, Michael Lee, and Loren Bell. Obesity, Poverty, and 
Participation in Nutrition Assistance Programs. Report prepared by Alta 
Systems for the Food and Nutrition Service, USDA, February 2005. 
Available on-line at www.fns.usda.gov/oane.
---------------------------------------------------------------------------
    Taken together, this research suggests that achieving dietary 
improvement among food stamp recipients is a complex challenge. It is 
not likely to be met by prohibiting use of benefits for a group of 
foods perceived as having limited nutritional value. Low-income 
consumers and food stamp recipients are subject to the same factors 
that influence food choices throughout our society--including marketing 
strategies, cultural preferences, the value of convenience, and 
personal tastes. Restricting the use of food stamp benefits would 
change only one variable in the complex calculus that results in a 
more--or less--healthful diet. More fundamentally, as the problems of 
poor food choices, unhealthy diets, and excessive weight characterize 
all segments of American society, the basis for singling out low-income 
food stamp recipients and imposing unique restrictions on their food 
choices is not clear.
Conclusion
    The idea of restricting the food choices of food stamp recipients 
as a means of promoting dietary improvement among low-income Americans 
has serious conceptual and practical flaws. There are better 
alternatives for promoting healthier diets. One could, for example, 
consider incentives--rather than restrictions--to encourage purchases 
of selected foods (fruits and vegetables or whole grains, for example) 
by food stamp participants. Or one could expand and strengthen 
nutrition education and promotion to make sure that participants have 
the knowledge, skills, and motivation they need to make healthy 
choices. These approaches are more practical, and likely to be more 
effective than restricting choice in achieving the dietary improvements 
that promote good health.
    USDA's 2007 Farm Bill proposals include a $100 million investment 
to establish a 5 year competitive grants demonstration program targeted 
at developing and testing solutions to the rising rates of obesity. 
These efforts would include rigorous independent evaluations to 
identify effective approaches, such as incentives at point-of-sale for 
purchases of fruits and vegetables by food stamp participants, grants 
to connect food stamp shoppers with farmers markets, and integrated 
communication and education programs to promote healthy diets and 
physical activity.
         appendix a: the slippery slope of characterizing foods
    Why is it so hard make distinctions among individual foods?
    Part of the problem is that foods contain many components that 
singly or collectively can affect health, and diets contain many foods. 
Attention paid to the presence or absence of single nutrients and to 
the relationship between those nutrients and particular diseases often 
comes at the expense of attention to the overall dietary pattern. For 
example, at the substantial risk of oversimplification, concerns about 
obesity may lead one to focus on calories and added sugars; concerns 
about chronic heart disease may lead to a focus on saturated fats, 
trans fats, and cholesterol; and concerns about hypertension may lead 
to a focus on sodium. Too narrow a focus, however, can lead one onto a 
slippery slope with puzzling results.
    Consider these examples, derived from information on the Nutrition 
Facts panel:

   Soft drinks have less total fat, saturated fat, and sodium 
        per serving than some granola bars.

   One manufacturer markets a low-calorie carbonated beverage 
        fortified with calcium and real fruit juice that has fewer 
        calories and total sugars (though more added sugars) per 
        serving than a typical serving of orange juice.

   Some brands of potato chips have less sodium per serving 
        than some of the most popular brands of breakfast cereal.

   Some candy bars have a lower percentage of calories from fat 
        and less saturated fat than a serving of cheddar cheese.

    At least two cautions apply to these comparisons. First, each is 
based on the serving size listed on food labels. While subject to 
regulation, serving sizes do not always reflect consumption patterns; 
comparisons of food as actually consumed may produce different results. 
Second, some of the foods listed here have other beneficial nutrients, 
and some do not. Drinkable yogurts, for example, can provide 25 percent 
or more of a wide range of vitamins and minerals in each serving; most 
soft drinks are not a significant source of any nutrient other than 
sugars.
            appendix b: means of assessing nutritional value
    Even if agreement can be reached in principle on a conceptual 
approach to distinguish allowable foods from restricted foods, there 
remains the challenge of putting such definition into practice. Several 
approaches could be considered; however, each has significant 
drawbacks.

   Expert and/or Stakeholder Opinion: One could rely on 
        ``common sense'' or the judgment of expert panels made up of 
        dietetics professionals, physicians, public health researchers, 
        and other stakeholders (consumers, producers, manufacturers, 
        retailers). The problem with common sense and expert or 
        stakeholder panels is that both can be influenced by a number 
        of factors, not all of which are necessarily related to the 
        nutritional value of the food under consideration. It is also 
        unlikely that expert panels could render judgment on over 
        300,000 separate food items; they are more likely to recommend 
        exclusion of broad categories (soft drinks, cookies, cakes, 
        salty snacks, for example). This simply defers the item-by-item 
        decisions that need to be made to implement a restriction at 
        the check-out counters.

   Foods of Minimal Nutritional Value: National School Lunch 
        Program regulations prohibit the sale of food of minimal 
        nutritional value (FMNV) in competition with school meals. 
        Foods are prohibited by category: soda water (carbonated 
        beverages), water ices, chewing gum, and certain candies 
        (including hard candies, jellies and gums, marshmallow candies, 
        fondant, licorice, spun candy, and candy-coated popcorn). The 
        definition of FMNV focuses on eight nutrients: protein, vitamin 
        A, vitamin C, niacin, riboflavin, thiamine, calcium, and iron. 
        FMNV can be exempted from the prohibition if they provide more 
        than five percent of the Reference Daily Intakes per serving 
        and per 100 calories (foods that are artificially sweetened are 
        assessed only on nutrients per serving). This approach is a 
        conservative one, identifying a limited set of foods that make 
        the least contribution to a healthy diet.

   A 5/20 Rule: The Food and Drug Administration advises 
        consumers to limit certain nutrients listed on the Nutrition 
        Facts panel while consuming adequate amounts of others.\12\ 
        Foods providing five percent or less of the daily value (DV) 
        are considered low in particular nutrients; foods that have 20 
        percent or more of the DV are considered high in the nutrient. 
        Thus, for example, an allowable food could be defined as one 
        which contains no more than 20 percent of the DV of total and 
        saturated fats, cholesterol or sodium and no less than five 
        percent of the DV of at least one of these nutrients: dietary 
        fiber, vitamin A, vitamin C, calcium, and iron.\13\ One serious 
        limitation of this approach is the absence of a daily reference 
        value for added sugars and trans fats.\14\ In addition, some 
        nutrients of concern across the lifespan are not required on 
        the food label (such as potassium). Application of this 
        approach may also conflict with current health recommendations 
        for certain foods (such as certain nuts and fish high in omega-
        3 fatty acids). In practice, relatively few snack foods would 
        fail the 20 percent threshold for total fats and for saturated 
        fat, and many of those that pass the five percent threshold 
        would do so on the basis of their fiber content.
---------------------------------------------------------------------------
    \12\ Food and Drug Administration. (2004). How to Understand and 
Use the Nutrition Facts Label, available on-line at www.cfsan.fda.gov.
    \13\ Note that this is intended only as an illustration, and 
alternate levels of the thresholds and combinations of nutrients could 
be considered.
    \14\ Note also that the sugars listed on the Nutrition Facts label 
include naturally occurring sugars (like those in fruit and milk) as 
well as those added to a food or drink.

   Food Composition Rules: An analysis of foods under this 
        approach would assess the level of selected ingredients 
        contained in foods. This approach directly addresses the 
        association between over consumption of certain food components 
        and current public health problems. In practice ingredients 
        could be assessed by their relative position on the ingredient 
        list. Foods in which selected ingredients--including, for 
        example, caloric sweeteners (including sugar and high-fructose 
        corn syrup), hydrogenated oils, or salt--appear among the 
        primary listed ingredients would fall onto the restricted list. 
        This approach gives no weight to the presence of desirable 
        nutrients. In addition, because ingredients are listed by 
        weight, some foods that provide a relatively large proportion 
        of the daily value of nutrients that should be avoided or 
        consumed in moderation--the salt in potato chips, for example--
---------------------------------------------------------------------------
        may not fall onto the restricted list.

   Nutrient Density Measures: Drewnowski (2005) reviews various 
        attempts to define and quantify the nutrient density of foods. 
        Past efforts to quantify nutrient density have been based on a 
        variety of calories-to-nutrient scores, nutrients-per-calorie 
        indexes, and nutrient-to-nutrient ratios. Drewnowski proposes a 
        naturally nutrient rich score based on the mean percentage 
        daily values for 14 nutrients in 2000 kcal of food.\15\ In 
        addition to requiring significant computational resources, the 
        measure as defined is limited by the exclusion of all fortified 
        foods. In addition, saturated fat, sodium, and other nutrients 
        whose consumption should be limited, do not enter into the 
        score.
---------------------------------------------------------------------------
    \15\ Drewnowski, A. ``Concept of a nutritious food: toward a 
nutrient density score.'' American Journal of Clinical Nutrition, Vol. 
82, No. 4, 721-732. October 2005.

    Mr. Kagen. Thank you for going under 5 minutes. I 
appreciate all that you are doing.
    Ms. Hatcher.

           STATEMENT OF JENNIFER HATCHER, SENIOR VICE
  PRESIDENT, GOVERNMENT RELATIONS, FOOD MARKETING INSTITUTE, 
                        WASHINGTON, D.C.

    Ms. Hatcher. Good morning. On behalf of the Food Marketing 
Institute and the families served by the 26,000 food stores 
operated by our members, thank you for the opportunity to 
testify about SNAP. SNAP EBT is a very positive example of a 
public-private partnership that works and that has added 
efficiency for all stakeholders in the program. Supermarket 
retailers are proud of our partnership with USDA and the state 
agencies to deliver safe, healthy and affordable foods to 
customers in need of assistance.
    FMI testified before this Subcommittee in 1999 and urged 
that you pass the Interoperability and Portability Act to 
ensure that EBT recipients could use their benefits across 
state lines, just as they had been able to use paper coupons. 
You passed this provision, and it was successfully tested and 
was critically important to the thousands of people displaced 
by Hurricanes Katrina, Rita, Ike, and Isabel.
    In the previous reauthorization of the farm bill you 
protected the SNAP program from expensive but unnecessary 
interchange fees. The SNAP program is now 100 percent 
electronic and runs successfully without any interchange fees 
charged to the state, merchants or consumers, and serves as a 
strong model for other government programs.
    One of the greatest efficiencies in the SNAP program has 
been the conversion to electronic benefits transfer, as EBT 
transactions reduce the time in lane and cut down on the 
potential for human error. EBT has also been a positive 
development in the fight against SNAP fraud. Prior to EBT, 
paper vouchers were easily exchangeable for cash or other goods 
since they could be used anonymously. One area in need of 
improvement in the EBT system would be to lessen the number of 
processor or carrier outages by utilizing redundant systems. 
When a carrier who helps to facilitate the processing of SNAP 
transactions experiences technical issues, retailers cannot run 
the transactions at the checkout and the merchant is put at 
greater risk for fraud.
    If all SNAP customers were issued benefits on the first day 
of the month stores would have significant inventory issues 
with widely purchased perishable products like milk and 
bananas. Thankfully, all but ten states have staggered issuance 
of benefits over a period of days. We encourage all states to 
provide enhanced staggered issuance of benefits each month, 
looking at models like those in Missouri and New Mexico, which 
spread their issuance over 20 days.
    Food choice: Another area that could work to decrease 
efficiency would be limiting food choices for SNAP recipients. 
An average store contains in excess of 40,000 items. Roughly 
half of these items are currently eligible to be purchased with 
SNAP benefits. All items are coded electronically as either 
eligible or ineligible, and there is very little confusion 
about what is eligible and what is not.
    We are beginning to collect survey data from our members on 
the purchasing habits of customers paying for their groceries 
with SNAP benefits versus all payment types. The initial 
results show that the purchasing habits are very similar. While 
our current data is based on the periods of time that are not 
the same for each company, and are thus not able to be 
consolidated, our initial findings are worth reporting. We 
believe a more comprehensive study on the buying habits of 
customers controlled for time of month, time of year, and how 
better to incent them to healthier choices should be initiated, 
and we intend to try to do this.
    Two products were on every list for both SNAP and non-SNAP 
customers, bananas and milk. Other product purchases were 
similar. Strawberries, cucumbers, corn and avocados were on 
several lists for both SNAP and non-SNAP customers. Rather than 
imposing penalties, or a ban on a particular food or category 
of food, we believe in educating and encouraging positive 
choices. It would cause much confusion and inconsistency to 
impose food limitations without a USDA-managed, comprehensive, 
real-time Universal Product Code database that could be 
downloaded directly into a retailer system to ensure a 
continued integrity of product selection. A SNAP database would 
be an expensive and challenging undertaking. USDA is, however, 
beginning the setup of the Healthy Incentive Pilot that has 
encouraging positive choices as its goal, and they will 
announce the location of the pilot in August. Several of our 
member companies are working on ways that they can participate 
in the pilot of this program.
    In closing, thank you for inviting FMI to share our 
thoughts on the SNAP program. I would be pleased to answer your 
questions.
    [The prepared statement of Ms. Hatcher follows:]

    Prepared Statement of Jennifer Hatcher, Senior Vice President, 
    Government Relations, Food Marketing Institute, Washington, D.C.
    Good morning. Chairman Baca and Ranking Member Fortenberry, on 
behalf of the Food Marketing Institute and the families served by the 
26,000 stores operated by our retail and wholesale members, I want to 
thank you for the opportunity to testify today on the Supplemental 
Nutrition Assistance Program (SNAP).
    My name is Jennifer Hatcher and I am Senior Vice President of 
Government Relations at the Food Marketing Institute (FMI). I have 
served as the primary staff contact for FMI's Electronic Payments 
Systems Committee for the past 11 years through the transition from 
paper Food Stamps to electronic benefits transfer and now the new 
program name, SNAP.
    SNAP EBT is a very positive example of a public-private partnership 
that works and that has added efficiency for all stakeholders in the 
program--the state agencies, the retailers and the customers. 
Supermarket retailers are proud of our partnership with USDA and the 
state agencies to deliver safe, healthy and affordable foods to 
customers in need of assistance.
    FMI testified before this Subcommittee in 1999 and urged that you 
pass the Interoperability and Portability Act to ensure that EBT 
recipients could use their benefits across state lines, just as they 
had been able to use paper coupons in any state. You passed this 
provision, and it was successfully tested and was critically important 
to hundreds of thousands of people displaced by Hurricanes Katrina, 
Rita, Ike and Isabel.
    In the previous reauthorization of the farm bill, you protected the 
SNAP program from expensive, but unnecessary interchange fees. The SNAP 
program is 100% electronic and runs successfully without any 
interchange fees charged to the state, merchants or consumers and 
serves as a strong model for other government programs. This was yet 
another step this Committee took to ensure continued efficiency.
    Our analysis of the SNAP program is that it is working very 
efficiently, particularly when you consider the many new and first time 
recipients who have received benefits in the past 2 years. With one in 
eight Americans currently enrolled in the SNAP program--more than ever 
before in the history of our nation--it is critical that we continue to 
increase efficiencies in this already smoothly operating program in 
order to ensure low benefit administration costs, and most importantly 
to continue to ensure access to healthy and affordable foods for 
participants enrolled in the SNAP program.
    Today in my testimony, I will highlight examples of the 
efficiencies that have been achieved, and I will share some 
recommendations on ways to continue to improve the retail operations 
side of the SNAP program.
Electronic Benefit Transfer
    One of the greatest efficiencies in the SNAP program has been the 
conversion to Electronic Benefit Transfer (EBT) delivery systems as EBT 
transactions reduce the time in lane and cut down on the potential for 
human error by cashiers.
    Additionally, EBT is an affordable payment solution that helps keep 
costs low throughout the system compared to other electronic payments, 
such as credit and debit cards, which have high-cost fees associated 
with them.
    EBT has also been a positive development in the fight against SNAP 
fraud because it creates an electronic record for each transaction that 
makes fraud easier to detect. Prior to EBT, paper vouchers were easily 
exchangeable for cash or other goods since they could be used 
anonymously. SNAP EBT transactions are protected by a user's personal 
identification numbers (PIN) so they are much more secure than paper or 
even credit cards, which do not require this added level of 
identification.
    One area in need of improvement in the EBT system would be to 
lessen the number of processor or carrier outages. When a carrier, such 
as AT&T, who helps facilitate the processing of SNAP transactions, 
experiences technical issues, or their systems fail to remain up, 
retailers have problems running EBT transactions at the checkout. 
Problems with system uptime, or availability, and lack of a back-up 
solution puts merchants at greater risk for fraud. We would encourage 
the enforcement of 99.99% uptime standards and the implementation of a 
back-up solution by the state to help correct this inefficiency. A 
retailer would ensure availability by running redundant systems, and a 
processor or carrier should be required to do the same.
Portability and Interoperability
    One of the greatest benefits to SNAP EBT users is that they have 
the flexibility of shopping across state borders. Take for example, the 
D.C., Maryland and Virginia area. A working mom on SNAP benefits may 
live in Maryland, but commutes to Virginia for work. If right after 
work is the only time that day she can run to the grocery store, she 
will still be able to use her SNAP benefits in Virginia. Portability in 
the SNAP program provides a great convenience to SNAP benefit users, 
and puts SNAP customers on a level playing field with customers paying 
with every type of tender. Additionally, flexibility in shopping 
location also affords SNAP benefit users greater flexibility to shop in 
stores where they feel they are able to stretch their dollars the 
farthest.
    Portability and interoperability are critical components of the 
SNAP program everyday, but they are also invaluable assets to the 
program when regions of our country deal with natural disasters, such 
as hurricanes, floods or snowstorms. For example, during Hurricane 
Katrina, SNAP benefit users from Louisiana were able to redeem benefits 
in Texas, Missouri or even Washington, D.C., where they were relocated 
or were staying with relatives.
    A few additional steps would enhance the efficiency of these 
portable benefits in the event of a disaster:

    1. Provide a floor limit of $25 per day for SNAP EBT transactions 
        with guaranteed payment to an authorized store when EBT systems 
        are not functioning as a result of a disaster.

    2. Provide an automatic hot food waiver for SNAP recipients in 
        disaster relief areas. Without electricity, recipients can not 
        cook many of the foods available in a retail food store, and 
        waivers issued while computers or telecommunication systems are 
        unavailable may not be effectively communicated.

    3. Release SNAP benefits early to ensure that storm-impacted 
        residents have an adequate food supply during the disaster 
        aftermath and recovery period.
Benefits Distribution
    If all SNAP customers were issued benefits on the first day of the 
month, stores would have significant inventory issues with widely 
purchased perishable products like milk and bananas.
    To address this, many states issue benefits over staggered days on 
the first 7-10 days of the month based on the case number, a digit of 
the user's Social Security Number, a card number or by other means. All 
but ten states stagger benefits, and while the staggering of benefits 
distribution is helpful to retailers to spread inventory needs over a 
series of days, we encourage states to provide enhanced staggered 
issuance of benefits each month. Benefits in states such as Missouri 
and New Mexico are made available throughout a period of around 20 days 
every month, as opposed to just the first 7-10. This allows for greater 
convenience for SNAP participants and helps address retailers' 
inventory concerns. A chart detailing the current benefit distribution 
schedule by state is attached in the appendix of my written testimony.
Food Choice
    Another area that could work to decrease efficiency would be 
limiting food choices for SNAP recipients. An average store contains in 
excess of 40,000 items; roughly half of those items are currently 
eligible to be purchased with SNAP benefits. All items are coded 
electronically as either eligible or ineligible and there is very 
little confusion about what is eligible and what is not eligible. We 
rarely have a customer--even a first time SNAP recipient--who comes 
through the line with an ineligible item. SNAP is at its core a hunger 
program and recipients need to be taught both how to stretch a dollar 
and how to do this in the most nutritious way possible.
    We are beginning to collect survey data from our members on the 
purchasing habits of customers paying for their groceries with SNAP 
benefits versus all payment types. The initial results show that the 
purchasing habits are very similar. While our current data is based on 
periods of time that are not the same for each company and are thus not 
able to be consolidated, our initial findings are worth reporting. We 
also believe a more comprehensive study on the buying habits of 
customers, controlled for time of month and time of year, and how to 
better incent them to healthier choices should be considered.
    Two products were on every list for both SNAP and non-SNAP 
customers--bananas and milk. Some of the milk purchased was whole milk, 
which could be fine if it was purchased for a 1-2 year old child, but 
whole milk would not be the best choice for an adult. Strawberries, 
cucumbers, corn and avocados were on several lists for both SNAP and 
non-SNAP customers when the store reported data from a summer 
collection time period. An earlier collection time period produced a 
list that included canned green beans and canned corn. White bread was 
on a few of the lists for SNAP purchases, and while that may not be the 
most nutritious choice, it may be a very economical option for a family 
who is working to ensure that they are not hungry.
    Rather than imposing penalties or a ban on a particular food or 
category of food, we believe in educating and encouraging positive 
choices. It would cause much confusion and inconsistency to impose food 
limitations without a USDA-managed, comprehensive, real-time Universal 
Product Code (UPC) database that could be downloaded directly into an 
authorized retailer's computer system. A SNAP database would be an 
expensive and challenging undertaking. For the last 10 years, USDA has 
been working on designing a UPC database for a much smaller list of 
eligible products for the Special Supplemental Nutrition Program for 
Women, Infants, and Children (WIC) and has not yet gotten the database 
to be fully operational. While USDA appears to be making significant 
progress now, the task has proved to be a significant and demanding 
project. USDA is beginning the set up of the Healthy Incentives Pilot 
that has encouraging positive choices as its goal, and they will 
announce the location of the pilot in August. Several of our member 
companies are working on ways that they can participate in the pilot of 
this program.
Summary: Recommendations for Continued Efficiency

    1. Improve uptime and require redundancy for processors and 
        carriers.

    2. Establish $25 floor limits for disasters.

    3. Allow automatic hot foods waivers for disasters.

    4. Release benefits early if a disaster is anticipated.

    5. Encourage enhanced staggered issuance of benefits.

    6. Incent/encourage/educate rather than penalize food choices.

    In closing, thank you for inviting FMI to share our thoughts on our 
experiences with the SNAP program. Our industry is committed to 
ensuring a pleasant and smooth shopping experience for our SNAP 
customers, and we welcome the opportunity to work with the Committee to 
move toward additional efficiencies in the SNAP program. Thank you.
                               Attachment

                        Food Marketing Institute
                                July 2010
------------------------------------------------------------------------
       State                     Day(s) of SNAP Distribution
------------------------------------------------------------------------
          Alabama   Benefits are made available from the 4th to the 18th
                     of every month, based on the last two digits of the
                     client's case number.
         8Alaska0   Benefits are distributed on the first day of the
                     month. Smaller supplemental issuances for new
                     applicants and late recertifications occur daily
                     throughout the month.
          Arizona   Benefits are distributed over the first 13 days of
                     the month by the first letter of the recipients'
                     last name.
         Arkansas   Recipients receive their benefits on the 4th, 5th,
                     8th, 9th, 10th, 11th, 12th or 13th of each month
                     based on the last digit of the client's Social
                     Security Number (SSN).
       California   Benefits are made available over the first 10 days
                     of every month, based on the last digit of the
                     client's case number. Others (i.e., new applicants)
                     get paid throughout the month depending on when
                     they were accepted.
         Colorado   Benefits are distributed on the first 10 days of the
                     month by the recipient's last digit of their SSN.
      Connecticut   Benefits and cash are distributed on the first three
                     days of the month, by the first letter of the
                     recipient's last name.
         Delaware   Benefits are made available over 7 days, beginning
                     with the 5th day of every month, based on the first
                     letter of the client's last name.
          Florida   Benefits are available the 1st to the 15th of every
                     month, based on the 9th and 8th digits of the
                     Florida case number, read backwards, dropping the
                     10th digit.
          Georgia   Benefits are made available from the 5th to the 14th
                     of every month, based on the last digit of the
                     client's case number.
           Hawaii   Benefits are made available on the 3rd and the 5th
                     of every month, based on the first letter of the
                     client's last name.
          8Idaho0   Benefits are made available on the first day of
                     every month.
         Illinois   SNAP benefits are made available on the 1st, 3rd,
                     4th, 7th, 8th, 10th, 11th, 14th, 17th, 19th, 21st,
                     and 23rd of every month, based on a combination of
                     the type of case and the case name.
          Indiana   Benefits are made available on the first 10 calendar
                     days each month, based on the first letter of the
                     recipient's last name.
             Iowa   Benefits are made available over the first 10
                     calendar days of every month, based on the first
                     letter of the client's last name.
           Kansas   Benefits are made available over the first 10
                     calendar days of every month, based on the first
                     letter of the client's last name.
         Kentucky   Benefits are made available over the first 10
                     calendar days of every month, based on the last
                     digit of the client's SSN.
                 LouBenefits are made available between the 5th and the
                     14th of every month, based on the last digit of the
                     client's SSN.
            Maine   Benefits are available the 10th to the 14th of every
                     month, based on the last digit of the recipient's
                     birth day.
         Maryland   Benefits are made available from the 6th to the 15th
                     of every month, based on the first letter of the
                     recipient's last name.
    Massachusetts   Distribution is based on the last digit of each
                     recipient's Social Security Number and distributed
                     over the first 14 days of the month.
         Michigan   Benefits are made available from the 3rd to the 10th
                     of every month, based on the last digit of the
                     client's recipient ID number.
        Minnesota   Benefits are made available from the 4th to the 13th
                     of every month, based on the last digit of the
                     client's case number.
      Mississippi   Benefits are made available from the 5th to the 19th
                     of every month, based on the last two digits of the
                     client's case number.
         Missouri   Benefits are made available over the first 22 days
                     of every month, based on the client's birth month
                     and last name.
          Montana   Benefits are distributed by the last number of the
                     recipient's case number, over a 5 day period.
         Nebraska   Nebraska distributes benefits to individuals during
                     the first 5 calendar days of the month. The day of
                     distribution is based on the last digit of their
                     SSN.
         8Nevada0   Benefits are issued on the first day of each month.
  8New Hampshire0   New Hampshire benefits are available on the 5th of
                     every month.
       New Jersey   The monthly allotment is available over the first 5
                     days of the month.
       New Mexico   Benefits are made available over 20 days every
                     month, based on the last two digits of the SSN.
         New York   Benefits are generally made available over the first
                     9-14 days of every month, based on the last digit
                     of the client's case number.
   North Carolina   Benefits are made available from the 3rd to the 12th
                     of every month, based on the last digit of the
                     primary cardholder's SSN.
   8North Dakota0   Benefits are made available on the first day of
                     every month.
             Ohio   Distribution is a staggered schedule between the
                     first and tenth days of the month.
       8Oklahoma0   Benefits issue on the 1st of each month.
           Oregon   Benefits are distributed on the first 9 days of the
                     month based on the last digit of the SSN.
     Pennsylvania   Benefits are made available over the first 10
                     business days of every month.
   8Rhode Island0   Benefits are made available on the first day of
                     every month.
   South Carolina   Benefits are made available from the 1st to the 10th
                     of every month, based on the last digit of the SNAP
                     case number.
   8South Dakota0   Benefits are made available on the 10th day of every
                     month.
        Tennessee   Benefits are made available on the first 10 days of
                     the month, based on the last two digit's of the
                     head of house hold's SSN.
            Texas   Benefits are made available over the first 15 days
                     of the month, based on the last digit of the
                     client's SNAP case number.
             Utah   Benefits are made available on the 5th, 11th, or
                     15th of every month, based on the first letter of
                     the client's last name.
        8Vermont0   Vermont benefits are available on the first of every
                     month.
       8Virginia0   All recipients are paid on the 1st of the month.
       Washington   Benefits are staggered over the first 10 days of the
                     month based on the last digit of the households'
                     assistance unit number. Weekends and holidays do
                     not affect the schedule.
    West Virginia   Benefits are made available over the first 9 days of
                     every month, based on the first letter of the
                     client's last name.
        Wisconsin   Benefits are made available over the first 15 days
                     of every month, based on the eighth digit of the
                     client's SSN.
          Wyoming   Benefits are made available from the 1st to the 4th
                     of every month, based on the first letter of the
                     client's last name.
------------------------------------------------------------------------
Note: 8Highlighted0 states are those that only distribute benefits on
  one day a month. There are ten that still do so.


    Mr. Kagen. Thank you all for your testimony. And I turn now 
to my colleague, the Ranking Member, Jeff Fortenberry.
    Mr. Fortenberry. Thank you, Mr. Kagen, and thank you all 
for your testimony. The Healthy Incentive Pilot Program that 
was put in place in the last farm bill is not going to have 
data available for 2 years, from what I understand. So if there 
is a delay in implementation or a delay in getting the pilot up 
and running, there is going to be a delay in data, and that is 
unfortunate. Because it is related to the earlier point that 
many of us, Chairman Baca, Mr. Kagen and I, and a lot of 
others, are very, very interested in, the correlation between 
good nutrition and health care outcomes. When the food stamp 
program was started, the idea being to increase caloric--to 
have a high level of caloric intake in order to combat hunger 
was the main paradigm of the program. Now, as we are seeing 
with the epidemic in obesity and other lifestyle-related 
diseases that result from poor nutrition, I believe it is 
absolutely essential that we look at this very large government 
program as to how we can improve outcomes in health, in 
addition to its core purpose of preventing hunger in the United 
States.
    So it is a bit difficult flying in the dark without data on 
the Healthy Incentive Pilot. But, Mr. Faber, you raised an 
interesting question, and your comments, Ms. Hatcher, were 
related, in regards to science-based standards on nutrition. 
Thinking a bit out loud about potential policy evolution that 
would reap the benefit to improved choice, either through 
incentives or rules, how could you foresee that being 
developed? In other words, instead of, and let's just take an 
example, a SNAP card having $100 on it, a SNAP card would have 
100 nutritional points. And that would also be measured as you 
buy certain foods. And therefore the market would then respond 
to develop food products that would fit easily into the 
nutritional categorizations. Or, as we do in the USDA, certify 
certain products as organic, could you foresee developing 
certain certified SNAP eligible products, because they are 
meeting the science-based standards on nutrition, and then that 
is a part of the electronic evaluation system?
    In my mind, these are creative policy ideas that could be 
potentially looked at as we begin to web the outcome of 
protecting people, protecting our country from hunger, and 
promoting the types of ideas which I think we all share in 
terms of good nutritional outcomes.
    I would like both of you to respond to these concepts.
    Ms. Hatcher. Sure. I think there are some good ideas that 
should be tested out there. The challenge is to make sure that 
they are operationally not so challenging that they can't be 
done within the time period.
    Mr. Fortenberry. Let's just stop right there, because you 
mentioned that right now in the electronic benefits system 
there is a mechanism which flags or allows certain types of 
products to be purchased.
    Ms. Hatcher. Right.
    Mr. Fortenberry. So it seems like the technological hurdle 
for the most part has been overcome. It would have to be 
adjusted to achieve the ideas that I just said. But it seems 
that way to me.
    Ms. Hatcher. We can flag products as either eligible or 
ineligible. When you start putting the additional parameters, 
at least in the Healthy Incentive Pilot, one of the ideas that 
have been proposed was similar to like the You Promise Program, 
where you get additional points on a separate type of card, and 
that those points--you get more points if you purchase a 
healthy product or a positive nutritional product. That is one 
way.
    Perhaps the easiest way that has been done, there have been 
a couple of Healthy Incentive Pilots that have been successful 
in the WIC program. One of those was in New York State, there 
was another one in California, and they were very simple. I 
mean, it was a dollar amount, and it was limited to just fresh 
fruits and vegetables. And because it was not complex it could 
be initiated very quickly. Once they found and identified a 
source of funding for it, they put it in place and they could 
run it over the period of time that they had and just capture 
that data on the purchasing patterns of the customers.
    I think you are right, there are some creative 
opportunities. The challenges, particularly in a pilot 
environment, if you do something that is too technologically 
challenging you may spend more funds than you want and more 
time on trying to build that program.
    Mr. Fortenberry. This is a huge Federal program. We are 
spending $50 billion. It is authorized up to $80 billion. It is 
a huge program. And it seems like we have lagged in trying to 
rethink some of the parameters that would lead to healthy 
outcomes, particularly given, again, the pilot program that we 
are talking about is now just being implemented. That is 
unfortunate, but that is the reality.
    Mr. Faber. And I would just add, we will certainly learn a 
lot from the pilot program. But we already know a lot about the 
elasticity of different kinds of foods and prices. And in 
particular we know that as we use coupons or bonuses to reduce 
the price of certain foods, including fruits and vegetables and 
dairy products, consumption will go up.
    USDA's Economic Research Service, a few years ago, 
estimated that if we reduce the price of fruits and vegetables 
by ten percent then consumption of fruits and vegetables would 
go up by six or seven percent. If we reduced it by 20 percent, 
as I mentioned earlier, we would get closer to the 3\1/2\ to 5 
cups a day of fruits and vegetables.
    Mr. Fortenberry. So what foods are inelastic?
    Mr. Faber. Some that are convenient and should be enjoyed 
occasionally, snack foods, for example, tend to be more 
inelastic than foods like dairy and fruits and vegetables. So 
the good news is there is an opportunity to provide a bonus or 
coupon to encourage consumers to increase their consumption of 
fruits and vegetables. I think the hardest challenge, as 
Jennifer alluded to, is trying to come up with a system that 
looks at hundreds of thousands of SIUs, and that change in the 
hourly--literally in the 2 hours we have all been here there 
are probably a handful of new products that have been put into 
the marketplace. And the most recent number we have is there 
are about 12,000 new products that are put into the marketplace 
every year. It would be virtually impossible for USDA to come 
up with a system that would be credible with nutritionists, and 
that could be used by retailers to sort through every 
conceivable product and say this product is healthy, this 
product is not. And it contradicts USDA policy, which has 
always been to focus on a whole diet approach, as opposed to an 
individual product approach.
    Mr. Fortenberry. Well, that contradiction is part of the 
problem here. Again, it goes back to the original intent of the 
program where you increase caloric intake on starches primarily 
which are cheaper, and as people have to stretch food dollars 
that is what gets incentivized for them, and yet we will get 
the long-term cost in terms of health. There is going to be a 
shift in paradigm, or at least I hope there is.
    Mr. Faber. Well, just two things and I will let Jim jump in 
here. One important point here is there is no evidence that 
low-income Americans who benefit from the SNAP program are any 
more susceptible to obesity than other Americans. I think that 
is an important point. Every review of the literature, of 
USDA's Economic Research Service and others, have found no 
correlation between obesity and SNAP participation.
    Mr. Fortenberry. I am aware of that statistic. It is an 
American problem or a subset of an America problem.
    Mr. Faber. And, the other thing we certainly have found is 
that where we have made a real investment in nutrition 
education we have seen change. And the best example is the 
shift from whole milk to low fat and skim. There are other 
examples. But clearly Americans are able to change their diets 
if they are presented with the right information.
    Mr. Fortenberry. Mr. Weill, I am way over time, so I am 
going have to let you incorporate your comments to me in 
somebody else's question. Sorry. Thank you.
    The Chairman [presiding.] At this time I would call on Mrs. 
Dahlkemper.
    Mrs. Dahlkemper. Thank you, Mr. Chairman. Thank you all. It 
is a very interesting subject. I spent 20+ years as a 
dietitian, so I dealt with a lot of individuals who received 
SNAP benefits over that time. And I also found education was 
the key. I actually used to work in early intervention, and I 
would work with the parents and take them directly to the 
grocery store. And not everyone--obviously, we can't do that 
with every person on SNAP, but once the education portion is 
brought in, as it is with people who aren't on SNAP, better 
choices are made along the way.
    One concern I also have is that individuals are on 
different, they have different dietary needs who are on SNAP. A 
person with diabetes, for example, or the person who is gluten 
free, there are all sorts of issues that people are dealing 
with. And that is one of the complexities as we go forward.
    So I have a couple different questions. But I guess one 
question I want to ask is how do we improve the education from 
your standpoint as marketers, grocers, manufacturers of 
product, how do we improve the education within this program? 
Obviously we need to do it for the whole country, but this is a 
subset of people that we actually may have some opportunity to 
do that with.
    Ms. Hatcher. I think the one idea that you mentioned 
earlier is a very good idea, which is having more supermarket 
retailers partner with the SNAP-Ed programs in the states where 
we can put some of the information on healthy recipes, and some 
of the purchasing patterns right there in the store. That links 
the SNAP-Ed information that they may have received when they 
applied for the benefits to their purchase at the time of their 
purchases.
    So that is an area that we are working on. That is 
something that we are already doing with the WIC program, so it 
would only be an extension of that. And it seems to make a lot 
of sense to also partner with the schools in some of those 
education programs where you involve the children and bring 
them into the shopping and cooking decisions. We have seen some 
evidence that that really starts to make some impact.
    Mrs. Dahlkemper. Mr. Faber.
    Mr. Faber. I would just add that clearly we need more 
resources for SNAP-Ed. We are concerned about proposals to cut 
SNAP-Ed that have been suggested in this session of the 
Congress.
    I think there is also a big role here for industry. And as 
I mentioned in my testimony, we are working now with FDA and 
USDA on new labels that will be clearer for consumers. In order 
to make those labels ultimately more effective, we are also 
building a public education campaign that will apply to 
different demographics, including low-income Americans.
    As you mentioned, people have very different diets, they 
are using nutrition facts panels in very different ways. We are 
working very closely with the Administration to design a public 
education strategy around our new labels that will reflect 
those differences.
    Mrs. Dahlkemper. They need detail, but they also need 
simplification for people. People need to be able to get that 
immediate message just from that label. I mean, I was around as 
a dietitian when we did the last labeling and they have been 
great and helpful, but we still need improvements. I am glad to 
hear that.
    Mr. Weill. We do need more and better nutrition education. 
As Administrator Paradis said, the program is working well, it 
can be made better, but also it needs not to have its funding 
cut as has been proposed recently on the Senate side.
    But also to get families to have healthier nutrition 
requires education, but also requires them to have access to 
stores that provide healthy foods. It requires them to have 
adequate incomes and benefits so that they can afford a healthy 
diet.
    Mrs. Dahlkemper. I did want to ask you a question on the 
issue of access to this, because I know that is certainly 
something you have some knowledge on. And in the previous panel 
I brought up the elderly and disabled having probably some of 
the biggest issues with access. Do you think some of that has 
to do with just public perception, the stigma?
    Mr. Weill. Yes. Although, I think the stigma in the program 
is far less than it was 5 or 10 years ago, which is great. And 
even before the recession there was much less stigma in the 
upsurge in participation with the recession. And policymaker 
support has further reduced stigma.
    But if I can now use that question to circle back to your 
earlier point. Our concern from the recipient point of view is 
that having restrictions on food choice at the checkout counter 
is going to make the transaction, and your participation in 
SNAP, more visible and drive people out of the program by 
increasing stigma.
    And the other thing I would say is that society thinks of 
beneficiaries as people--the only money they spend for food is 
through SNAP, when in fact we are talking about the senior 
citizen who gets $16 a month from SNAP and is spending $100 of 
her own money on food. And the working mom who is showing up 
with a SNAP card, that is half of her food budget. So when we 
talk about restricting food choice we have to think about the 
reality of people's lives, what portion of their food budget 
SNAP is, what stores they are going to, are there stores that 
are available to them that have these healthy choices, and so 
on.
    Mrs. Dahlkemper. Thank you very much. I appreciate it.
    The Chairman. Thank you very much. I have a couple of 
questions that I would like to ask Mr. Faber.
    One of the questions: in your testimony you make it clear 
that you believe that the attempt to limit consumer food 
choices through SNAP are more harmful than helpful. Can you 
explain to the Subcommittee why you think eliminating SNAP 
choices is a bad idea.
    Mr. Faber. I think there are four main points I would want 
to make. One is it is very hard to come up with a definition of 
which foods are healthy, and, therefore, should be eligible for 
SNAP; and which foods are unhealthy and should be ineligible. 
There are many foods, and Mrs. Dahlkemper is probably much 
more--can explain this much more elegantly than I can. That, 
for example, nuts that have certain nutritional benefits, that 
would be excluded from SNAP because of the amount of fat that 
they would have.
    So it is very hard to simply say there are good foods and 
bad foods. We tend to think that there are good diets and bad 
diets. And administratively it would be very difficult to 
administer such a program.
    The second point is that just the sheer amount of products 
that are in the marketplace, there are more than 300,000 
different products that are in the marketplace. We are bringing 
in the last estimate about 12,000 new products to the 
marketplace every year. That is a couple of products an hour. 
So it really is--in order for USDA to administratively grade 
each of these products over and over and over again would be an 
extraordinary administrative challenge.
    But the real problem is the one that Mr. Weill alluded to, 
that the vast majority of SNAP recipients are spending their 
own money in addition to SNAP dollars. And so at the end of the 
day the most likely scenario is that they would simply use 
their dollars to purchase the things that should be enjoyed 
occasionally and SNAP dollars to purchase foods that would be 
considered healthy.
    Ms. Hatcher. And just to add on what Scott was saying, we 
have many of our customers that do mixed basket transactions, 
so that you would have all of your items go through the line, 
and they would be coded as either SNAP eligible or ineligible. 
The cashier at the end of the line would ask for the additional 
payment for maybe the paper plates or paper towels, or other 
items that they would have purchased that would have been 
ineligible. So Scott is exactly right in terms of the mixed 
basket and the customer using additional forms of payment in 
addition to SNAP benefits.
    Mr. Faber. So it would be extraordinarily complicated, 
extraordinarily costly, and ultimately wouldn't work because 
SNAP recipients would generally use their own dollars to buy 
the prohibited items.
    The Chairman. I just heard all three of you make a 
statement here, and I agree to a degree, that we should have 
more SNAP education on nutritional education. All of us believe 
that is very important as we look at obesity and the problems 
that we are having with obesity. And yet, it becomes very 
difficult in telling someone the kind of foods that they should 
buy and shouldn't buy, because they are looking at rationing 
for a month before they are able to go back to a store.
    Some discussions have been discussed, and give me your 
thoughts on it, besides the money that is needed there and not 
cutting the funds there and monies that are already there, for 
anyone who is in a SNAP program to have some kind of an 
orientation being done for any new eligible person, or if it is 
done through the Internet or some kind of mailing or something 
that is done, an orientation that needs to be done on what is 
good and what isn't, so this way they can make better choices 
with what is available. I don't know if that is being done 
right now to each and every one of the SNAP recipients. But 
that is something that I think we should consider, an 
orientation of some sort or another when they are eligible to 
receive the SNAP program. Because ultimately we end up paying 
at the end through obesity because the effects it has on 
diabetes, breast cancer, other forms of illness that come 
through diabetes to us, not to mention the life span of an 
individual as well.
    So I throw the question back up to any one of you three, 
since all three of you mentioned nutritional education and 
SNAP-Ed.
    Mr. Weill. I think that most recipients probably receive 
some paper nutrition education material when they apply or when 
they receive a determination of eligibility. But it would be 
infrequent that they would receive a one-on-one counseling 
system. Their primary interaction with the agency of course is 
through a case worker with a very large caseload just trying to 
manage 400 cases. But then from the nutrition education side of 
the program there are often classes offered and they 
participate that way. It is not like WIC where at the point of 
participation and eligibility you get nutrition counseling. 
And, looking at a strategy that maybe doesn't go as far as WIC 
because the caseload is so much larger, but moves towards 
offering nutrition education when people are in the office is a 
good strategy.
    The Chairman. Because it has to be affordable. We can say 
that we can get our educational systems or our manufacturers or 
stores, our grocery stores and others, to offer the educational 
programs. And I can only speak for myself. You know, I can be 
in an educational classroom, but coming from a large family of 
15 the classroom taught me everything about nutrition, but when 
I got home my parents said this is all I can afford to give 
you. So, I am eating the tortillas, the frijoles, the butter, 
everything else I shouldn't have. And most of the kids now, 
because they are not actively involved with physical fitness 
and the kind of activities that we had, most of these kids are 
all on computers and using the Internet and spending all kinds 
of time, to us we had critical thinking just playing kick the 
can. You know, you had to hide, you had to think and you ran 
and you did something. But nowadays we are not doing any of 
that. And I can just imagine that we can have the educational 
programs, which are good and I think that they are needed, but 
when I got home my parents said this is all I can afford, we 
can't afford to give you anything else.
    And I know that, Ms. Hatcher, you have a thing here that 
you wanted to recommend a floor limit of $25 per day for a SNAP 
EBT transaction where EBT systems are not functioning as a 
result of a disaster. And I know that we should decrease it, 
but can you explain to this Committee what you mean by that and 
how do the limits benefit the SNAP recipient?
    Ms. Hatcher. Sure. That suggestion was one that came out of 
some of the disaster preparation work that we did after the 
last series of hurricanes. And when the systems are down, I 
mean the beauty of the electronic system is they work really 
well when there is electricity up and running, but in the 
aftermath of a hurricane, when you are in the middle of a 
disaster and you don't have any communications or computer 
systems, it would be very helpful for the retailers to know 
that there was an automatic floor limit or a $25 amount. This 
way a person could come in and get those basic items to be able 
to feed their family for the next day or a couple of days while 
the computer systems were down, and they may not be able to 
access their balance on their SNAP benefits.
    The Chairman. Mr. Weill, I am interested in the $2.2 
billion in payment errors in the system. Can you make 
recommendations for FNS that will help reduce the $2.2 billion 
in errors?
    Mr. Weill. Well, as discussed earlier, a lot of that is due 
to agency error, not client error or client fraud. And, part of 
it is due to agencies being terribly understaffed, which also 
was true before the recession but is more true now. So agencies 
need support, they need support in updating computer programs, 
many of the computers are vastly outdated, they need more 
staff. So that is one strategy. Simplifying the program in key 
ways is another strategy.
    The Chairman. But why haven't we updated the equipment and 
why can't they talk to one another?
    Mr. Weill. Well, the states can speak better to that than I 
can. But certainly, as you know, states are in a terrible 
budget situation, and new expensive computer systems are last 
on the list often.
    The Chairman. Mrs. Dahlkemper, do you have any additional 
questions you would like to ask?
    Mrs. Dahlkemper. Thank you, Mr. Chairman. I just have one 
additional question. Mr. Faber, how can we reduce the cost of 
those foods that we know are most nutritious? I mean, if a 
person goes to the grocery store, it was mentioned, Ms. 
Hatcher, in your testimony, and they have a choice between 
white bread and whole wheat bread, we know the cost difference 
can be substantial, yet we know that the whole wheat bread is a 
healthier choice. If they have a choice between a gallon of 
milk and a large bottle of soda, pop as we call it in my 
region, but anyway, the choice that has to be made when you 
have a family back home with a bunch of hungry children, so you 
try to make those SNAP benefits spread along with whatever 
little income you might be bringing in. So how can we reduce 
the cost of fruits and vegetables, whole grains, dairy 
products, the things that we know are very healthy?
    Mr. Faber. Well, that is a complicated question.
    Mrs. Dahlkemper. On Federal policy.
    Mr. Faber. Yes, I understand. You know, certainly there are 
levers in our farm and energy policies that are having an 
impact on the cost of ingredients and ultimately the cost of 
food. So, for example, we spend significant sums every year 
providing subsidies to certain farmers and not to other 
farmers. There may be opportunities in the next farm bill to 
provide incentives that ultimately increase the production of 
some crops at the expense of others, but those are complicated 
economic and, ultimately, political questions.
    It is also the case that our energy policies are 
contributing to modestly higher commodity costs because a 
significant amount of corn is being diverted from our food 
supplies, and really our feed supplies, into fuel. And so there 
are some opportunities in the farm bill and the energy bill to 
invest in advanced biofuels that use other feedstocks 
ultimately than food ingredients.
    But, the good news is that food inflation is very low right 
now. And because of the First Lady's leadership, and because 
consumers are simply demanding more and more healthy choices, 
we are living in a time when there are many, many more choices 
in the grocery store than ever before. And as someone who has 
worked on these issues for more than 20 years, I am sure you 
walk through the grocery store and notice many more low 
calorie, low sugar, low sodium products that are more 
affordable than ever.
    Americans are spending a smaller share of their income on 
food than at any time in history. But there is certainly more 
progress that we can make. And the farm bill and our energy 
policy, and ultimately to some extent our tax policy, could 
drive us in that direction.
    Mrs. Dahlkemper. Thank you, Mr. Chairman.
    The Chairman. Thank you. You know, a thought just came 
through my mind. I know that we are offering a lot more 
healthier foods and we are making them a lot more available at 
a lot of our grocery stores and people have more choices. Is 
there a possibility to have some kind of--I know we have 
enterprise zones where we give tax incentives to enterprise 
zones, but to give the American farmers and farmers that are 
producing healthy foods some kind of incentive. This way it 
would help in buying an American product, but at the same time 
buying healthy products and from those farmers that are willing 
to produce those. Has that thought ever come up yet or not? I 
don't know.
    Mr. Faber. In the last farm bill, and we do provide some 
fairly modest support to provide fruits and vegetables to 
schools. That is something that we could certainly expand in 
the next farm bill.
    The Chairman. They can look at working with farmers because 
then that gives them the incentive to say I am going to produce 
fresh fruits and vegetables, since I am going get some kind of 
a tax break just as we have done for businesses or someone 
else. I think I am willing to explore that and look at it. And 
we put our own incentive instead of saying an enterprise zone, 
we have a farm zone with tax incentives for those farmers that 
are producing the kind of healthy food that will reduce the 
price. Because ultimately we end up paying at the end in the 
area of obesity with the health costs, the effects it has on 
us, and the quality of life, too.
    Mr. Faber. I think those are interesting ideas. Ultimately 
the array of subsidies and insurance programs that we have in 
place are not having a really significant impact on the acres 
that are ultimately planted to certain crops. That is certainly 
true in some parts of the country. But there is ample incentive 
to grow fruits and vegetables in California, and there is ample 
incentive to grow corn in Illinois and Iowa regardless of the 
mix of subsidies that we provide. There are certainly some 
parts of the country where if you restructured our farm safety 
net you might see a shift from some commodity crops to fruit 
and vegetable production, and that might have a marginal impact 
on the cost of fruits and vegetables, but probably not a very 
significant impact.
    The Chairman. We should give an advantage to our domestic 
farmers versus importing fresh fruits and vegetables from 
outside the country, because we don't know the safety in terms 
of the products that we are getting versus our own personal 
farmers. And if we provided them that kind of an incentive 
people would feel a lot safer because they know that we have 
followed all of the CAL OSHA requirements and safety 
requirements that are there versus any other products you may 
get from somewhere else.
    Mr. Faber. One of the great developments this Congress, and 
hopefully the Senate will act on this before the recess, is the 
passage of food safety legislation. That would set tough new 
standards, or allow FDA to set tough new standards for how we 
produce fruits and vegetables, not only in the U.S., but 
overseas.
    The Chairman. But give the incentive to those that are 
compliant here and have those enterprise zones or whatever, 
farm zones.
    Mr. Faber. Interesting idea.
    The Chairman. With that, I want to thank each of the 
panelists for being here and taking the time. That concludes 
the hearing that we have.
    Before we adjourn I just would like to again thank the 
witnesses for their participation in the hearing and your 
thoughtful testimony. Your knowledge, ideas, and experience I 
hope will be used by Congress to ensure adequate nutrition will 
be available to the neediest Americans in the most effective 
manner. Again, I want to thank you for being here.
    With that, I would like to state before we adjourn and I 
hit the gavel, under the rules of the Committee the record of 
today's hearing will remain open for 10 calendar days to 
receive additional materials and supplement your testimony, and 
to receive any written responses from the witnesses to any 
question posed by Members.
    The hearing of the Subcommittee on Department Operations, 
Oversight, Nutrition, and Forestry is adjourned.
    Thank you very much for being here.
    [Whereupon, at 11:55 a.m., the Subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
                          Submitted Questions
Questions Submitted by Hon. Frank D. Lucas, a Representative in 
        Congress from Oklahoma
Response from Julie Paradis, Administrator, Food and Nutrition Service, 
        U.S. Department of Agriculture
    Question 1. Have any of you looked at SNAP nutrition education to 
see what the results of these efforts have been? Do we know what 
tactics are working or not working?
    Answer. The Food and Nutrition Service (FNS) has multiple 
initiatives to monitor SNAP nutrition education (SNAP-Ed) and to 
identify effective practices. In FY 2008, FNS introduced the Education 
Administrative Reporting System (EARS). EARS provided, for the first 
time, uniform data across states regarding who receives SNAP-Ed, what 
kinds of educational services are provided and how resources are 
allocated. While not a measure of dietary impacts, this reporting 
system makes it possible to profile the key features of SNAP-Ed both 
nationally and by state. FNS can use this information to examine 
efficiency, service coverage, and consistency with FNS policy 
priorities.
    FNS is also evaluating a set of SNAP-Ed demonstration projects to 
assess dietary impacts. The demonstration projects were competitively 
selected for both their educational promise and their commitment to 
rigorous FNS evaluation requirements. Projects include a variety of 
approaches, such as Internet-based strategies, social marketing and 
classroom lessons. An impact report on the first round of 
demonstrations is expected in the fall of 2011.
    FNS is sponsoring a review of existing research to assess the 
available evidence for alternative approaches to changing children's 
dietary behaviors. Pertinent studies are critiqued by a panel of 
technical experts to determine the availability of sound research and 
the associated results. A series of reports will be produced during 
2011 to highlight what intervention features are found to be effective 
and what information gaps still exist.
    Current FNS policy calls for states to pursue science-based SNAP 
nutrition education. Specifically, states are directed to incorporate a 
variety of features known to be effective. These include messages that 
are behaviorally focused and personally relevant to the target 
audience, use multiple channels of communication, actively engage the 
audience, and offer multiple exposure to the message.
    The SNAP-Ed provision in the Child Nutrition Reauthorization bill 
further requires nutrition education activities be science-based and 
outcome driven; provides for accountability and transparency through 
state plans and collaboration among stakeholders; provides focus on the 
issue of obesity; and increases effectiveness of important nutrition 
education dollars across various nutrition programs via the connection 
to SNAP as a program that serves the low-income community.

    Question 2. According to GAO, $1.8 billion was issued in 
overpayments for Fiscal Year 2009. Your testimony says that states 
established a total of over $367 million in new claims for over 
issuances and collected just under $300 million. Does this mean USDA 
has only recouped less than $300 million of the $1.8 billion in 
overpayments?
    Answer. The overpayment rate of $1.8 billion for Fiscal Year (FY) 
2009 is an estimate based on a random sample of approximately 52,000 
households reviewed as part of the quality control process. It does not 
represent identification of actual cases of overpayments, but rather a 
statistical projection of possible overpayments to Supplemental 
Nutrition Assistance Program (SNAP) households nationwide.
    The FY 2009 claims data represent the actual overpayments states 
identified and collected in that year. Overpayments can result from 
client household or agency errors, as well as recipient fraud. The 
states establish claims in accordance with the Food and Nutrition Act 
and SNAP regulations.
    Legal factors that influence the establishment and collection of 
claims in any given fiscal year include:

   States can only collect from current SNAP households the 
        greater of $10 per month or 10 percent of the monthly SNAP 
        allotment, unless it is a fraud claim which can be $20 or 20 
        percent a month. This allotment reduction method of collection 
        can often extend the collection period beyond the current 
        fiscal year.

   States are not required to collect claims that are less than 
        the Federal cost effectiveness threshold amount of $125.

   Claims that are delinquent for 180 days must be referred to 
        the Treasury Offset Program (TOP). TOP collections on claims go 
        beyond the current fiscal year.

   A state agency may compromise a claim or any portion of a 
        claim if it can be determined that a household's economic 
        circumstances dictate that the claim cannot be paid in 3 years.

   In accordance with common debt collection practices, state 
        agencies may terminate claims if they are no longer considered 
        collectable.

    Question 3. What do the states do with the performance bonus money? 
Does USDA have any ability to tell the states that receive these 
bonuses what it can and can't do with the money?
    Answer. The Food and Nutrition Act does not provide USDA with 
authority to require that bonus money be used for a specific purpose. 
Therefore, states may use bonus money however they wish. Although funds 
do not have to be spent on SNAP or any other Federal program, some 
states do re-invest their bonus dollars into SNAP.

    Question 4. Has the use of broad-based categorical eligibility 
played a large role in reducing error rates to an historic low in FY09?
    Answer. Errors in the Supplemental Nutrition Assistance Program 
(SNAP) are overwhelmingly related to determining the right level of 
benefits, neither too much nor too little, for participants rather than 
the determination of basic eligibility. In fact, over 98 percent of all 
basic eligibility determinations are found to be correct. Categorical 
eligibility, both basic and broad-based, while easing eligibility 
requirements, still subjects participants to the standard benefit 
determination process.
    Categorical eligibility is included as one of the many policies 
related to household circumstances that state agencies review as part 
of the Quality Control (QC) reviews that they annually conduct on a 
sample of their participating SNAP households. QC does not separate 
broad-based categorical eligibility from traditional categorical 
eligibility which makes households categorically eligible for SNAP 
because the household receives TANF, Supplemental Security Income (SSI) 
or general assistance cash benefits. As a result there is currently no 
mechanism to determine a specific effect that broad-based categorical 
eligibility may have on the error rate. Even so, as most errors are 
related to determination of the amount of benefits, not determination 
of eligibility, the Food and Nutrition Service (FNS) believes that 
broad-based categorical eligibility has not had a significant impact on 
the error rate.

    Question 5. Which of the 36 states that use categorical eligibility 
have received bonus payments for low error rates?
    Answer. As of October 25, there are currently 40 states with broad-
based categorical eligibility (BBCE). In FY 2009, 29 states had BBCE. 
Five of the eight states that received bonuses that year for low error 
rates had implemented BBCE (Delaware, Georgia, Ohio, Washington, and 
Wisconsin).

    Question 6. Does the Department have data on what SNAP participants 
are purchasing with their benefits?
    Answer. USDA does not collect administrative data on the kinds of 
food that SNAP recipients purchase with their benefits or other food 
resources. (Most clients use a combination of SNAP benefits and their 
own money to purchase food.)
    The Department does conduct periodic studies and analyses of data 
from national nutrition surveys to assess the diet quality of SNAP 
participants. The most recent analysis, examining data collected 
through the National Health and Nutrition Examination Survey between 
1999 and 2001, found that the diet quality of SNAP participants, low-
income nonparticipants, and higher-income consumers all fell far short 
of the Dietary Guidelines for Americans.
    Overall, the similarities between the diets of these groups were 
more striking than the differences. All groups had very low intakes of 
whole grains, dark green and orange vegetables, and legumes, and high 
intakes of fat, saturated fat and added sugars. Among adults, both low 
income groups (SNAP participants and low-income nonparticipants) were 
less likely to consume foods from eight out of ten food groups than 
higher-income consumers. SNAP participants were less likely to consume 
fruits or vegetables than nonparticipants, however. Differences between 
SNAP participants and nonparticipants were more often observed for 
adults and older adults than for children. Over half of all foods 
consumed by all groups came from foods that should be consumed only 
occasionally; SNAP participants were somewhat more likely than both 
nonparticipant groups to consume foods recommended for occasional 
consumption and somewhat less likely to consume foods recommended for 
selective or frequent consumption.
    It should be noted that available data cannot distinguish between 
foods that SNAP clients purchase with their benefits, and those they 
purchase with other resources.

    Question 7. What is the projected cost of the ALERT system? Are 
there expectations that this will save the program money once it is 
fully implemented?
    Answer. The projected overall 5 year cost for the ALERT system is 
$10.5 million. Overall costs consist of development for a next 
generation system, operation and maintenance of the existing and future 
systems, data center consolidation, and data mining activities. Prior 
to the new contract, operations and maintenance cost $1.5 million 
annually for the existing ALERT system with a projected 5 year cost of 
$7.5 million. Operations and maintenance for the next generation ALERT 
system are projected to cost $4.8 million over the next 5 years, 
resulting in an annual savings of 36 percent.
    The next generation ALERT system is designed to utilize a robust 
data warehouse to support advanced data mining techniques to improve 
upon FNS' ability to identify and act upon fraudulent behavior more 
quickly and effectively than its current capabilities. Current data 
mining efforts allow FNS to move towards more advanced predictive 
models to better assess risk, allowing FNS to allocate its resources 
more effectively resulting in program savings.

    Question 8. When the Department is considering the disqualification 
of a retailer, does it consider whether or not there are other 
retailers that will accept SNAP benefits in that area?
    Answer. In all instances where violations leading to 
disqualification did not include trafficking (i.e., exchanging SNAP 
benefits for cash or consideration other than eligible food) in 
benefits, FNS makes a determination as to whether client hardship 
exists before a disqualification is imposed. If there are not a 
sufficient number of stores that stock similar products in the area, a 
store subject to sanction is given the option to pay a hardship civil 
money penalty in lieu of serving a disqualification period.
    If trafficking has occurred in a store, a hardship civil money 
penalty is not considered. Trafficking is the most egregious Program 
violation, and allowing stores to pay a monetary penalty and continue 
to participate is not allowed by regulation.
Response from Kay E. Brown, Director, Education, Workforce, and Income 
        Security Issues, U.S. Government Accountability Office
October 1, 2010

Hon. Frank D. Lucas,
Ranking Minority Member,
House Committee on Agriculture,
Washington, D.C.

    Dear Representative Lucas:

    The enclosed information responds to the post-hearing questions in 
your letter of September 21, 2010, concerning our testimony before your 
Committee on July 28, 2010, on quality control measures in the 
Supplemental Nutrition Assistance Program. If you have any questions or 
would like to discuss this information, please contact me at 
[redacted].
            Sincerely yours,
            

            
Education, Workforce, and Income Security Issues,
U.S. Government Accountability Office.
Enclosure
    The enclosure provides your questions and our responses for the 
record and supplements information provided to your Committee in our 
testimony, Supplemental Nutrition Assistance Program: Payment Errors 
and Trafficking Have Declined, but Challenges Remain (GAO-10-956T, 
Washington, D.C.: July 28, 2010).

    Question 1. Have any of you looked at SNAP nutrition education to 
see what the results of these efforts have been? Do we know what 
tactics are working or not working?
    Answer. We last reviewed USDA's nutrition education efforts, 
including SNAP nutrition education, in 2004. In our April 2004 report, 
we found that USDA programs' administrative structures hindered 
coordination among the USDA nutrition education efforts and that little 
was known about the outcomes of these services because of limited 
monitoring and evaluation. In response to this report, FNS reported 
taking steps to improve coordination, systematically collect reliable 
data, and identify and disseminate lessons-learned for its nutrition 
education efforts. Several years have passed since the time of this 
study, however, and we do not know whether USDA's efforts were 
effective. We have not been asked to update our report. (GAO-04-528)
    More recent information about SNAP nutrition education efforts can 
be found on this FNS website: http://www.fns.usda.gov/ora/menu/
published/NutritionEducation/NutEd.htm 

    Question 2. Your testimony says that it is unclear what effect 
categorical eligibility has on QC rates, but if states are using 
categorical eligibility to give SNAP benefits to otherwise ineligible 
recipients does it not stand to reason that state error rates would be 
low?
    Answer. State efforts to simplify program rules can reduce 
caseworker errors and reduce states' error rates. However, we are not 
aware of studies that have specifically looked at the effect of state 
use of expanded categorical eligibility on payment error rates.

    Question 3. Your testimony states that households with substantial 
assets but low income could be eligible for SNAP under broad-based 
categorical eligibility policies. Do you know how many, or what 
percentage, of households have been deemed eligible for SNAP due to 
categorical eligibility that might not otherwise qualify under regular 
SNAP requirements?
    Answer. We do not know how many, or what percentage, of households 
deemed eligible for SNAP due to categorical eligibility would otherwise 
not qualify under regular SNAP rules. We conducted an analysis of the 
potential effect of eliminating TANF noncash categorical eligibility in 
2006, but this report doesn't specifically address your question. 
Further, state use of expanded categorical eligibility has increased in 
recent years, so circumstances may be much different now compared to 
the time we conducted this study. (GAO-07-465)
Response from Hon. Phyllis K. Fong, Inspector General, Office of 
        Inspector General, U.S. Department of Agriculture
    Question 1. Have any of you looked at SNAP nutrition education to 
see what the results of these efforts have been? Do we know what 
tactics are working or not working?
    Answer. Food and Nutrition Service (FNS) data indicate that there 
has been significant growth in nutrition education over the last 
several years. The number of state agencies with approved Nutrition 
Education Plans increased from seven in 1992 to 52 in 2007. Federal 
funds approved for Food Stamp (now SNAP) Nutrition Education also grew 
from $661,000 in 1992 to over $270 million in 2007.
    This is an area in which we have not performed any audits. 
Currently we are conducting a multi-phase audit of Recovery Act Impacts 
on the Supplemental Nutrition Assistance Program. In our second phase, 
we plan to review state plans for the use of funds authorized by the 
American Recovery and Reinvestment Act of 2009 (Recovery Act). OIG 
could include a review of state use of funds for nutrition education, 
after considering such factors as the amount of funding states have 
allotted for this purpose. This review will be conducted later in 
Fiscal Year (FY) 2011.

    Question 2. From a December 3, 2009, OIG report titled, 
``Supplemental Nutrition Assistance Program Benefits and the Thrifty 
Food Plan'' it states that, ``We did not perform work to validate 
participant eligibility for SNAP benefits, nor did we verify the 
accuracy of benefits received by individual participants. Reviews of 
these participant aspects of SNAP will be conducted separately as part 
of our overall examination of Recovery Act fund expenditures.'' Is this 
work underway?
    Answer. The work is not yet underway. As mentioned above, OIG is 
conducting a multi-phase audit of Recovery Act Impacts on the 
Supplemental Nutrition Assistance Program. The second phase of the 
audit, which will be conducted later in FY 2011, will include a review 
of participant eligibility and accuracy of benefits.

    Question 3. With the increase in the amount of participants and 
SNAP benefits, have you seen an increase in waste and abuse in the 
program?
    Answer. Yes, we have seen an increase in the amount of potential or 
alleged fraud within the program. Our OIG hotline, which is the vehicle 
commonly used by the public to report fraud, waste, and abuse in USDA 
programs, received approximately 1,000 complaints alleging SNAP fraud. 
This is a significant increase over the number of complaints we 
received last year. The complaints are referred to OIG Investigations 
or directly to FNS for appropriate action. Additionally, for every year 
since 2007, OIG Investigations has initiated approximately 140 
investigations a year involving allegations of SNAP fraud. During FY 
2010, however, that number rose to nearly 300, thus doubling the amount 
of SNAP fraud investigations opened in the past 3 years.

    Question 4. You testified that the two states you audited for 
Recovery Act purposes did not have adequate or effective fraud 
detection units and that FNS had not conducted periodic reviews of the 
states. Could this be a reason that the QC rates are historically low? 
Could it be that the QC rates are not accurate? Have you audited the QC 
rates?
    Answer. OIG has not conducted a recent audit of the QC rates and 
therefore has no work upon which to answer your specific questions. We 
do plan, however, to include an evaluation of the QC process in our 
audit on SNAP improper payments starting later in FY 2011.
Response from Jennifer Hatcher, Senior Vice President, Government 
        Relations, Food Marketing Institute
    Question 1. Do retailers work with the states and others who carry 
out SNAP nutrition education to reach consumers at the point of sale 
and encourage healthier buying patterns?
    Answer. Retailers are increasing efforts to address nutrition 
education and promote healthier buying habits with all their customers, 
not just SNAP customers. We would welcome additional opportunities to 
work with states and nonprofits on SNAP education projects. We are 
currently working on a large nutrition education project to coincide 
with the new front-of-package labeling system at FDA as it is 
developed. While education efforts at the store level are very 
effective, education outreach efforts are rarely, if ever, implemented 
specifically at the point of sale for a couple of reasons. First, 
reducing the time in the checkout lane is a top priority for retailers 
as low checkout wait time is considered a primary factor of customer 
satisfaction with their trip to the store. Additionally, by the time 
the customer is at the point of sale, they have completed their 
shopping and have made all their purchase decisions. Efforts to 
influence purchases when the customer enters the store, and throughout 
the shopping experience, are more likely to influence consumer behavior 
during that shopping trip.

    Question 2. According to GAO, rates of trafficking SNAP benefits 
are higher in smaller stores. Why do you think rates of trafficking are 
higher in small stores as compared to large stores? Do you have 
suggestions for reducing or eliminating trafficking in smaller stores?
    Answer. We have no knowledge of any of our member companies large 
or small being implicated in any trafficking investigations. Should 
there be a rogue employee involved in one of these schemes, we would 
fully support USDA in prosecuting these crimes. The EBT card has 
eliminated most all of the fraud and related crimes we were seeing 
under the paper system and has dramatically improved the integrity of 
the program for vendors and customers alike.
Response from James D. Weill, President, Food Research and Action 
        Center

    Question. You mentioned that states need to be more responsive in 
taking the many options they have to simplify the program. Do you think 
state options should be eliminated and instead have the Department 
setting the policies for administering the program?
    Answer. In many respects the SNAP program is strengthened by its 
roots both in federalism and the public-private partnership it entails. 
A mix of Federal and state policy action generally improves the 
effectiveness of SNAP in serving needy people.
    In some instances, however, Federal standards have been or would be 
helpful. Whether a Federal standard rather than a state option may be 
more appropriate depends on the particular program aspect at issue.
    For example, Federal mandates established by Congress and 
administered by the Department of Agriculture ensure that SNAP 
Electronic Benefit Transfer (EBT) cards are interoperable across state 
lines (previously not a mandate) and that the foods that are eligible 
for purchase with those benefits are the same across state lines. Those 
national standards help to promote the efficient delivery of assistance 
through regular channels of private sector commerce--both through 
grocery retailers and through EBT processing systems.
    We recognize that some discretion for states to adapt SNAP policies 
and practices to fit particular state circumstances can be useful. For 
example, caseworker intake models often vary from state-to-state. In 
some cases these variations reflect different needs to establish 
cooperation with other Federal and state benefits programs operating in 
states. An example, however, where a Federal standard might be more 
appropriate than leaving policy to state discretion is the 
certification period for elderly and disabled households, whose 
financial circumstances are very stable. States now have discretion to 
set those periods anywhere from 3 to 24 months. Making 24 months the 
standard time for the certification period for those households could 
promote continuity of benefits for a very vulnerable population and 
reduce the drain on the Federal and state administrative costs entailed 
with shorter certification periods and more frequent case processing.