Errors and Fraud in the Supplemental Nutrition Assistance Program (SNAP)

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Errors and Fraud in the Supplemental

Nutrition Assistance Program (SNAP)

Randy Alison Aussenberg

Specialist in Nutrition Assistance Policy

Updated September 28, 2018

Congressional Research Service

7-5700

www.crs.gov

R45147

Errors and Fraud in the Supplemental Nutrition Assistance Program (SNAP)

Congressional Research Service

Summary

The Supplemental Nutrition Assistance Program (SNAP) is the nation’s largest domestic food

assistance program, serving over 42.1 million recipients in an average month at a federal cost of

over $68 billion in FY2017. SNAP is jointly administered by state agencies, which handle most

recipient functions, and the federal government—specifically, the U.S. Department of

Agriculture’s Food and Nutrition Service (USDA-FNS)—which supports and oversees the states

and handles most retailer functions. In a program with diverse stakeholders, detecting, preventing,

and addressing errors and fraud is complex. SNAP has typically been reauthorized in a farm bill

approximately every five years; this occurred most recently in 2014 (P.L. 113-79). Policymakers

have long been interested in reducing fraud and improving payment accuracy in the program.

Provisions related to these goals have been included in past farm bill reauthorizations and may be

considered for the next farm bill, expected in 2018.

There are four main types of inaccuracy and misconduct in SNAP:

 Trafficking SNAP benefits is the illicit sale of SNAP benefits, which can involve

both retailers and recipients.

 Retailer application fraud generally involves an illicit attempt by a store owner

to participate in SNAP when the store or owner is not eligible.

 Errors and fraud by households applying for SNAP benefits can result in

improper payments. Errors are unintentional, while fraud is the intentional

violation of program rules.

 Errors and fraud by state agencies—agency errors can result in inadvertent

improper payments; the discussion of agency fraud largely focuses on certain

states’ Quality Control (QC) misconduct.

Certain key ideas are fundamental to any discussion of SNAP errors and fraud:

 Errors are not the same as fraud. Fraud is intentional activity that breaks federal

and/or state laws, while errors can be the result of unintentional mistakes. Certain

acts, such as trafficking SNAP benefits, are always considered fraud; other acts,

such as duplicate enrollment, may be the result of either error or fraud depending

on the circumstances of the case.

 SNAP fraud is relatively rare, according to available data and reports.

 There is no single measure that reflects all the forms of fraud in SNAP. There are

some frequently cited measures that capture some parts of the issue, and there are

relevant data from federal and state agencies’ enforcement efforts.

The most frequently cited measure of fraud is the national retailer trafficking rate, which,

estimated that 1.5% of SNAP benefits redeemed from FY2012-FY2014 were trafficked. While

the national retailer trafficking rate (which is issued roughly every three years) estimates the

extent of retailer trafficking, there is not a standard recipient trafficking rate, nor is there an

overall recipient fraud rate.

USDA-FNS is responsible for identifying stores engaged in retailer trafficking—using transaction

data analysis, undercover investigations, and other tools—and imposing penalties on store owners

who commit violations. Retailers found to have trafficked may be subject to permanent

disqualification from participation in SNAP, fines, and other penalties. USDA-FNS also works to

identify fraud by retailers applying to accept SNAP benefits. Retailers found to have falsified

their applications may be subject to denial, permanent disqualification, and other penalties.

Errors and Fraud in the Supplemental Nutrition Assistance Program (SNAP)

Congressional Research Service

While retailer trafficking and retailer application fraud are primarily pursued by a single federal

entity (USDA-FNS), recipient violations (i.e., recipient trafficking and recipient application

fraud) are pursued by 53 different state agencies. Recipients found to have trafficked may be

required to repay the amount trafficked and may be subject to disqualification from receiving

SNAP benefits and other penalties. State agencies’ efforts to reduce and punish recipient fraud

vary, which is evident, for instance, in state-submitted data on recipient disqualification activities.

The national payment error rate (NPER) is the most-cited measure of nationwide payment

accuracy. Using USDA-FNS’s Quality Control (QC) system, the NPER estimates states’ accuracy

in determining eligibility and benefit amounts. The NPER has limitations, though; for instance, it

only reflects errors above a threshold amount ($38 in FY2017). After publishing a FY2014

NPER, USDA Office of the Inspector General (OIG ) and USDA-FNS identified data quality

issues that prevented the publication of an NPER in FY2015 and FY2016, but USDA-FNS

published a NPER for FY2017 in June 2018. For FY2017, it was estimated that 6.30% of SNAP

benefit issuance was improper—including a 5.19% overpayment rate and a 1.11% underpayment

rate. Regardless of the cause of an overpayment, SNAP agencies are required to work toward

recovering excess benefits from households that were overpaid (this is referred to as “establishing

a claim against a household”). Applying these rates to benefits issued in FY2017 (over $63.6

billion), an estimated $3.30 billion in benefits were overpaid, and about $710 million in benefits

were underpaid.

Overpayments and underpayments to households can be the result of recipient errors, recipient

fraud, or agency errors during the certification process. State agencies rely on household-provided

information in applications, but also employ a range of data matches—some required by federal

law, some optional that vary by state—to promote accuracy and double-check information.

According to the USDA-FNS FY2016 State Activity Report, of states’ established claims for

overpayment, approximately 62% of overpayment claim dollars were for recipient errors, about

28% were for agency errors, and about 11% were due to recipient fraud.

In addition to inadvertent agency errors, state agencies and their agents have been involved in

isolated instances of fraud. Beyond cases of fraud conducted by state agency employees for

personal gain, in FY2017 the Department of Justice obtained False Claim Act settlements from

three state agencies accused of falsifying their Quality Control data and unlawfully obtaining

federal bonuses. Investigations into this matter, conducted by the USDA-OIG, are ongoing.

Across all types of fraud, oversight entities such as the Government Accountability Office and

USDA-OIG have identified issues and strategies relevant to combating errors and fraud in SNAP.

USDA-FNS has also proposed related regulatory changes that were not finalized. On the retailer

side, issues identified focus on opportunities to prevent and more promptly punish trafficking. On

the recipient side, issues identified include the nonexistence of a recipient fraud rate, states’varied

levels of anti-fraud efforts (which may be better incentivized), and improvements to data

matching in the application process. During the 115

Congress, Members voted on farm bill

proposals that contained some changes to SNAP program integrity policy; these proposals are

summarized in CRS Report R45275, The House and Senate 2018 Farm Bills (H.R. 2): A Side-by-

Side Comparison with Current Law.

Changes that might strengthen payment accuracy and punishments against fraud can be in tension

with other policy objectives such as preserving recipient access to the program, and may have

unintended consequences such as incurring costs greater than their savings. Balancing program

objectives such as these are considerations for policymakers in this area.

Errors and Fraud in the Supplemental Nutrition Assistance Program (SNAP)

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Contents

Introduction ..................................................................................................................................... 1

Types of Errors and Fraud ............................................................................................................... 2

Trafficking: Retailer and Recipient ........................................................................................... 3

Retailer Application Fraud ........................................................................................................ 3

Errors and Fraud in Benefit Issuance to Households ................................................................ 4

Recipient Errors .................................................................................................................. 4

Recipient Application Fraud ............................................................................................... 4

Agency Errors ..................................................................................................................... 5

Fraud Conducted by State Agencies or Their Agents ................................................................ 5

State Agency Employee Fraud ............................................................................................ 5

State Agency Fraud ............................................................................................................. 5

Extent of Errors and Fraud .............................................................................................................. 5

Extent of Retailer Trafficking ................................................................................................... 5

Extent of Retailer Application Fraud ........................................................................................ 7

Extent of Errors and Fraud in Benefit Issuance to Households ................................................ 8

National Payment Error Rate .............................................................................................. 8

Differentiating Between Recipient Fraud, Recipient Errors, and Agency Errors ............. 10

Detection and Correction of Errors and Fraud .............................................................................. 13

Retailer Fraud .......................................................................................................................... 14

Detection of Retailer Trafficking ...................................................................................... 14

Correction of Retailer Trafficking ..................................................................................... 15

Detection of Retailer Application Fraud ........................................................................... 17

Correction of Retailer Application Fraud.......................................................................... 17

Errors in Benefit Issuance to Households ............................................................................... 17

Detection of Recipient Errors—Data Matching ................................................................ 17

Detection of Agency Errors .............................................................................................. 21

Correction of Recipient and Agency Errors—Claims ....................................................... 21

Recipient Fraud ....................................................................................................................... 22

Detection of Recipient Fraud ............................................................................................ 22

Correction of Recipient Fraud .......................................................................................... 23

State Agency Employee Fraud Detection and Correction ....................................................... 25

State Agency Fraud: SNAP Quality Control ................................................................................. 25

Quality Control: Incentives and Penalties Overview .............................................................. 25

State Agency Misreporting and Falsification of Quality Control Data ................................... 27

Combating Errors and Fraud: Issues and Strategies ...................................................................... 29

Retailer Trafficking ................................................................................................................. 29

Certain Store Owners Remain Active in SNAP Despite Permanent

Disqualification for Trafficking ..................................................................................... 29

Strengthening Monetary Penalties against Trafficking Retailers ...................................... 30

Changes in EBT Transaction Processing since 2014 ........................................................ 31

Enhancing Retailer Stocking Standards ............................................................................ 32

Suspending “Flagrant” Retailer Traffickers ...................................................................... 33

Increasing Requirements for High-Risk Stores ................................................................ 33

Recipient Trafficking............................................................................................................... 34

Requiring Recipient Photographs on EBT Cards.............................................................. 34

State Agency Reporting on Recipient Fraud ..................................................................... 35

Errors and Fraud in the Supplemental Nutrition Assistance Program (SNAP)

Congressional Research Service

Enhancing Federal Financial Incentives for State Agencies to Fight Fraud ..................... 36

Federal Oversight of State Agencies—Management Evaluations (MEs) ......................... 36

Delayed State Agency Notification of Retailer Trafficking Cases .................................... 37

Difference in Burden of Proof for Retailer Trafficking versus

Recipient Trafficking ..................................................................................................... 37

Best Practices for Fighting Recipient Fraud—the SNAP Fraud Framework .................... 38

Retailer Application Fraud ...................................................................................................... 38

Verification and Use of Retailer Submitted Social Security Numbers (SSNs) ................. 38

Other Verification of Retailer Submitted Information ...................................................... 39

Mandating Background Checks on High-Risk Retailer Applications ............................... 39

Additional Retailer Application Vulnerabilities Identified in 2012 and 2013

USDA-FNS Proposed Rules .......................................................................................... 40

Recipient Application Errors and Fraud .................................................................................. 41

Establish Federal Incentives to Conduct Pre-certification Investigations ......................... 41

Difficulties in Collecting Amounts Overpaid to or Trafficked by Recipients ................... 41

Duplicate Enrollment and the National Accuracy Clearinghouse (NAC) ........................ 42

Considerations for Data Matching .................................................................................... 44

State Agency Errors and Fraud................................................................................................ 45

Modifying State Involvement in the Quality Control System .......................................... 45

Figures

Figure 1. Authorization and Trafficking at Convenience Stores, 2006-2014 .................................. 7

Figure 2. Claims Establishment by Type, FY2007-FY2016 ......................................................... 13

Figure 3. Data Matching in SNAP Certification ........................................................................... 18

Figure 4. Per Capita Recipient Disqualifications in States ............................................................ 24

Figure 5. Claims Established and Claims Collected as Shares of Estimated Dollars

Overissued, FY2005-FY2014 .................................................................................................... 42

Tables

Table 1. National Payment Error Rate, FY2011-FY2014, FY2017 .............................................. 10

Table 2. Bonuses Awarded to States for High Payment Accuracy, FY2014 .................................. 26

Table 3. Penalties Repaid by States for Low Payment Accuracy, FY2005-FY2014 ..................... 27

Table B-1. Inactive USDA-FNS Rulemaking Actions Related to SNAP Integrity ....................... 48

Table D-1. Convenience Stores as a Percentage of All Stores in SNAP ....................................... 52

Table D-2. Trafficking Rates in Convenience Stores Compared to the

National Trafficking Rates ......................................................................................................... 52

Table D-3. Convenience Store Redemptions and Trafficking as a Percentage of

All Redemptions and Trafficking ............................................................................................... 53

Table E-1. State Payment Error Rates, FY2010 to FY2014 .......................................................... 54

Table E-2. State Bonuses and Liabilities, FY2010 to FY2014 ...................................................... 56

Errors and Fraud in the Supplemental Nutrition Assistance Program (SNAP)

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Appendixes

Appendix A. Glossary of Abbreviations ........................................................................................ 46

Appendix B. “Inactive” USDA-FNS Rules ................................................................................... 48

Appendix C. Optional Income Data Matches ................................................................................ 50

Appendix D. Trends in Retailer Trafficking and Convenience Store Participation in

SNAP .......................................................................................................................................... 52

Appendix E. Payment Error Rate Information .............................................................................. 54

Contacts

Author Contact Information .......................................................................................................... 58

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Introduction

The Supplemental Nutrition Assistance Program (SNAP) is the nation’s largest domestic food

assistance program, serving about 42.2 million recipients in an average month at a federal cost of

over $68 billion in FY2017.

It is jointly administered by the federal government and the states

and provides means-tested benefits to recipients who are deemed eligible. These benefits may be

used only for eligible foods at any of the approximately 260,000 authorized retailers, which range

from independent corner stores to national chain supermarkets.

In a program that operates with

so many different stakeholders, detecting, preventing, and addressing errors and fraud is a

complex undertaking. Among the complexities are the monitoring of retailer acceptance and

recipient use of benefits, the accuracy of information provided by applicant households, and

states’ performance administering the program. Many governmental entities—federal and state

agencies, including both human services and law enforcement—play a role in efforts to detect,

prevent, and punish fraudulent SNAP activities and to reduce inadvertent errors.

SNAP has typically been reauthorized in a farm bill approximately every five years; this occurred

most recently in 2014 (P.L. 113-79).

Policymakers have long been interested in reducing fraud

and improving accuracy in the program, and provisions related to these goals are frequently

included in farm bills. In preparation for the next farm bill, up for reauthorization in September

2018, policymakers have again begun to discuss error and fraud in the program.

The Trump

Administration has also announced related policy changes.

At the same time, some policymakers

defend the program against criticism of its integrity.

To help policymakers navigate this complex set of policy issues, this report seeks to define terms

related to errors and fraud; identify problems and describe what is known of their extent;

summarize current policy and practice; and share recommendations, proposals, and pilots that

have come up in recent years. The report answers several questions around four main types of

inaccuracy and misconduct: (1) trafficking SNAP benefits (by retailers and by recipients); (2)

retailer application fraud; (3) errors and fraud in SNAP household applications; and (4) errors and

fraud committed by state agencies (including a discussion of states’ recent Quality Control (QC)

misconduct). The report then discusses challenges to combating errors and fraud—across the four

areas—and potential strategies for addressing those challenges.

Average monthly participation data and total program cost for FY2017 are from the U.S. Department of Agriculture

Food and Nutrition Service (USDA-FNS) administrative data.

For basic information on SNAP eligibility rules, benefit calculation, and benefit redemption, see CRS Report R42505,

Supplemental Nutrition Assistance Program (SNAP): A Primer on Eligibility and Benefits, by Randy Alison

Aussenberg.

For background, see CRS In Focus IF10663, Farm Bill Primer: SNAP and Other Nutrition Title Programs, by Randy

Alison Aussenberg.

See Chairman K. Michael Conaway, Past, Present, and Future of SNAP: Hearing Series Findings: 114

Congress,

House Committee on Agriculture, December 7, 2016, pp. 38-48, https://agriculture.house.gov/UploadedFiles/

SNAP_Report_2016.pdf.

For information regarding these policy changes, see, for example: December 5, 2017, USDA press release,

https://www.usda.gov/media/press-releases/2017/12/05/usda-promises-new-snap-flexibilities-promote-self-sufficiency;

and December 8, 2017, USDA press release: https://www.usda.gov/media/press-releases/2017/12/08/usda-clears-

arizona-test-snap-fraud-prevention-improvement.

See, for example, Representative Jim McGovern, “U.S. Rep. McGovern’s 18

End Hunger Now Speech: Fraud,

Waste, Abuse,” press release, July 17, 2013, https://mcgovern.house.gov/news/documentsingle.aspx?DocumentID=

396547.

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Certain key ideas that are fundamental to discussion of SNAP errors and fraud are explored

further in the report:

 Errors are not the same as fraud. Fraud is intentional activity that breaks federal

and/or state laws, but there are also ways that program stakeholders—particularly

recipients and states—may inadvertently err, which could affect benefit amounts.

Certain acts, such as trafficking, are always considered fraud, but other acts, such

as duplicate enrollment, may be the result of either error or fraud depending on

the circumstances of the case.

 SNAP fraud is relatively rare, according to available data and reports. While this

report discusses illegal or inaccurate activities in SNAP, they represent a

relatively small fraction of SNAP activity overall.

 There is no single data point that reflects all the forms of fraud in SNAP. The

most frequently cited measure of fraud is a national estimate of retailer

trafficking, which is a significant, but not the only, type of fraud in the program.

 While retailer trafficking and retailer application fraud are pursued primarily by a

single federal entity, recipient violations are pursued by 53 different state

agencies. This leads to disparate approaches and disparate reporting.

 The national payment error rate (NPER) is the most-often cited measure of

nationwide SNAP payment accuracy, but it has limitations. For example, it only

reflects errors above an error tolerance threshold.

Policies to reduce fraud and increase accuracy can be in tension with other policy objectives, and

may have unintended consequences. Policies that make retailer authorization more onerous, for

instance, have the potential to decrease participants’ access to SNAP-authorized stores. Making

eligibility determinations more complex for recipients can impede recipients’ access to the

program and could strain states’ eligibility determination operations. Implementing better data

collection and accountability systems could require more staff and could incur more costs than it

reduces.

This report provides a foundation for discussing error and fraud in SNAP and for evaluating

policy proposals. It does not make independent CRS findings, but rather synthesizes the many

available resources on error and fraud in SNAP. It relies, in particular, on reports and data from

the United States Department of Agriculture’s Food and Nutrition Service (USDA-FNS) as well

as the published audits of the USDA’s Office of the Inspector General (USDA-OIG) and the

Government Accountability Office (GAO). For a list of abbreviations used in this report, see

Appendix A.

Types of Errors and Fraud

This section defines each of the types of intentional fraud and unintentional errors committed by

recipients, retailers, and state agencies, including retailer trafficking (fraud), recipient trafficking

(fraud), retailer application fraud, recipient application fraud, recipient errors, agency errors, state

agency employee fraud, and state agency fraud.

50 states, the District of Columbia, Guam, and the U.S. Virgin Islands administer SNAP.

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Trafficking: Retailer and Recipient

USDA-FNS is responsible for administering the retailer side of SNAP and for pursuing retailer

fraud; while states are responsible for administering the recipient side of SNAP (with federal

oversight) and for pursuing recipient fraud.

“Trafficking” usually means the direct exchange of

SNAP benefits (formerly known as food stamps) for cash, which is illegal, and both retailers and

recipients can engage in this form of fraud.

Although SNAP benefits have a dollar value, they are

not the same as cash because they can only be spent on eligible food for household consumption

at authorized stores equipped with Electronic Benefit Transfer (EBT) point of sale (POS)

machines.

Trafficking can also include the exchange of SNAP benefits for controlled

substances, firearms, ammunition, or explosives.

Additionally, trafficking includes indirect

exchanges, such as obtaining cash refunds for products purchased with SNAP benefits or

reselling products purchased with SNAP benefits. Trafficking SNAP benefits includes recipient

trafficking and retailer trafficking. Retailer trafficking of SNAP benefits usually occurs when a

SNAP recipient sells their benefits for cash, often at a loss, to an owner or employee of a store

participating in SNAP.

Recipient trafficking usually coincides with retailer trafficking, but it

may take other forms (e.g., if a recipient were to sell their benefits, or food purchased with

benefits, to another individual). Trafficking is one of the most serious forms of SNAP fraud, and

although it does not increase costs to the federal government (as overpayments do), it does divert

federal funds from their intended purpose.

Retailer Application Fraud

Retailers misrepresenting themselves or circumventing disqualification in the application process

can be a source of fraud. To obtain SNAP authorization, applicant retailers must meet certain

requirements, including stocking

and business integrity standards.

When a retailer initially

applies to receive authorization to participate in SNAP or applies for reauthorization to continue

SNAP participation,

the store owner must submit personal and business information and

documentation to USDA-FNS in order to verify eligibility for SNAP participation. If a retailer

Sections 9, 12, and 15 of the Food and Nutrition Act of 2008 (FNA) outline the requirement that USDA-FNS

administer SNAP on the retailer side; Section 11 outlines the requirement that states administer SNAP on the recipient

side.

For the full definition of trafficking, see 7 C.F.R. §271.2.

Stores authorized to participate in SNAP are required to ensure that SNAP benefits are accepted as payment only for

eligible food. Many, but not all, stores ensure compliance by programming their point of sale systems to recognize the

SNAP eligibility of products at the checkout counter, thereby preventing the use of SNAP benefits to pay for ineligible

products.

Controlled substances as defined at 21 U.S.C. §802.

For example, a recipient swipes their SNAP EBT card for a $20 purchase transaction, but rather than receiving $20

of eligible food, the recipient obtains $10 in cash from the store owner. The total amount of the transaction ($20) is

deposited into the store owner’s bank account. In this example, both the recipient and retailer are engaged in trafficking

SNAP benefits.

SNAP stocking standards may be met with either a range of different staple foods on hand or documentation

reflecting more than 50% of store sales in staple foods. For more information, see CRS Report R42505, Supplemental

Nutrition Assistance Program (SNAP): A Primer on Eligibility and Benefits, by Randy Alison Aussenberg.

SNAP business integrity standards require that store owners do not have a history of certain convictions, civil

judgments, and violations. Section 9(a)(1)(D) of the FNA (codified at 7 U.S.C. §2018(a)(1)(D) and implemented at 7

C.F.R §278.1(b)(3)).

Stores participating in SNAP must apply for reauthorization on a regular basis. Depending on risk level and other

factors, stores are reconsidered on reauthorization cycles that vary from one to five years.

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deliberately submits false or misleading information of a substantive nature in order to receive

SNAP authorization despite their ineligibility, then they have committed falsification—retailer

application fraud.

Another kind of retailer application fraud involves a store owner attempting to

circumvent disqualification from SNAP by engaging in a purported sale or transfer of ownership

of their store to a spouse or relative; after which the new purported owner applies to participate in

SNAP, claiming that the former disqualified owners are no longer associated with the store. This

practice is often referred to as “straw ownership,” and USDA-FNS does not consider such sales

or transfers of ownership to be bona fide.

Such actions by the disqualified retailer are

considered circumvention—retailer application fraud.

Retailer application fraud does not

increase costs to the federal government (as overpayments can), but it does enable retailers who

may be more likely to engage in trafficking to enter the program.

Errors and Fraud in Benefit Issuance to Households

In addition to retailer trafficking and retailer application fraud, errors and fraud can arise in

determining eligibility and benefit amounts for recipients.

Recipient Errors

When a household initially applies to receive or recertifies to continue receiving SNAP benefits,

the applicant household must submit personal information and documentation to their state

agency for eligibility determination, and for benefit calculation if found to be eligible. During this

application process, an applicant may misunderstand SNAP rules, make a miscalculation,

otherwise unintentionally provide incorrect information, or accidentally omit certain information.

If this error results in an overpayment to the household and there is no proof that this error was

intentional, then this error is designated as an inadvertent household error (IHE).

Recipient Application Fraud

If an applicant is found to have intentionally submitted false or misleading information during the

initial application or recertification process that leads to an incorrect eligibility or allotment

determination (resulting in an overpayment), then that applicant has committed an intentional

program violation (IPV)—recipient application fraud.

Examples of falsification include providing USDA-FNS with a fake Social Security Number (SSN) for a store

owner, untruthfully attesting that a store owner had never been convicted of a crime, or providing forged records

indicating an inventory of foodstuffs not stocked at the store.

A “straw owner” is an individual who legally owns property, or has the legal appearance of owning property, on

behalf of another individual, sometimes for a fee. Typically, such arrangements are conducted solely to hide the

identity of the effective owner.

U.S. Department of Agriculture, Office of the Inspector General, FNS: Controls for Authorizing Supplemental

Nutrition Assistance Program Retailers, Audit Report 27601-0001-31, July 2013, pp. 3-4, https://www.usda.gov/oig/

webdocs/27601-0001-31.pdf (hereinafter cited as “July 2013 USDA-OIG report”).

Inadvertent household errors are sometimes referred to as unintentional program violations (UPVs).

This is also referred to as “eligibility fraud” although recipient application fraud can involve recipients falsifying

information pertaining to eligibility as well as income. See Section 6(b) of the FNA (codified at 7 U.S.C. §2015(b) and

implemented at 7 C.F.R. §273.16).

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Agency Errors

SNAP overpayments or underpayments that are not the result of recipient actions (i.e., not the

result of recipient errors or recipient fraud) are generally the result of agency errors (AEs).

Agency errors include overpayments or underpayments caused by the action of, or failure to take

action by, any representative of a state agency.

Fraud Conducted by State Agencies or Their Agents

“State agency employee fraud” and “state agency fraud” are not terms defined in statute,

regulation, or agency guidance. As used in this report, “state agency employee fraud” and “state

agency fraud” include forms of fraud often referred to as “insider threats”—a threat to SNAP

integrity that comes from within entities that administer SNAP (i.e., state agencies).

State Agency Employee Fraud

State agency employee fraud is any intentional effort by state employees to illegally generate and

benefit from SNAP overpayments. State agency employee fraud usually involves eligibility

workers who abuse their positions and access to the SNAP certification process in order to

unlawfully generate SNAP accounts that materially benefit individuals not entitled to such

benefits.

State Agency Fraud

State agency fraud is any intentional effort by state officials to mislead USDA-FNS or other

federal authorities in order to illegally obtain federal funds or avoid federal monetary penalties.

State agency fraud cases are very infrequent and generally center on a state’s falsification of

program-related data. Of interest to policymakers, the state agency fraud case examined in this

report, first identified in 2017, deals with multiple states’ falsification of Quality Control (QC)

data in order to obtain monetary bonuses and avoid monetary penalties, with some actions dating

back to 2008.

(For more information, see “State Agency Fraud: SNAP Quality Control.”)

Extent of Errors and Fraud

Extent of Retailer Trafficking

USDA-FNS publishes an annual report that summarizes their annual administrative activities

pertaining to retailers participating in SNAP,

including detailed retailer data on participation and

redemptions, retailer applications and authorizations, investigations and sanctions, and

administrative review. According to this Retailer Management Report, in FY2016 there were

260,115 retailers participating in SNAP, and USDA-FNS permanently disqualified 1,842 stores

for retailer trafficking (less than 1% of all

stores).

Roughly every three years, USDA-FNS

publishes a study estimating the extent of

retailer trafficking in SNAP over about three

years of SNAP redemption data. The retailer

trafficking studies referenced in this report were

issued in 2017 (covering 2012-2014), 2013

National Retailer Trafficking Rate

The most recent trafficking study (analyzing 2012-

2014 data) estimated that 1.50% of all SNAP benefits

redeemed were trafficked (sold for cash or

exchanged illegally) at stores. This is up from an

estimated 1.34% in the 2009-2011 study. This only

reflects one type of fraud—retailer trafficking.

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(covering 2009-2011), and 2011 (covering 2006-2008).

By examining a representative sample,

these studies determined two national rates that reflect the prevalence of retailer trafficking. The

national retailer trafficking rate represents the proportion of SNAP redemptions at stores that

were estimated to have been trafficked. The national store violation rate represents the proportion

of authorized stores that were estimated to have engaged in trafficking.

The national retailer trafficking rate is the most-cited measure of fraud in SNAP, although it does

not capture all types of fraud (i.e., it represents only retailer trafficking). According to the

September 2017 USDA-FNS Retailer Trafficking Study, the national retailer trafficking rate for

2012-2014 was 1.50%, up from 1.34% in the 2009-2011 study.

This means that, during this

period, USDA-FNS estimates that 1.50% of all SNAP benefits redeemed were trafficked at

participating stores. This constitutes about $1.1 billion in estimated benefits trafficked each year

at stores during this period.

Additionally, this study estimated that the national store violation

rate for this period was 11.82%, up from 10.47% in the 2009-2011 study.

This means that,

during this period, USDA-FNS estimates that 11.82% of all SNAP-authorized retailers engaged

in retailer trafficking at least once.

The September 2017 USDA-FNS Retailer Trafficking Study found that the increase in retailer

trafficking was due to increased program participation by smaller stores, which have a higher rate

of retailer trafficking. While stores enter and leave the program from year to year, the overall

growth in SNAP-authorized stores over the last 10 years (FY2007-FY2016) was about 93,000,

and about 63% of this growth came from convenience stores in the program (see Table D-1 in

Appendix D).

As of FY2016, convenience stores constitute about 46% of all stores in the

program, up from 36% in FY2007.

According to the September 2017 USDA-FNS Retailer

Trafficking Study, covering 2012-2014, convenience stores account for about 5% of total SNAP

redemptions, but about 57% of retailer trafficking (see Table D-3 in Appendix D).

Also

Agency errors are sometimes called “administrative errors.”

U.S. Department of Justice (DOJ), “Wisconsin Department of Health Services Agrees to Pay Nearly $7 Million to

Resolve Alleged False Claims for SNAP Funds,” press release, April 12, 2017, https://www.justice.gov/opa/pr/

wisconsin-department-health-services-agrees-pay-nearly-7-million-resolve-alleged-false-claims.

Retailer Management Reports are available at https://www.fns.usda.gov/snap-retailer-data.

This comes to about 0.71% of total stores participating in the program in FY2016. This CRS calculation is based on

data provided in an email from SNAP, USDA-FNS, October 25, 2017.

Joseph Willey, Nicole B. Fettig, and Malcolm Hale, The Extent of Trafficking in the Supplemental Nutrition

Assistance Program: 2012–2014, prepared by WRMA, Inc. for the U.S. Department of Agriculture, Food and Nutrition

Service, September 2017, pp. ii-9, https://www.fns.usda.gov/snap/extent-trafficking-supplemental-nutrition-assistance-

program-2012%E2%80%932014 (hereinafter cited as “September 2017 USDA-FNS Retailer Trafficking Study”).

These three studies can be found online at https://www.fns.usda.gov/report-finder.

September 2017 USDA-FNS Retailer Trafficking Study, pp. ii-9.

SNAP benefit redemptions in FY2012, FY2013, and FY2014 were about $75 billion, $76 billion, and $70 billion,

respectively.

September 2017 USDA-FNS Retailer Trafficking Study, p. 17.

This CRS calculation is based on data provided in an email from SNAP, USDA-FNS, January 5, 2018. USDA-FNS

categorizes retailers into “store types” (e.g., “convenience store”) according to definitions in an internal agency

document. Store types are largely defined by volumes of sales, size, and other business characteristics.

This CRS calculation based on data provided in an email from SNAP, USDA-FNS, January 5, 2018, and from U.S.

Department of Agriculture, Food and Nutrition Service, 2016 Retailer Management Year End Summary Report,

December 2016, p. 1, https://fns-prod.azureedge.net/sites/default/files/snap/2016-SNAP-Retailer-Management-Year-

End-Summary.pdf (hereinafter cited as “December 2016 USDA-FNS Retailer Management Report”).

This CRS calculation based on data from September 2017 USDA-FNS Retailer Trafficking Study, p. 9.

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according to this study, about 18% of all SNAP benefits used at authorized convenience stores are

trafficked by these stores (i.e., the convenience store trafficking rate), and about 19% of all

authorized convenience stores are engaged in trafficking (i.e., the convenience store violation

rate).

These rates are significantly higher than the national rates for all stores (see Table D-2 in

Appendix D). The increase in SNAP participation by smaller stores appears to correlate to an

overall increase in retailer trafficking, according to USDA-FNS.

Figure 1 displays some of

these data from the three most recent trafficking studies.

Figure 1. Authorization and Trafficking at Convenience Stores, 2006-2014

Source: The three USDA-FNS retailer trafficking studies referenced can be found online using

https://www.fns.usda.gov/report-finder.

Extent of Retailer Application Fraud

There is no standard measure of retailer application fraud. However, USDA-FNS does report

annually on actions taken against business integrity violations, and a retailer engaged in

application fraud (including falsification and circumvention) is generally considered to be in

violation of business integrity standards.

In FY2016, USDA-FNS sanctioned 126 stores for business integrity violations. This number

includes sanctions not related to retailer application fraud and amounts to less than 1 store

sanctioned for every 2,064 stores participating in the program.

During the same period, USDA-

FNS permanently disqualified about 15 times as many stores for retailer trafficking.

September 2017 USDA-FNS Retailer Trafficking Study, p. 9.

September 2017 USDA-FNS Retailer Trafficking Study, pp. iii-14.

This business integrity sanction total includes stores sanctioned for past convictions as well as retailer application

fraud (i.e., circumvention and falsification). Total FY2016 business integrity sanctions include 25 time-limited denials,

5 time-limited withdrawals, 56 permanent denials, 37 permanent withdrawals, and 3 permanent disqualifications;

December 2016 USDA-FNS Retailer Management Report, p. 5, and email from SNAP, USDA-FNS, October 25, 2017.

Total FY2016 permanent disqualifications for retailer trafficking were 1,842. CRS calculations in this paragraph use

data from the December 2016 USDA-FNS Retailer Management Report, pp. 1-8, and email from SNAP, USDA-FNS,

October 25, 2017.

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Extent of Errors and Fraud in Benefit Issuance to Households

National Payment Error Rate

The SNAP Quality Control (QC) system measures improper payments in SNAP. This system was

first established by the Food Stamp Act of 1977.

Under the QC system, every state agency

conducts a monthly review of a sample of its households, comparing the amounts of

overpayments and underpayments to total issuance.

From this review, state agencies calculate

their state payment error rate (SPER). USDA-FNS conducts annual reviews of a sample of each

state’s reviews to validate state findings and determine national rates—developing the national

payment error rate (NPER).

The NPER is the most-often cited measure of payment accuracy in SNAP.

Unlike the national

retailer trafficking rate, the NPER is not a measure of fraud. The NPER reflects improper

payments, but not the cause of these overpayments and underpayments. The NPER estimates all

overpayments and underpayments resulting from recipient errors, recipient application fraud, and

agency error.

Per current federal law, only overpayments and underpayments of $38 or more

(inflation-adjusted annually) in the sample month are counted when calculating the payment error

rate—this is called the Quality Control threshold.

Additionally, the NPER combines both the

overpayment rate and the underpayment rate, so it does not reflect only excess expenditures. For

example, in FY2017, the NPER was 6.30%—which included a 5.19% overpayment rate and a

1.11% underpayment rate.

In discussions regarding SNAP payment accuracy, the NPER is sometimes misunderstood to be a

measure of the federal dollars lost to fraud and waste in the program. The NPER instead reflects

the extent of inaccurate payments that exceed the Quality Control threshold in a given year.

Regardless of the cause of an overpayment, SNAP agencies are required to work towards

recovering excess benefits from households that were overpaid. Recovery of overpayments

involves, first, the establishment (or determination) of a claim against a household, and, second,

the actual collection of that claim. Applying the FY2017 NPER to total benefit issuance, in

FY2017 an estimated $3.3 billion in benefits were overpaid, an estimated $710 million in benefits

Section 16 of the 1977 FSA originally established the SNAP QC system; Section 4418-4420 of the Farm Security

and Rural Investment Act of 2002 (the 2002 Farm Bill) and Sections 4019-4021 of the 2014 Farm Bill modified

Section 16 of the FNA (codified at 7 U.S.C. §2025 and implemented at 7 C.F.R. §275).

This statistical sample includes households receiving benefits, as well as households denied, suspended, or

terminated from receiving benefits in the sample month.

USDA uses the NPER to measure the payment accuracy of SNAP issuance per the requirements of the Improper

Payments and Elimination and Recovery Act of 2010 (P.L. 111-204); see https://paymentaccuracy.gov/program/

supplemental-nutrition-assistance-program/. Also see CRS Report R43694, Improper Payments in High Priority

Programs: In Brief, by Garrett Hatch.

For information regarding the determination of payment error rates, see 7 C.F.R. §275.23(b) & (c).

When SNAP agencies detect overpayments and underpayments of less than $38 (inflation adjusted annually), they

still must follow SNAP rules and correct these errors. The Quality Control threshold, also known as the error tolerance

threshold, is only important in the calculation of the payment error rate. The current Quality Control threshold was

most recently set by Section 4019 of the 2014 Farm Bill which modified Section 16(c)(1)(A) of the FNA (codified at 7

U.S.C. §2025(c)(1)(A) and implemented at 7 C.F.R. §275.12(f)(2)). This threshold has been adjusted by statute and

regulation over the years (set at $5 in FY1980, $25 in FY2000, $50 in FY2009, $25 in FY2010, $50 in FY2012, $37 in

FY2014, and most recently $38 in FY2015).

The NPER is sometimes called the “combined payment error rate” or the “national performance measure”, and the

NPER is sometimes called the “national payment accuracy rate” when inverted (i.e., 93.70% in FY2017).

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were underpaid.

In FY2016, the most recent year available, states established over $684 million

in claims to recover overpayments.

Context for Comparing FY2017 NPER to Prior Years

Recent years’ NPERs are listed in Table 1, showing rates from FY2011-FY2014 and then

skipping to FY2017. SNAP national payment error rates were not released by USDA-FNS in

FY2015 or FY2016, due to data quality concerns.

In 2014, USDA found data quality issues in 42 of 53 state agencies’ Quality Control data

reporting. These data quality issues are not, in and of themselves, proof of wrongdoing. In some

cases, states had not followed protocol, while in other cases states had been found to have

deliberately covered up errors (fraudulent actions). (A more detailed discussion of Quality

Control as well as these audits and investigations can be found in “State Agency Fraud: SNAP

Quality Control”). USDA-FNS suspended error reporting for FY2015 and FY2016, and also used

this time to examine and improve state quality control procedures.

In June 2018, USDA-FNS published FY2017 state and national error rates (NPER). USDA-

FNS’s accompanying materials describe that this NPER was determined “under new controls to

prevent any recurrence of statistical bias in the QC system,” which includes “a new management

evaluation process to examine state quality control procedures on a regular basis.”

The agency

also described that the FY2017 rate stems from “a modernized review process, which includes

updated guidance, revisions to [the relevant FNS handbook], extensive training for State and

Federal staff, and modifications to State procedures to ensure consistency with Federal

guidelines.”

As displayed (Table 1) and discussed earlier, the FY2017 NPER of 6.30% is a substantial

increase from the FY2014 of 3.66%. USDA-FNS states the FY2017 rate “is higher than the

previous rate ... but it is more accurate.”

However, changes to data collection and related

oversight since FY2014 make it difficult to reliably compare FY2017 rates to earlier years, as it is

possible that earlier years include systemic under-reporting.

CRS calculation using USDA-FNS SNAP summary data for FY2017. This data is typically published in USDA-FNS

QC annual reports; the FY2017 report has not been published as of the date of this report.

In FY2016, 884,301 claims were established with a total value of $684,187,891, and $402,007,206 in claims were

collected. Claims are established only when an overpayment is detected by the state agency. Claims are not always

established or collected in the year that the overpayment occurred, and there exists large variability between levels of

state claim establishment and collection activity. FY2016 SAR, pp. 32, 34.

See, e.g., U.S. Department of Agriculture, Food and Nutrition Service , Fiscal Year (FY) 2016 Supplemental

Nutrition Assistance Program (SNAP) Payment Error Rate, June 29, 2017, https://fns-prod.azureedge.net/sites/default/

files/snap/FY2016-Payment-Error-Rate-Memo.pdf.

USDA-FNS, “Fact Sheet: SNAP Payment Error Rate,” June 2018, https://www.fns.usda.gov/sites/default/files/snap/

QC-FactSheet-2018.pdf.

USDA-FNS, “Quality Control,” https://www.fns.usda.gov/snap/quality-control, accessed September 24, 2018.

USDA-FNS, “Fact Sheet: SNAP Payment Error Rate,” June 2018, https://www.fns.usda.gov/sites/default/files/snap/

QC-FactSheet-2018.pdf.

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Table 1. National Payment Error Rate, FY2011-FY2014, FY2017

FY2011

FY2012

FY2013

FY2014

FY2017

Overpayment

2.99%

2.77%

2.61%

2.96%

5.19%

Underpayment

0.81%

0.65%

0.60%

0.69%

1.11%

NPER

3.80%

3.42%

3.20%

3.66%

6.30%

Source: USDA-FNS QC Annual Reports from the respective fiscal years.

Note: Overpayment and underpayment rates may not total to listed NPER due to rounding.

a. Per USDA-FNS, the agency developed new controls for FY2017 data collection that were not in place in

FY2014.

Differentiating Between Recipient Fraud, Recipient Errors, and Agency Errors

The SNAP overpayment rate (component of the national payment error rate) estimates the extent

of all SNAP overpayments, including overpayments resulting from recipient errors, recipient

fraud, and agency errors (estimated to total about $3.3 billion overpaid in FY2017). The NPER

does not, however, differentiate between the relative extents of each of these types of errors and

fraud (i.e., the NPER cannot tell us what percentage of this $3.3 billion is due to, for example,

agency errors). There is currently no single standard measurement that individually quantifies the

extent of recipient errors, recipient fraud, or agency errors. State agencies are, however,

responsible for administering the recipient side of SNAP, and every year states report data on

these activities which USDA-FNS publishes in the SNAP State Activity Report (SAR).

This

report includes detailed data on state-level program operations including benefit issuance,

participation, administrative (i.e., non-benefits) costs, recipient disqualification, and claims.

When a recipient error, an act of recipient fraud, or an agency error results in an overpayment to a

household (and that overpayment is detected by the state agency), the household is generally

required by the state agency to repay the overpaid amount (i.e., a claim is established). Data on

the establishment of claims resulting from recipient errors, recipient fraud, and agency errors is

provided in the state report (subdivided by type). The extent of claims establishment, therefore,

can serve as a proxy for the extent of these types of errors and fraud. In addition, when a recipient

commits fraud (and that act of fraud is detected and proven by the state agency), that recipient is

generally punished with disqualification from SNAP. The extent of recipient disqualifications,

therefore, can serve as a proxy for the extent of recipient fraud.

Before examining these claims and disqualification data, however, it is important to understand

the limitations of this approach. Claims are not established in all instances of overpayments

resulting from recipient errors, recipient fraud, or agency errors. For example, claims may not be

established when overpayment amounts fall below state agencies’ claims thresholds

or when

overpayments are not detected by state agencies. Likewise, not all acts of recipient fraud are

detected, proven, and punished with disqualification. Also, these claims establishment and

disqualifications data are not based on representative samples and, therefore, these data may not

fully reflect the prevalence of recipient errors, recipient fraud, or agency errors in the SNAP

State Activity Reports are available at https://www.fns.usda.gov/pd/snap-state-activity-reports.

Per SNAP regulation at 7 C.F.R. §273.18(e)(2), the “claims threshold” is the minimum dollar value of overpayments

that must be collected by states. States may establish claims on amounts below this threshold. The claims threshold

applies to overpayments regardless of cause (i.e., recipient error, recipient fraud, or agency error). Since 2000 the

claims threshold has been set at $125.

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caseload. Despite these shortcomings, these claims and disqualification data are the only available

measures which reflect, albeit imperfectly, the extent of recipient errors, recipient fraud, or

agency errors in SNAP. The following calculations of the extent of these types of errors and fraud

are based on SNAP State Activity Report FY2016 data including the following: total issuance of

$66,539,351,219; average monthly participation of 21,777,938 households; an average monthly

participation of 44,219,363 persons; total claims established of 884,301; and total claims dollars

established of $684,197,891.

Recipient Fraud

Unlike retailer trafficking, which is handled by one federal entity (USDA-FNS), recipient fraud is

detected and punished by 53 different SNAP agencies (50 states, DC, Guam and the U.S. Virgin

Islands) and, as noted in the September 2012 USDA-OIG report, “FNS cannot estimate a

recipient fraud rate because it has not established how States should compile, track, and report

fraud in a uniform manner.”

This lack of standardization is a reason why a national recipient

fraud rate does not exist.

Both recipient trafficking and recipient application fraud are included

in these figures.

According to the FY2016 SNAP State Activity Report

 for every 10,000 households participating in SNAP, about 14 contained a

recipient who was investigated and determined to have committed fraud that

resulted in an overpayment that the state agency required the household to repay

(30,274 claims established);

 for every $10,000 in benefits issued to households participating in SNAP, about

$11 were determined by state agencies to have been overpaid due to recipient

fraud and were required to be repaid by the overpaid household ($73,403,758 in

fraud claims established);

 about 3% of the total number of claims established were established due to

recipient fraud;

 about 11% of the total claims dollars established were established due to

recipient fraud;

 for every 10,000 recipients participating in SNAP, about 13 were disqualified

from the program for violating SNAP rules (e.g., committing fraud; 55,930

disqualified);

U.S. Department of Agriculture, Food and Nutrition Service, State Activity Report Fiscal Year 2016, September

2016, pp. 5-36, https://fns-prod.azureedge.net/sites/default/files/snap/FY16-State-Activity-Report.pdf (hereinafter cited

as “FY2016 SAR”).

U.S. Department of Agriculture, Office of the Inspector General, Analysis of FNS’ Supplemental Nutrition Assistance

Program Fraud Prevention and Detection Efforts, Audit Report 27002-001-13, September 2012, p. 2,

https://www.usda.gov/oig/webdocs/27002-0011-13.pdf (hereinafter cited as “September 2012 USDA-OIG report”).

USDA-FNS has considered developing a level of standardization sufficient to calculate a recipient fraud rate, but in

May 2014 the agency determined that it was not possible without significant investment and oversight. Email from

SNAP, USDA-FNS, November 24, 2017.

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 about 1.5% of disqualification entries made into the USDA-FNS electronic

Disqualified Recipient System (eDRS)

in FY2016 were permanent

disqualifications;

and

 for every $10,000 in benefits issued to households participating in SNAP, about

$21 were determined by state agencies to have been lost (overpaid due to

recipient application fraud or trafficked) to recipient fraud associated with

disqualified recipients ($136,475,242 in program loss associated with

disqualified recipients).

Recipient Errors

According to the FY2016 SNAP State Activity Report

 for every 10,000 households participating in SNAP, about 181 were overpaid due

to a recipient error and the state agency required the household to repay the

overpaid amount (394,883 recipient error claims established);

 for every $10,000 in benefits issued to households participating in SNAP, about

$63 were determined by state agencies to have been overpaid due to recipient

errors and were required to be repaid by the overpaid household ($421,934,288 in

recipient error claims established);

 about 45% of the total number of claims established were established due to

recipient errors;

 about 62% of the total claims dollars established were established due to

recipient errors;

 about 65% of FY2016 claims were established by four states;

 about 55% of FY2016 claims amounts were established by these four states; and

 these four states accounted for about 30% of SNAP participants.

Agency Errors

According to the FY2016 SNAP State Activity Report

 for every 10,000 households participating in SNAP, about 47 were overpaid due

to agency errors, and the state agency required the household to repay the

overpaid amount (459,144 agency error claims established);

 for every $10,000 in benefits issued to households participating in SNAP, about

$28 were determined by state agencies to have been overpaid due to agency

errors and were required to be repaid by the overpaid household ($188,859,846 in

agency error claims established);

The USDA-FNS-eDRS compiles information regarding recipients disqualified by SNAP state agencies.

Email from SNAP, USDA-FNS, January 3, 2018.

Per the FY2016 SAR, p. 32, “Some states establish all non-agency error claims as household error claims initially

and then transfer the claim from household error to fraud after the prosecution or [administrative disqualification

hearing] ADH. Therefore, the sum of the fraud associated with disqualifications is a better measure of the ultimate

amount of fraud claims than the newly established amount.”

These states are California, Illinois, Texas, and Florida.

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 about 52% of the total number of claims established were established due to

agency errors;

 about 28% of the total claims dollars established were established due to agency

errors;

 about 80% of the total number of agency error claims established were

established by California;

 about 64% of the total agency error claims dollars established were established

by California; and

 California accounted for about 10% of SNAP participants.

Although the total volume of claims established has increased over time, the majority of claims

established have been the result of recipient errors, with agency errors being second most

common, and recipient fraud claims being least common—as illustrated by Figure 2.

Figure 2. Claims Establishment by Type, FY2007-FY2016

Source: Created by CRS using data from SNAP State Activity Reports FY2007-FY2016.

Detection and Correction of Errors and Fraud

State and federal efforts to detect and correct errors, as well as efforts to detect and deter fraud,

are detailed in this section.

The claim threshold for agency errors in California is $35 for current households and $125 for inactive households.

See http://www.cdss.ca.gov/shd/res/htm/FoodStampIndex.htm.

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Retailer Fraud

USDA-FNS is responsible for administering the retailer side of SNAP and for pursuing retailer

fraud.

USDA-OIG, in collaboration with the Federal Bureau of Investigations (FBI), U.S. Secret

Service, and other federal, state, and local law enforcement entities, is responsible for pursuing

criminal charges against retailers found to be engaging in retailer trafficking.

Detection of Retailer Trafficking

Retailer trafficking can be detected through a variety of means, including the following:

Analysis of EBT Transaction Data—Whenever a SNAP EBT card is swiped, the transaction

data is captured and analyzed by USDA-FNS for suspicious patterns. USDA-FNS use these data

to develop a case against a retailer when the transactions indicate retailer trafficking is occurring

at their store. In FY2016, USDA-FNS reviewed the transactions of nearly 9% of participating

stores.

Over 80% of retailer trafficking detected by USDA-FNS are found primarily through

EBT transaction analysis.

Undercover Investigations—USDA-FNS performs undercover investigation of stores suspected

of violating SNAP rules (e.g., trafficking), and in FY2016, USDA-FNS investigated over 1% of

participating stores.

State Law Enforcement Bureau (SLEB) Agreements—Some state agencies enter into state law

enforcement bureau (SLEB) agreements with law enforcement entities in their jurisdictions in

order to further their efforts to detect trafficking. These agreements are typically focused on

recipient trafficking, but they can have implications for retailer trafficking.

Tips and Referrals—USDA-FNS receives tips, complaints, and referrals, which can lead to

cases of retailer trafficking. These referrals come from SNAP retailers, SNAP recipients,

members of the public, state agencies, SLEBs, USDA-OIG, or other law enforcement entities.

USDA-OIG operates a website and hotline for members of the public to report instances of

fraud.

In FY2016, USDA-OIG referred 4,320 complaints to USDA-FNS.

Sections 9, 12, and 15 of the FNA outline the requirement that USDA-FNS administer SNAP on the retailer side.

This CRS calculation is based on data from the December 2016 USDA-FNS Retailer Management Report, p. 1.

This CRS calculation is based on data from the December 2016 USDA-FNS Retailer Management Report, p. 8 and

an email from SNAP, USDA-FNS, October 25, 2017. In FY2016 1,842 stores were permanently disqualified for

trafficking SNAP benefits, and USDA-FNS undercover investigations identified retailer trafficking in 288 instances.

The remaining stores were EBT cases, sometimes referred to as paper cases.

About 20% of these investigations resulted in findings of trafficking. This CRS calculation is based on data from the

December 2016 USDA-FNS Retailer Management Report, p. 8.

USDA-OIG hotline information available at https://www.usda.gov/oig/hotline.php.

U.S. Department of Agriculture, Office of the Inspector General, Semiannual Report to Congress: Second Half, April

1, 2016-September 30, 2016, Number 76, November 2016, p. 54, https://www.usda.gov/oig/webdocs/

sarc2016_2nd_half_508.pdf (hereinafter cited as “USDA-OIG SARC 2

Half FY2016”); U.S. Department of

Agriculture, Office of the Inspector General, Semiannual Report to Congress: First Half, October 1, 2015-March 31,

2016, Number 75, May 2016, p. 57, https://www.usda.gov/oig/webdocs/sarc2016_1st_half.pdf (hereinafter cited as

“USDA-OIG SARC 1

Half FY2016”).

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Correction of Retailer Trafficking

If a store is found to have committed trafficking, then all of the owners of the store may be

subject to penalties.

Major penalties associated with retailer trafficking include the following:

Disqualification—If USDA-FNS finds that a SNAP-authorized retailer violated any SNAP rules,

then that retailer may be subject to a period of disqualification from program participation.

Trafficking SNAP benefits is considered one of the most severe violations of SNAP rules, and a

retailer found by USDA-FNS to have trafficked SNAP benefits (regardless of the amount) is

generally subject to a permanent disqualification (PDQ) from program participation.

Reciprocal WIC Disqualification—Stores that are disqualified for violations of the rules of

SNAP are disqualified for an equal (but not necessarily concurrent) period of time from

participation in the Special Supplemental Nutrition Program for Women, Infants, and Children

(WIC).

Likewise, stores disqualified from WIC are disqualified from SNAP for an equal (but

not necessarily concurrent) period of time. PDQs, such as PDQs for trafficking, are also

reciprocal between the programs.

Restitution of Benefits Trafficked

(Claims)—When a retailer accepts or

redeems SNAP benefits in violation of

the Food and Nutrition Act of 2008

(FNA), such as engaging in retailer

trafficking of SNAP benefits, that retailer

may be compelled to repay the amount

that they illegally redeemed. This is

called a claim and is considered a federal

debt. USDA-FNS has the authority to

collect such claims by offsetting against a

store’s SNAP redemptions as well as a

store’s bond or letter of credit (LOC),

where applicable.

Public Disclosure of Disqualified Retailers—USDA-FNS has the authority to publicly disclose

the store and owner name for disqualified retailers.

A December 2016 USDA-FNS Final Rule

asserted USDA-FNS’s intent to disclose this information in order to deter retailer trafficking.

In community property states, the spouses of owners are automatically considered owners themselves and are also

subject to all applicable penalties. As of March 2018, Arizona, California, Idaho, Louisiana, Nevada, New Mexico,

Texas, Washington, and Wisconsin are community property states.

Disqualifications can be for a term or permanent. Term disqualification can vary in length from 6 months to 10 years,

depending on the nature of the violation. Disqualification for trafficking is generally permanent. Section 12 of the FNA

(codified at 7 U.S.C. §2021 and implemented at 7 C.F.R. §278.6).

Section 12(b)(3)(B) of the FNA (codified at 7 U.S.C. §2021(b)(3)(B) and implemented at 7 C.F.R. §278.6(e)(1)(i)).

Section 12(g) of the FNA (codified at 7 U.S.C. §2021(g) and implemented at 7 C.F.R §278.6(e)(8)). For more

information on WIC, see CRS Report R44115, A Primer on WIC: The Special Supplemental Nutrition Program for

Women, Infants, and Children, by Randy Alison Aussenberg.

In certain circumstances USDA-FNS may require a retailer to provide a form of financial collateral (i.e., a collateral

bond or an irrevocable letter of credit) as a condition of SNAP authorization.

Section 15(e) of the FNA (codified at 7 U.S.C. §2024(e) and clarified at 7 C.F.R. §278.7).

Section 9(c) of the FNA (codified at 7 U.S.C. §2018(c) and implemented at 7 C.F.R. §278.1(q)(5).

U.S. Department of Agriculture, Food and Nutrition Service, “Enhancing Retailer Standards in the Supplemental

Rights of Retailers Accused of Fraud

Following a completed trafficking investigation, the agency

sends a retailer a “charge letter” detailing the charges, and

explaining the retailer’s right to request administrative

review. If requested, an independent subdivision of USDA-

FNS considers the validity of the charges anew and issues a

Final Agency Determination that sustains, reverses, or

modifies the charges and explains the retailer’s right to

request judicial review. The retailer may choose to file a

complaint against USDA-FNS in the court of jurisdiction after

receiving a Final Agency Determination.

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Transfer of Ownership Civil Money Penalty (TOCMP)—If a retailer under a period of

disqualification sells or transfers ownership of their store, then USDA-FNS is to assess that

disqualified retailer a “transfer of ownership civil money penalty” (TOCMP).

This means that

retailers permanently disqualified from SNAP for committing retailer trafficking are to be

assessed this penalty whenever they sell or transfer ownership of their stores (regardless of how

much time has passed since the disqualification occurred). In FY2016, USDA-FNS assessed 257

such penalties with a mean value of $29,284.

Exclusion from the General Service Administration’s System for Award Management

(GSA-SAM)—This GSA system tracks individuals and entities that do business with the federal

government. An individual or entity excluded from this system is prohibited from doing business

with the federal government for the duration of the exclusion.

All of the owners of a store

permanently disqualified from SNAP participation for trafficking benefits are permanently listed

as exclusions in GSA-SAM. As of September 2017, 10,307 permanently disqualified retailers

have been listed by USDA-FNS in GSA-SAM as exclusions due to SNAP and WIC violations.

This type of exclusion can have collateral consequences for the excluded party.

Criminal Charges and Penalties—Retailers engaged in trafficking may be criminally charged

and penalized with fines up to $250,000 and imprisonment up to 20 years.

In addition, other

adverse monetary penalties (e.g., asset forfeitures, recoveries, collections, and restitutions) may

be assessed against those convicted. USDA-OIG, in collaboration with federal, state, and local

law enforcement entities, pursues charges against retailers who traffic SNAP benefits. USDA-

OIG usually criminally pursues only retailers who traffic in high dollar amounts of benefits

and/or retailers who also engaged in other criminal activity. In some cases, state law enforcement

bureaus may pursue criminal charges against individuals engaged in retailer trafficking under

state or local statutes. In FY2016, USDA-OIG opened 208 SNAP fraud investigations, and

obtained 600 indictments, 510 convictions, and $95.3 million in monetary penalties.

Nutrition Assistance Program (SNAP),” 81 Federal Register 90675, December 15, 2016 (hereinafter cited as

“December 2016 Final Rule”). For more information about this final rule, see CRS Report R44650, Updated Standards

for SNAP-Authorized Retailers, by Randy Alison Aussenberg.

Section 12(e)(1) of the FNA (codified at 7 U.S.C. §2021(e) and implemented at 7 C.F.R. §278.6(f)(2)).

Email from SNAP, USDA-FNS, October 17, 2017.

For more information on GSA-SAM, see CRS Report RL34753, Procurement Debarment and Suspension of

Government Contractors: Legal Overview, coordinated by Kathleen Ann Ruane (available to congressional clients

upon request to CRS).

U.S. Department of Agriculture, Office of the Inspector General, Implementation of Suspension and Debarment

Tools in the U.S. Department of Agriculture, 50016-0001-23, September 2017, p. 5, https://www.usda.gov/oig/

webdocs/50016-0001-23.pdf (hereinafter cited as “September 2017 USDA-OIG report”).

This GSA system is available to the public, and this system is frequently used by employers, banks, universities,

professional associations, and other institutions when checking the background of candidates or applicants. A GSA-

SAM exclusion is often regarded by such institutions as a derogatory mark and may result in a wide range of adverse

actions against the individual subject to the exclusion (e.g., denial of a mortgage loan, revocation of professional

credentials, or non-selection for employment).

This penalty is applicable to any party that knowingly misuses SNAP benefits equal to or greater than $5,000 in

value (a felony). For felony violations involving benefits valued equal to or greater than $100 and less than $5,000, the

penalties are a fine up to $10,000 and imprisonment up to five years. For misdemeanor violations involving benefits

valued at less than $100, the penalties are a fine up to $1,000 and imprisonment up to one year. Section 15(b) of the

FNA (codified at 7 U.S.C. §2024(b)(1)).

Email from USDA-OIG, January 11, 2018.

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Detection of Retailer Application Fraud

USDA-FNS reviews all information and materials submitted by applicant retailers in order to

identify suspicious items and documentation that may indicate retailer application fraud. Where

such suspicions arise, USDA-FNS may require additional supporting documentation from the

applicant retailer and may contact other federal, state, or local government entities (e.g., entities

that administer business licensure, taxation, or trade) to verify questionable items.

Correction of Retailer Application Fraud

Denial of Application—If USDA-FNS finds during the application process that a retailer fails to

meet requirements such as stocking and business integrity standards, then the retailer’s

application is to be denied. If USDA-FNS determines that an applicant retailer has falsified the

application, then that retailer’s application is to be denied—the period of denial ranges from three

years to permanent depending on the severity and nature of the falsification.

A retailer denied

authorization to participate in SNAP is not generally subject to any penalties other than denial.

Permanent or Term Disqualification—Retailers who knowingly engage in falsification of

substantive matters (e.g., falsification of ownership or eligibility information) may be subject to a

permanent disqualification from program participation. Retailers who engage in falsification of a

lesser nature (e.g., falsification of store information such as store name or address) are generally

subject to a term disqualification of three years. Retailers that are permanently disqualified for

falsification may be subject to all of the penalties associated with permanent disqualification (as

discussed previously in the context of retailer trafficking penalties), including reciprocal WIC

disqualification, claims, public disclosure, TOCMP, GSA-SAM exclusion, and criminal charges

and penalties where appropriate.

Errors in Benefit Issuance to Households

SNAP certification is the process of evaluating an application, determining if an applicant is

eligible to receive SNAP benefits, and the appropriate size of the benefit allotment if the applicant

is found to be eligible. This is one of the primary responsibilities of state agencies (with federal

oversight). Errors (i.e., recipient errors and agency errors) that occur during this process can result

in underissuance or overissuance of SNAP benefits.

Detection of Recipient Errors—Data Matching

The primary sources for information needed to make certification determinations are generally

the applicants themselves, but the eligibility worker may also utilize collateral contact with other

entities when necessary.

In addition, an eligibility worker may perform additional checks using

federal, state, local, or private data systems in order to verify information provided by

Section 9(c) of the FNA (codified at 7 U.S.C. §2018(c) and implemented at 7 C.F.R. §278.1(b)).

See 7 C.F.R. 278.1(k)(3)-(4), 278.6(e)(1),(3).

According to 7 C.F.R. §278.1(o), a retailer applicant’s submission of false information may subject the store and its

owners to civil or criminal action, but no such penalties are currently pursued against retailers denied for falsification.

Email from SNAP, USDA-FNS, January 5, 2018.

For example, an eligibility worker may contact an applicant’s landlord in order to confirm residency and shelter

costs.

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applicants.

A visual overview of data matching in the certification process is presented in

Figure 3.

Figure 3. Data Matching in SNAP Certification

Source: Prepared by the Congressional Research Service (CRS).

Notes: Certification, as illustrated in this graphic, includes five main steps: (1) a household initially applies to

receive or recertifies to continue receiving SNAP benefits; (2) a SNAP eligibility worker evaluates the

household’s application for completion and verifies submitted information (including through interviews with the

applicant); (3) a range of data matching systems (both mandatory and optional) is used to confirm eligibility and

income information reported by the applicant; (4) when needed, the SNAP staff follows up to verify data; and (5)

SNAP staff ultimately makes a SNAP eligibility determination and, if appropriate, designates the benefit allotment

amount.

In FY2016, about 62% of overpayment dollars identified through the claims establishment

process (i.e., after overpayments have already occurred) were due to inadvertent household errors

made by recipients when applying for benefits.

With a caseload of about 22 million households,

recipient errors (sometimes stemming from simple misunderstanding of federal SNAP

regulations) can add up quickly and create a serious payment accuracy problem for states.

Although the upfront cost and effort required of a state agency to implement a data match as part

of the SNAP certification process can be considerable, data matches using federal, state, local, or

private systems can allow agencies to quickly identify recipient errors that could affect applicants’

eligibility or benefit amount. Over the years, policymakers have been interested in data matching

systems to reduce overpayments.

Mandatory Data Matches

The following six data matches have been statutorily mandated as part of the SNAP certification

process:

U.S Department of Health and Human Services, Administration for Children and Families,

National Directory of New Hires (HHS-ACF-NDNH) New Hire File—This system is used to

verify household employment information.

The 2014 Farm Bill mandated state use of the New

For more information regarding verification requirements, see 7 C.F.R. §273.2(f)

This is addressed more fully in the “Extent of Errors and Fraud in Benefit Issuance to Households” section of this

report.

Matches made from this file are not considered verified upon receipt, so additional steps are necessary to confirm

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Hire File and this requirement was implemented in a January 2016 USDA-FNS Interim Final

Rule.

Social Security Administration, Prisoner Verification System (SSA-PVS)—This system is

used to verify if household members are incarcerated.

The Balanced Budget Act of 1997

mandated that all SNAP agencies match against the SSA’s Prisoner Verification System.

Social Security Administration, Death Master File (SSA-DMF)—This system is used to verify

if household members are deceased.

In 1998, P.L. 105-379 mandated that all SNAP agencies

match against the SSA-DMF.

USDA-FNS Electronic Disqualified Recipient System (USDA-FNS-eDRS)—This system is

used to verify if household members are disqualified from SNAP.

U.S. Department of Homeland Security U.S. Citizenship and Immigration Services

Systematic Alien Verification for Entitlements (DHS-USCIS-SAVE)—This system is used to

verify household members immigration status.

The 2014 Farm Bill mandated that SNAP

agencies utilize an immigration status verification system

as a part of the certification process;

a December 2016 USDA-FNS notice of proposed rulemaking (NPRM) regarding the requirement

to utilize this data match was published, but the rule has not yet been finalized.

matches. According to USDA-FNS, as of September 2017, 47 SNAP agencies were utilizing NDNH (per telephone

call, SNAP, USDA-FNS, January 5, 2018) and in a survey of SNAP agencies from an October 2016 GAO report,

only

14 of the 39 agencies utilizing it at the time considered it moderately or extremely useful (U.S. Government

Accountability Office, Supplemental Nutrition Assistance Program: More Information on Promising Practices Could

Enhance States’ Use of Data Matching for Eligibility, GAO-17-111, October 2016, p. 16, https://www.gao.gov/assets/

690/680535.pdf (hereinafter cited as “October 2016 GAO report”).

Section 4013 of the 2014 Farm Bill modified Section 11(e)(24) of the FNA (codified at 7 U.S.C. §2020(e)(24) and

implemented at 7 C.F.R. §272.16) and U.S. Department of Agriculture, Food and Nutrition Service, “SNAP

Requirement for National Directory of New Hires Employment Verification and Annual Program Activity Reporting,”

81 Federal Register 4519, January 26, 2016.

Matches made from this system are not considered verified upon receipt, so additional steps are necessary to confirm

matches.

Section 1003 of P.L. 105-33 modified Section 11(r) of the FNA (codified at 7 U.S.C. §2020(q) and (e)(18) and

implemented at 7 C.F.R. §272.13). This requirement was implemented initially in a USDA-FNS directive in February

2000 and finally in U.S. Department of Agriculture, Food and Nutrition Service, “Supplemental Nutrition Assistance

Program: Disqualified Recipient Reporting and Computer Matching Requirements,” 77 Federal Register 48045,

August 13, 2012 (hereinafter cited as “August 2012 USDA-FNS Final Rule”).

This system is also referred to as the Deceased Matching System (DMS). Matches made from this system are not

considered verified upon receipt, so additional steps are necessary to confirm matches.

Section 1 of P.L. 105-379 modified Section 11(r) of the FNA (codified at U.S.C. §2020(r) and clarified at 7 C.F.R.

§272.14). This requirement was implemented initially in a USDA-FNS directive in February 2000 and finally in the

August 2012 USDA-FNS Final Rule.

Matches made from this system are not considered verified upon receipt, so additional steps are necessary to confirm

matches. The use of the USDA-FNS-eDRS is mandated by SNAP regulations at 7 C.F.R. §273.16(i).

Matches made from this system are considered verified upon receipt. As of January 2018, every state is using this

system (Email from SNAP, USDA-FNS, January 2, 2018).

Section 4015 of the 2014 Farm Bill modified Section 11(p) of the FNA (codified at 7 U.S.C. §2020(p)) to specify

that SNAP agencies must use the immigration status verification system established under §1137 of the Social Security

Act (42 U.S.C. §1320b-7). This system is DHS-USCIS-SAVE.

Section 4015 of the 2014 Farm Bill modified Section 11(p) of the FNA (codified at 7 U.S.C. §2020).

U.S. Department of Agriculture, Food and Nutrition Service, “Supplemental Nutrition Assistance Program: Student

Eligibility, Convicted Felons, Lottery and Gambling, and State Verification Provisions of the Agricultural Act of

2014,” 81 Federal Register 86614, December 1, 2016 (hereinafter cited as “December 2016 Proposed Rule”).

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Income and Eligibility Verification System (IEVS)—SNAP agencies are required to verify the

income and eligibility of all applicants during the SNAP certification process. They generally

fulfill this requirement through the use of an income and eligibility verification system (IEVS).

An IEVS is not a single data match, but rather a state system that may use multiple federal, state,

and local data sources to confirm the accuracy of eligibility and income information provided by

the applicant and to locate pertinent information that may have been omitted by the applicant.

The specific data matches used in an IEVS, however, will vary from state to state.

The 2014

Farm Bill made states’ use of IEVS mandatory in accordance with standards set by the Secretary

of Agriculture. This policy is pending implementation, as USDA-FNS published an NPRM in

December 2016, but a final rule has not yet been published.

100

Optional Data Matches

States also use optional data matches and incorporate these into their processes. Several key

eligibility data examples, such as income and program disqualifications, are discussed below:

101

Income matches—A household’s income and related SNAP deductions are basic determinants of

eligibility and an applicant’s benefit allotment. As a result, in addition to the mandatory matches

discussed above, most states utilize several optional federal and state data matches to verify

earned and unearned income. For examples of optional income matches, see Appendix C.

SNAP disqualification matches—In addition to the mandatory USDA-FNS-eDRS match, states

maintain their own internal databases of recipients disqualified within the state, and a match from

such state databases indicates that a member of an applicant household is ineligible.

102

Other data matches—In addition, state agencies use data sources to assess a number of other

aspects of a household’s application or recertification. For instance, state criminal justice or

correctional agency system matches and state department of health vital information system or

burial assistance program matches can ensure that a household does not include incarcerated or

deceased members. Likewise, state department of children’s services or foster care matches can

ensure that a household does not include children that have been removed. Such state matches to

verify that household size is correct are generally considered verified upon receipt. Matches

against state and federal crime databases can ensure that individuals subject to crime-related

restrictions are correctly excluded in eligibility determination.

103

Data matches between SNAP

and other public benefit programs can also help a state agency ensure that states are accurately

implementing their comparable disqualification policies.

104

These data matches are discussed in

more detail in the October 2016 GAO report.

105

See §1137 of the Social Security Act for IEVS federal requirements.

The definition of IEVS can be found at 7 C.F.R. §§271.2 and 272.8.

100

Section 2015 of the 2014 Farm Bill modified Section 11(p) of the FNA (codified at 7 U.S.C. §2020). December

2016 Proposed Rule.

101

For more information regarding SNAP eligibility, see CRS Report R42505, Supplemental Nutrition Assistance

Program (SNAP): A Primer on Eligibility and Benefits, by Randy Alison Aussenberg.

102

Matches made from these systems are generally considered verified upon receipt.

103

For more information, see CRS Report R42394, Drug Testing and Crime-Related Restrictions in TANF, SNAP, and

Housing Assistance, by Maggie McCarty et al.

104

Section 6(i) of the FNA (codified at 7 U.S.C. §2015(i) and implemented at 7 C.F.R. §273.11(k)).

105

See https://www.gao.gov/assets/690/680535.pdf.

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Detection of Agency Errors

State agencies are responsible for preventing, detecting, and correcting agency errors.

106

Agency

errors are generally the product of human error, so training and supervision of eligibility workers

is the primary means of mitigating them (e.g., something as simple as an eligibility worker

transposing two digits during data entry). Agency errors can be detected by ongoing, independent

process improvements (e.g., quality control or quality assurance), supervisory case review,

eligibility workers, and recipients. Agency errors may also result from state system technical

glitches, so states may detect these errors through system audits and mitigate them through

system improvements.

Correction of Recipient and Agency Errors—Claims

If a household receives an overpayment, and that overpayment is detected by the state agency,

then the agency generally establishes a claim against the household, requiring the adult members

of the household to repay the amount that was overpaid. Claims are considered federal debt and

must be repaid by the adult members of overpaid households regardless of the cause of the

overpayment (i.e., recipient error, recipient fraud, or agency error) except in the case of a major

systems failure.

107

Agencies must also correct underpayments that they identify. State agencies

may elect not to establish claims on low dollar overpayments when such overpayments fall below

the agency’s claims threshold, explained below.

Claims Threshold

The “claims threshold” is the minimum dollar value of overpayments that must be collected by state agencies.

Agencies may establish claims on amounts below this threshold.

108

This threshold applies to overpayments

regardless of cause (i.e., recipient error, recipient fraud, or agency error). Since 1983, this threshold was set at

$35, but in 2000 it was raised to $125.

109

This threshold does not apply to any overpayments discovered during

the Quality Control (QC) process, and claims must be established on all such amounts (regardless of dollar value).

Generally, this threshold does not apply to households currently participating in the program, as it is easier to

collect claims from actively participating households using allotment reduction (i.e., a portion of the household’s

monthly SNAP benefits are withheld until the claim amount is repaid). States may, however, establish their own

cost-effectiveness plans. Under such a plan, if approved by USDA-FNS, a state may modify this threshold for one

or more types of overpayments and may create a threshold limit for claims on households currently participating

in the program.

Claims are not always established in the year that the overpayment occurs and claims are not

always collected in the year that they are established. State agencies are entitled to retain 35% of

the amount they collect on recipient fraud claims and certain recipient error claims, 20% of the

106

Section 13 of the FNA (codified at 7 U.S.C. §2022 and implemented at 7 C.F.R. §273.18).

107

In the case of a state agency’s major systemic error “overissued benefits to a substantial number of households,”

USDA “may prohibit the State agency from collecting these overissuances from some or all households” and “shall

establish a claim against the State agency equal to the value of the overissuance caused by the systemic error.” Section

13(b)(5) of the FNA (codified at 7 U.S.C. §2022(b)(5)). In 2011, USDA-FNS published a proposed rule to implement

this statutory provision; as of the date of this report, this rulemaking action is inactive (see Table B-1 in Appendix B).

As an example of USDA applying this statutory authority, in 2012, USDA established a claim of nearly $5 million

against Maine for certain overissuances. (Eric Russell, Feds order Maine to pay for food-stamp error, The Portland

Press Herald, September 27, 2012, https://www.pressherald.com/2012/09/27/maine-food-stamp-overpayment-

recipeints-usda-reimbursment-letter-mary-mayhew/).

108

See 7 C.F.R. §273.18(e)(2).

109

U.S. Department of Agriculture, Food and Nutrition Service, “Food Stamp Program: Recipient Claim Establishment

and Collection Standards; Final Rule,” 65 Federal Register 41751, July 6, 2000.

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amount they collect on all other recipient error claims, and none of the amount they collect on

agency error claims.

Recipient Fraud

Detection of Recipient Fraud

State agencies are responsible for administering the recipient side of SNAP (with federal

oversight) and for pursuing recipient fraud.

110

State agencies must, furthermore, establish and

operate a SNAP recipient fraud investigation unit.

111

These units detect and punish recipient

trafficking, as well as other forms of recipient fraud. USDA-FNS supports state agencies in this

capacity by providing technical assistance and setting policy. USDA-OIG, in collaboration with

other federal and state law enforcement entities, sometimes criminally pursues recipients who

traffic SNAP benefits when such recipients traffic in high dollar amounts of benefits and/or such

recipients also engage in other criminal activity. Recipient fraud, like retailer fraud, can be

detected through a variety of means, including the following:

Analysis of EBT Transaction Data—Once USDA-FNS has completed the process of

administratively penalizing a retailer for retailer trafficking, and the retailer has exhausted their

appeal rights,

112

then USDA-FNS provides the retailer trafficking case to the appropriate state

agency including EBT card numbers which can be used to identify SNAP recipients who may be

trafficking.

Social Media—State agencies use automated tools and manual monitoring to detect postings on

social media and online commerce websites by individuals attempting to traffic SNAP benefits.

Undercover Investigations—As is done with retailer trafficking cases, state agencies perform

undercover investigations to detect recipient trafficking and recipient application fraud.

Multiple Card Replacement—Recipients who frequently request replacement EBT cards are

flagged for review as potentially involved in trafficking benefits, because they would request

replacements after selling their cards.

113

This recipient trafficking detection mechanism was

established by an April 2014 USDA-FNS Final Rule.

114

In December 2017 USDA-FNS granted a

waiver for one state to contact recipients who request a replacement card more than two times in

a 12-month period, as opposed to the current regulations’ standard of four requests in a 12-month

period.

115

State Law Enforcement Bureau (SLEB) Agreements—Some state agencies enter into state law

enforcement bureau (SLEB) agreements with law enforcement entities in their jurisdictions in

order to further their efforts to detect recipient trafficking and recipient application fraud. There

are advantages to such arrangements for state agencies; for example, under SLEB agreements, the

agency could be notified whenever an individual is arrested in possession of multiple EBT cards,

110

Section 11 of FNA outlines the requirement that states administer SNAP on the recipient side.

111

Section 11(e)(20) of the FNA (codified at 7 U.S.C. §2020(e)(20)).

112

Section 14 of the FNA (codified at 7 U.S.C. §2023).

113

Section 7(h)(8) of the FNA (codified at 7 U.S.C. 2016(h)(8) and implemented at 7 C.F.R. §274.6(b)(6)).

114

U.S. Department of Agriculture, Food and Nutrition Service, “Supplemental Nutrition Assistance Program:

Trafficking Controls and Fraud Investigations,” 79 Federal Register 22766, April 23, 2014 (hereinafter cited as “April

2014 USDA-FNS Final Rule”).

115

USDA Office of Communications, “USDA Clears Arizona to Test SNAP Fraud Prevention Improvement,” press

release, December 8, 2017, https://content.govdelivery.com/accounts/USDAOC/bulletins/1cad357.

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allowing the agency to flag the recipients associated with those EBT cards for potential recipient

trafficking.

Tips and Referrals—As is done in detecting retailer trafficking, agencies use tips and referrals to

detect recipient trafficking and recipient application fraud.

Data Matching and Other Verification—As is done in detecting recipient errors when applying

for SNAP benefits, the data matching and certification process may also provide information

useful in detecting recipient application fraud.

Correction of Recipient Fraud

Whenever a SNAP recipient is found to have committed fraud, that individual is subject to

individual penalties, such as disqualification. The other members of the SNAP household will not

automatically be subject to such penalties, but the adult members of the household will generally

be obligated to repay the amount established by the state agency as a claim for overpayment or

trafficking. Major penalties associated with recipient fraud include the following:

Rights of Recipients Accused of Fraud

When a state agency determines that a recipient has committed fraud, the agency provides notice of adverse

action to the recipient, which outlines the charges. This notice explains the recipient’s right to request a fair

hearing (fair hearings may be requested by any recipient aggrieved by a SNAP agency action, not just recipients

accused of fraud).

116

After a hearing, the recipient is notified of the decision reached and of the recipient’s right to

request an appeal or rehearing with the state agency. After a rehearing or appeal, the recipient is notified of the

decision reached and the recipient’s right to request judicial review. Until this process has been exhausted,

recipients continue to receive SNAP benefits. Advocates argue that some states’ anti-fraud efforts are overly

aggressive and deny recipients’ access to SNAP when a recipient error, not fraud, may be to blame for an

overpayment.

117

Disqualification—Trafficking and recipient application fraud are types of intentional program

violations, and a SNAP recipient found to have committed fraud is generally subject to a period

of program disqualification varying from one year to permanent.

118

Figure 4 below compares the

number of FY2016 SNAP recipient disqualifications to the monthly average number of

participating recipients in the state in FY2016. Performing investigations and proving that

recipients have committed intentional program violations (in order to disqualify them from

SNAP) can require a considerable amount of state agency resources. This chart illustrates the

116

SAR data indicates significant variability between the number of fair hearings held and the percentage of state

decisions upheld/reversed from state to state. One state, Pennsylvania, accounted for about 36% of the fair hearings

held in FY2016 although this state had an average of only 4% of the monthly recipients participating in that year. CRS

calculation based on data from the FY2016 SAR, pp. 5, 20, 50.

117

Bill Lueders, “Wisconsin FoodShare fraud crackdown questioned,” Wisconsin Center for Investigative Journalism,

May 3, 2015, https://www.wisconsinwatch.org/2015/05/wisconsin-foodshare-fraud-crackdown-questioned/. When

charging a recipient with an intentional program violation, state agencies often encourage recipients to sign

administrative disqualification hearing waivers. Signing such a document waives a recipient’s rights to a fair hearing.

This type of waiver accounted for about 44% of SNAP disqualifications in FY2016. Many recipients, advocates posit,

are also unaware of their appeal rights and that participants often win on appeal. According to the FY2016 State

Activity Report (pp. 20-25), state decisions were reversed in about 63% of fair hearings (this includes fair hearings held

as result of any adverse state action, not just hearings held as a result of disqualification actions).

118

Penalties for fraud generally include a one-year disqualification for the recipient’s first violation, a two-year

disqualification for the recipient’s second violation, and a permanent disqualification for the recipient’s third violation;

however, recipients that traffic $500 or more in benefits are permanently disqualified upon the first violation. Section

6(b) of the FNA (codified at 7 U.S.C. §2015(b)).

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extent to which agencies have prioritized this aspect of SNAP administration relative to their

SNAP caseload.

Figure 4. Per Capita Recipient Disqualifications in States

Comparing levels of state agency disqualification action

Source: Prepared by the Congressional Research Service (CRS) using data from the FY2016 State Activity

Report, pp. 29-37.

Restitution of Benefits Defrauded (Claims)—A SNAP household must generally repay benefits

amounts that are overpaid due to recipient application fraud or are trafficked.

119

Comparable Disqualification—If a SNAP recipient is disqualified from any federal, state, or

local means-tested public assistance program, then the state agency may impose the same period

of disqualification on the individual under SNAP.

120

This comparable disqualification is

mandatory for the Food Distribution Program on Indian Reservations (FDPIR).

Criminal Charges and Penalties—Generally, if criminal charges are pursued against recipients

who traffic benefits or commit recipient application fraud, it is the states that will pursue and

prosecute. State fraud laws vary in their penalties for recipient fraud.

121

Additionally, as stated in a

119

Section 13 of the FNA (codified at 7 U.S.C. §2022 and implemented at 7 C.F.R. §273.18).

120

Section 4211 of the 2008 Farm Bill modified Section 6(i) of the FNA (codified at 7 U.S.C. §2018(i) and

implemented at 7 C.F.R. §273.11(k)).

121

These criminal penalties may include fines, imprisonment, probation, community service, etc. For example, under

Oklahoma law, recipient trafficking is punishable by fines up to $5,000 and/or imprisonment up to two years (OK

Statute Title 56 Chapter 7 §243); under Mississippi law, recipient trafficking is punishable by fines up to $10,000

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GAO report from August 2014, each state exercises its discretion differently with respect to filing

criminal charges in cases of recipient fraud.

122

As with retailer trafficking, USDA-OIG sometimes

pursues criminal charges in collaboration with federal and state law enforcement entities against

recipients engaged in SNAP fraud.

State Agency Employee Fraud Detection and Correction

U.S. Department of Agriculture, Office of the Inspector General (USDA-OIG), in conjunction

with local, state, and other federal law enforcement entities, investigates cases of state agency

employee fraud and penalizes state agency employees engaged in it. Criminal penalties for state

agency employee fraud vary from state to state, and individuals who commit state agency

employee fraud may be prosecuted for other crimes (e.g., identity theft) that occurred during the

commission of the state agency employee fraud. Penalties for this type of criminal fraud vary but

may include imprisonment, probation, and/or monetary restitutions.

State Agency Fraud: SNAP Quality Control

SNAP has long had policies and procedures in place for measuring improper payments—largely,

the program’s Quality Control (QC) system. QC is currently the basis for levying financial

penalties from low-performing states and providing financial performance incentives for the

higher-performing and most improved states. In June 2018, following concerns that there had

been misreporting of errors, USDA-FNS released a FY2017 NPER under new quality control

procedures. This section reviews QC and these developments.

Quality Control: Incentives and Penalties Overview

This section discusses false claims by state agencies with regard to Quality Control (QC) data and

state payment error rates (SPERs). As discussed earlier in this report, since 1977, the SNAP

Quality Control system has measured improper payments in SNAP, comparing the amounts of

overpayments and underpayments that exceed the error tolerance threshold ($38 adjusted

annually for inflation)

123

to total benefits issuance. The Quality Control process starts with state

agency analyses that determine state payment error rates, which are then reviewed by USDA-FNS

to develop the SNAP national payment error rate (NPER). After conducting this annual Quality

and/or imprisonment up to three years (MS Code Title 97 Chapter 19 §71). Most of the state laws’ penalties for

recipients are more lenient than the penalties enumerated at Section 15(b) of the FNA (codified at 7 U.S.C.

§2024(b)(1)).

122

U.S. Government Accountability Office, Supplemental Nutrition Assistance Program: Enhanced Detection Tools

and Reporting Could Improve Efforts to Combat Recipient Fraud, GAO-14-641, August 2014, pp. 15-16,

https://www.gao.gov/products/GAO-14-641 (hereinafter cited as “August 2014 GAO report”). For example, this report

stated that the minimum amount of recipient fraud that would result in the filing of criminal charges was $100 in

Tennessee, while it was $5,000 in Texas. In addition, according to this report certain prosecutors and jurisdictions

refused to prosecute recipient trafficking cases entirely due to limited resources and caseloads replete with more serious

criminal cases.

123

When agencies detect overpayments and underpayments under the threshold, they still must follow SNAP rules and

correct these errors. This current Quality Control threshold was most recently set by Section 4019 of the 2014 Farm

Bill which modified Section 16(c)(1)(A) of the FNA (codified at 7 U.S.C. §2025(c)(1)(A) and implemented at 7 C.F.R.

§275.12(f)(2)).

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Control review, USDA-FNS awards bonuses to high-performing state agencies and assigns

penalties to low-performing state agencies.

124

USDA-FNS annually awards high-performance bonuses to up to 10 states with the lowest or most

improved state payment error rates. High-performance bonuses must be used by states to improve

their administration of SNAP.

125

The total annual amount awarded for SPER high-performance

bonuses is $24 million.

126

The bonuses awarded in FY2014 are summarized in Table 2. Awards

for FY2017 have not yet been announced, as of the date of this report.

Table 2. Bonuses Awarded to States for High Payment Accuracy, FY2014

Amount of bonuses in thousands

State

Bonus

$247

$7,742

$628

$1,302

$502*

$1,672

$2,687

$6,497

$293*

$2,428

Source: USDA-FNS, https://fns-prod.azureedge.net/sites/default/files/snap/2014-chart-awards.pdf.

Note: Bonus amounts marked with an asterisk “*” are for the most-improved state payment error rates.

State sanctions—known as “liabilities”—are used to punish states that have comparatively high

payment error rates. If there is a 95% probability that a state makes payment errors 5% more

frequently than the national average, then that state has “exceeded the liability level”. If a state

exceeds the liability level for two years in a row, then it is assessed a penalty—known as a

“liability amount”.

127

Liability amounts are assessed for only that portion of the state payment

error rate that is above 6% (e.g., a state that exceeds the liability level with a state payment error

rate of 5.99% would be assessed a $0 liability amount).

128

Once assessed, states have the option to

pay the liability amount in full or enter into a settlement agreement with USDA-FNS.

129

From FY2005 to FY2014, 42 of 53 state agencies have exceeded the liability level at least once,

but only 9 state agencies have ever been compelled to actually repay an at-risk penalty amount to

124

See Section 16(d) of FNA (codified at 7 U.S.C. §2025(d) and implemented at 7 C.F.R. §275.24).

125

Section 4021 of the 2014 Farm Bill modified Section 16(d) of the FNA (codified at 7 U.S.C. §2025(d) and

implemented at 7 C.F.R. §275(a)(8)). Consistent with the 2014 statutory change, this regulation limits the use of high-

performance bonuses to SNAP administration. In terms of related proposals, the House-passed farm bill in the 113

Congress would have eliminated the performance bonuses (H.R. 2642), and the FY2019 President’s Budget (FY2019

USDA-FNS Budget Justification, http://www.obpa.usda.gov/32fns2019notes.pdf, p. “32-87”) also proposed

elimination (estimating a savings of $480 million over FY2019-2028).

126

Section 4420(a) of the 2002 Farm Bill modified Section 16(d)(2)(B)(ii) of the FNA (codified at 7 U.S.C.

§2025(d)(1)(ii) and implemented at 7 C.F.R. §275.24(b)(1)).

127

USDA-FNS determinations of error rates must be within 95% statistical probability. As a result, sometimes smaller

states report exceeding the liability level, but are not assessed a liability as such a statistical determination cannot be

made. Email from SNAP, USDA-FNS, December 28, 2017.

128

Section 16(c)(1)(C) of the FNA (codified at 7 U.S.C. §2025(c)(1)(C) and implemented at 7 C.F.R. §275.23(d)(2)).

Once assessed, generally half of liability amounts must be invested by the state in improving SNAP administration

(without a federal match) and the other half are designated as “at-risk” for repayment to USDA-FNS. At-risk funds

must be repaid to USDA-FNS if the state exceeds the liability level again the following year. This means that states

have three years in which to improve their program administration before they are ever required to pay a penalty to

USDA-FNS. See also 7 C.F.R. §275.234(e).

129

Under such a settlement, half of the liability amount must be invested by the state into improving SNAP

administration (without federal match) and the other half are designated “at-risk” for repayment to USDA-FNS. At-risk

funds must be repaid to USDA-FNS if the state exceeds a 6% error rate again the following year. This means that states

have three years in which to improve their program administration before they are required to pay a penalty to USDA-

FNS.

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USDA-FNS.

130

This is because most states improve their state payment error rates within one or

two years and avoid being required to make a payment to USDA-FNS. Over these 10 years, these

9 states repaid about $1.5 million to USDA-FNS (see Table 3).

131

Table 3. Penalties Repaid by States for Low Payment Accuracy, FY2005-FY2014

Liability amounts (penalty) are in thousands, and year is fiscal year liability amount was established

State

TOTAL

Penalty

$189

$387

$220

$212

$77

$171

$76

$152

$68

$38

$1,514

Year

2006

2007

2010

2011

2012

2013

2005-2014

Source: Email from SNAP, USDA-FNS, January 19, 2018.

a. Amount due for repayment has not yet been paid as of the date of this report.

State Agency Misreporting and Falsification of Quality

Control Data

State agencies perform Quality Control reviews to determine state payment error rates and then

submit these rates to USDA-FNS for its annual review; and agencies may be awarded or

sanctioned according to these rates. This combination of positive and negative reinforcement is

intended to incentivize high payment accuracy among states. USDA-FNS oversees state agencies

through the management evaluation process and the Quality Control system, in addition to other

federal oversight mechanisms.

132

USDA-OIG performs regular audits of and investigations into state agency compliance with a

range of SNAP rules. Through this oversight, USDA-OIG and USDA-FNS identified concerns in

state-reported Quality Control data. In order to examine this issue, USDA-OIG began a series of

audits in March 2013, which culminated in a September 2015 USDA-OIG report.

133

USDA-OIG

looked at eight states and determined that all eight state agencies had deliberately weakened the

integrity of the Quality Control process with the aid of hired consultants.

134

USDA-FNS

responded in the September 2015 USDA-OIG report that USDA-OIG drew its conclusions on the

basis of unconfirmed information, misunderstandings of SNAP policy, and insufficient statistical

analysis. As a result, USDA-FNS contends that the concerns identified over these eight states’ QC

efforts were largely the result of administrative issues rather than fraud.

135

According to 2017 U.S. Department of Justice (DOJ) findings, at least three state agencies

(Virginia, Wisconsin, and Alaska) engaged in state agency fraud related to Quality Control data

falsification since at least 2008. These three state agencies, with the help of their third-party

130

Email from SNAP, USDA-FNS, January 19, 2018.

131

This is compared to about $17.6 billion in benefits overissued by states, based on USDA-FNS QC Reports, FY2005-

FY2014.

132

Management evaluations are periodic reviews of state agency operations by USDA-FNS focusing on specific areas

of compliance with program rules. More information regarding SNAP management evaluations is available at

https://www.fns.usda.gov/snap/snap-program-improvement.

133

U.S. Department of Agriculture, Office of the Inspector General, FNS Quality Control Process for SNAP Error

Rate, 27601-0002-41, September 2015, https://www.usda.gov/oig/webdocs/27601-0002-41.pdf (hereinafter cited as

“September 2015 USDA-OIG report”).

134

Ibid., p. 4.

135

Ibid., pp. 56-58.

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Congressional Research Service R45147 · VERSION 7 · UPDATED 28

consultants, were found to have mitigated errors,

136

fraudulently improving their state payment

error rates.

137

USDA-FNS and USDA-OIG testified on this subject in two hearings, one before

the Senate Committee on Agriculture, Nutrition, and Forestry in August 2017 and one before the

House Committee on Agriculture in July 2016.

138

Entities, including state agencies, found to have

defrauded federal programs are required to repay funds obtained through fraud, plus interest,

under the False Claims Act (31 U.S.C. §3729). As of the date of this report, these three state

agencies have admitted to the DOJ that they engaged in falsifying QC data and violating the False

Claims Act in their administration of SNAP.

139

As part of their settlements with DOJ, the Virginia

state agency agreed to pay $7,150,436,

140

the Wisconsin state agency agreed to pay $6,991,905,

141

and the Alaska state agency agreed to pay $2,489,999.

142

These $16.6 million in payments

represent the share of the high-performance bonuses awarded to these states for low state

payment error rates while they were engaged in fraudulent practices, plus interest.

For FY2015, USDA-FNS determined that data quality issues existed for 79% of state agencies;

however, such issues are not in and of themselves proof of fraud.

143

All three states that settled

with DOJ had hired the same Quality Control consultant firm. As of the date of this report, the

USDA-OIG investigation into this state agency fraud is still ongoing and Mississippi is known to

be under investigation for Quality Control fraud.

144

In her comments at the August 2017 Senate

Agriculture Committee Hearing, Ann M. Coffey, Assistant Inspector General of Investigations at

USDA-OIG, stated that a “significant number” of states were still under investigation and that the

scale of this state fraud was “unique.”

145

136

For example, if a household in the Quality Control sample was overpaid by $50 due to an agency error (AE), the

state agency employee conducting the Quality Control review would look for ways to offset this error (e.g., by adding

new household or medical expenses) in order to bring the total overpayment below the Quality Control threshold, rather

than simply reporting the error as required. September 2015 USDA-OIG report, p. 5.

137

Wisconsin, for example, reduced its state payment error rate from 7.38% in FY2008 to 2.02% in FY2011, a 73%

decline, during the period it worked with consultants and committed state agency fraud.

138

Senate Committee on Agriculture, Nutrition, and Forestry, Nutrition Programs: Perspectives for the 2018 Farm

Bill, 115

Cong., 1

sess., August 13, 2017, https://www.agriculture.senate.gov/hearings/nutrition-programs-

perspectives-for-the-2018-farm-bill (hereinafter cited as “August 2017 Senate Agriculture Committee Hearing”).

House Committee on Agriculture, Past, Present, and Future of SNAP: Evaluating Error Rates and Anti-Fraud

Measures to Enhance Program Integrity, 114

Cong., 1

sess., July 6, 2016. https://agriculture.house.gov/news/

documentsingle.aspx?DocumentID=3472.

139

For more information regarding the False Claims Act, see CRS Report R40785, Qui Tam: The False Claims Act and

Related Federal Statutes, by Charles Doyle.

140

U.S. Department of Justice, “Virginia Department of Social Services Agrees to Pay $7.1 Million to Resolve Alleged

False Claims for SNAP Funds,” press release, April 10, 2017, https://www.justice.gov/opa/pr/virginia-department-

social-services-agrees-pay-71-million-resolve-alleged-false-claims-snap.

141

U.S. Department of Justice (DOJ), “Wisconsin Department of Health Services Agrees to Pay Nearly $7 Million to

Resolve Alleged False Claims for SNAP Funds,” press release, April 12, 2017, https://www.justice.gov/opa/pr/

wisconsin-department-health-services-agrees-pay-nearly-7-million-resolve-alleged-false-claims.

142

U.S. Department of Justice, “Alaska Department of Health and Social Services to Pay Nearly $2.5 Million to

Resolve Alleged False Claims for SNAP Funds,” press release, August 18, 2017, https://www.justice.gov/opa/pr/

alaska-department-health-and-social-services-pay-nearly-25-million-resolve-alleged-false.

143

This CRS calculation is based on data provided by the USDA-FNS QC Statement; QC data for only 11 of the 53

state agencies could be validated for FY2015. The remaining 42 state agencies had serious data quality issues in their

QC samples. See https://www.fns.usda.gov/snap/quality-control.

144

See https://www.clarionledger.com/story/news/2017/11/29/doj-investigates-mississippi-department-human-services-

over-food-stamps-consultant/901927001/.

145

August 2017 Senate Agriculture Committee Hearing.

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Combating Errors and Fraud: Issues and Strategies

Over time, USDA-FNS, SNAP state agencies, USDA-OIG, GAO, and other stakeholders have

identified issues that may complicate or impede the detection and correction of errors and fraud in

SNAP. These kinds of issues can stem from shortcomings or gaps in existing regulation and law,

as well as complexities in the fundamental design of the program itself. In addition, stakeholders

have proposed strategies to address these kinds of issues and further curb errors and fraud in

SNAP. These include, for example, proposed rulemaking actions, proposed statutory changes, and

state pilots. Changes that strengthen payment accuracy and punishments against fraud can be in

tension with other policy objectives, such as preserving recipient access to the program, and may

have unintended consequences such as incurring costs greater than their savings. Balancing

program objectives such as these is always a consideration for policymakers in this area.

Recent Developments

In the second session of the 115

Congress, Members voted on related policies in farm bill proposals considered

in the House and Senate. See CRS Report R45275, The House and Senate 2018 Farm Bills (H.R. 2): A Side-by-Side

Comparison with Current Law for a summary of the policies passed in versions of H.R. 2. The House and Senate

each passed bills that contained policies related to errors and fraud, but the bills differ in their precise contents.

Retailer Trafficking

Certain Store Owners Remain Active in SNAP Despite Permanent

Disqualification for Trafficking

According to SNAP rules, if a store is permanently disqualified from participating in SNAP and

later that store’s owner applies to participate in SNAP at a new store, then USDA-FNS will deny

the new store’s application. Due to a longstanding USDA-FNS policy, however, store owners

who own multiple stores that participate in SNAP have been able to remain in the program with

some of their stores despite a permanent disqualification at another of their stores.

146

This USDA-

FNS policy, identified and examined in the July 2013 USDA-OIG report, was intended to prevent

the elimination of whole chains of stores from the program as a result of violations at one store.

147

However, the policy has been applied beyond chain stores, and USDA-OIG identified it as a

weakness in efforts to combat trafficking. In the July 2013 report, USDA-OIG identified 586

store owners who remained in SNAP due to this policy despite their association with a

permanently disqualified store; 66 of these owners were found to have obtained SNAP

authorization at new stores.

148

In the July 2013 report, USDA-OIG proposed that USDA-FNS make a change to SNAP

regulations and USDA-FNS policy to allow for the permanent disqualification or denial of all

146

For example, an individual owns three stores (Store A, B, and C) that are authorized to participate in SNAP. Store B

is permanently disqualified from participating in SNAP due to a USDA-FNS finding that the store engaged in retailer

trafficking. Store A and Store C will continue to participate in SNAP irrespective of the permanent disqualification of

Store B. Additionally, when the store owner applies for SNAP authorization for a new store location, Store D, USDA-

FNS will generally process that new application irrespective of the past trafficking violations that took place at Store B.

147

July 2013 USDA-OIG report, p. 9.

148

Ibid., pp. 2-19.

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current or future stores, respectively, associated with an owner of a store that is permanently

disqualified for retailer trafficking unless the retailer can meet certain criteria.

149

USDA-FNS responded to USDA-OIG with an alternative policy that would impose collateral

requirements for these owners. (Under current law, collateral bonds or letters of credit are

required as a condition of participation in SNAP for stores that have been subjected to a term

disqualification.

150

These are held as collateral against the retailer committing future violations.)

USDA-FNS suggested requiring a bond or letter of credit for all authorized stores associated with

a permanently disqualified owner and for new stores when such stores have an owner associated

with a store permanently disqualified for trafficking.

151

USDA-OIG indicated that it considered

this USDA-FNS alternative to its disqualification recommendations inadequate, noting “[w]e

believe that continuing to allow known traffickers to participate in SNAP will undermine program

integrity.”

152

As of the date of this report, none of these proposed policy changes have been implemented.

153

Strengthening Monetary Penalties against Trafficking Retailers

An estimated $1.1 billion in SNAP benefits were trafficked annually at stores,

154

but in FY2016,

USDA-FNS fined trafficking retailers only about $7.5 million.

155

Monetary penalties can

discourage retailers from engaging in trafficking and also help recoup federal funds lost to fraud.

For these reasons, changes to SNAP rules have been proposed to augment the monetary penalties

assessed against trafficking retailers.

Increasing Transfer of Ownership Civil Money Penalties—The 2008 Farm Bill modified the

FNA to increase civil monetary penalties against retailers that break SNAP rules to a maximum of

$100,000 per violation.

156

If a retailer that has been permanently disqualified for trafficking

SNAP benefits subsequently sells or transfers ownership of a store, then USDA-FNS assesses that

retailer a “transfer of ownership civil money penalty” (TOCMP).

157

This is currently the primary

financial penalty assessed by USDA-FNS against retailers found to have engaged in trafficking.

In August 2012, USDA-FNS published a notice of proposed rulemaking (NPRM) to implement

the 2008 Farm Bill change.

158

This notice stated that existing limits used by USDA-FNS were

149

Relevant criteria are outlined in SNAP regulations at 7 C.F.R. §278.6(i).

150

The value of these bonds or letters of credit is equal to 10% of the SNAP business conducted by the store in the

previous 12-month period. Section 12(d) of the FNA (codified 7 U.S.C. §2021(d) and implemented at 7 C.F.R.

§278.1(b)(4)).

151

Under this change, if a retailer owned three stores (Store A, B, and C) and Store B was permanently disqualified for

trafficking, the retailer would be required to submit a bond or letter of credit for Store A and Store C, in addition to a

bond or letter of credit for any future store applying for participation in SNAP.

152

July 2013 USDA-OIG report, p. 21.

153

July 2013 USDA-OIG report, pp. 20-22.

154

This figure represents estimated retailer trafficking annually from 2012 to 2014 per the September 2017 USDA-FNS

Retailer Trafficking Study, pp. ii-iii.

155

This CRS calculation is based on information provided via email from SNAP, USDA-FNS, October 17, 2017.

156

Section 4132 of the Food, Conservation, and Energy Act of 2008 (the 2008 Farm Bill, P.L. 110-246) modified

Section 12(a)(1)(B) and (c)(1) of the FNA (codified at 7 U.S.C. §2021(a)(1)(B) and (c)(1) and implemented at 7 C.F.R.

§3.91(b)(3)(i)).

157

Section 12(e)(1) of the FNA (codified at 7 U.S.C. §2021(e) and implemented at 7 C.F.R. §278.6(f)(2)).

158

U.S. Department of Agriculture, Food and Nutrition Service, “Supplemental Nutrition Assistance Program: Farm

Bill of 2008 Retailer Sanctions,” 77 Federal Register 4848461, August 14, 2012 (hereinafter cited as “August 2012

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Congressional Research Service R45147 · VERSION 7 · UPDATED 31

$11,000 per violation and $59,000 per investigation, and that this rulemaking action would

increase these limits to up to $100,000 per violation per the intent of Congress expressed in the

2008 Farm Bill.

159

As of the date of this report, this rulemaking action is inactive (see Table B-1

in Appendix B). Because this change in the limits on TOCMPs has not been implemented,

USDA-FNS continues to assess TOCMPs according to the limits in place before the passage of

the 2008 Farm Bill (i.e., $11,000 per violation and $59,000 per investigation). In FY2016, the

mean value of TOCMPs assessed by USDA-FNS was $29,284, about half of the limit per

investigation.

160

Implementation of these changes in the maximum limits on TOCMPs could

represent a nearly tenfold increase in the penalty amounts for permanently disqualified retailers

engaged in a high volume of SNAP business, potentially increasing the penalties’ deterrent

effect.

161

Creating Additional Civil Money Penalties—Currently, USDA-FNS only fines a limited share

of trafficking retailers. Firms permanently disqualified for trafficking are subject to a TOCMP

when USDA-FNS becomes aware that the permanently disqualified store owner has sold a store,

but USDA-FNS can only become aware of such a sale when, and if, the new store owner applies

for SNAP authorization. For every retailer assessed a TOCMP in FY2016, more than seven

retailers were permanently disqualified for trafficking.

162

Ultimately this means that the

overwhelming majority of store owners found by USDA-FNS to have committed and materially

benefited from retailer trafficking are subject to no monetary penalty at all.

USDA-FNS proposed to create a new kind of monetary penalty, the trafficking civil penalty

(TCP), in the August 2012 USDA-FNS NPRM.

163

Under this proposal, a retailer permanently

disqualified for trafficking would be subject to this new kind of fine, the size of which would be

based on the retailer’s volume of fraud, as it is for a TOCMP.

164

Establishing this new fine would

provide an immediate monetary penalty at the time of permanent disqualification to further deter

retailers from engaging in trafficking activity and recoup misappropriated federal funds. As of the

date of this report, this rulemaking action is inactive (see Table B-1 in Appendix B) and USDA-

FNS is not assessing this new kind of fine.

Changes in EBT Transaction Processing since 2014

Prior to September 2014, about half of all SNAP-authorized retailers (including many smaller

independent retailers) used free EBT-only point of sale (POS) devices provided by their state’s

EBT host processors.

165

Transaction data for purchases made at these free EBT-only POS devices

USDA-FNS NPRM”).

159

Ibid., p. 48466.

160

Email from SNAP, USDA-FNS, October 17, 2017.

161

For example, if a store that redeemed an average of $4,000 in SNAP benefits per month is permanently disqualified

for six retailer trafficking violations, then it would be assessed a TOCMP at the maximum of $59,000 under current

regulations. Such a store would be assessed a TOCMP of $576,000 under this proposal. This CRS calculation is based

on information provided in the August 2012 USDA-FNS NPRM and regulations at 7 C.F.R. §278.6(g).

162

This CRS calculation is based on data from the December 2016 USDA-FNS Retailer Management Report, pp. 1-8.

163

The Food Stamp Act of 1977 granted USDA-FNS the authority to either disqualify a firm for program violations or

impose a civil money penalty, but not both. This authority was broadened by the 2008 FNA to allow USDA-FNS to

simultaneously apply both kinds of penalties (i.e., disqualification and civil money penalty) to retailers in violation.

164

For example, if a store that redeemed an average of $4,000 in SNAP benefits per month is permanently disqualified

for six retailer trafficking violations, then it would be immediately assessed a fine in the amount of $288,000. This CRS

calculation is based on information provided in the August 2012 USDA-FNS NPRM.

165

EBT host processors are larger companies, such as Fidelity National Information Services (FIS), Solutran, and

Errors and Fraud in the Supplemental Nutrition Assistance Program (SNAP)

Congressional Research Service R45147 · VERSION 7 · UPDATED 32

went directly to EBT host processors and then to USDA-FNS. USDA-FNS uses this transaction

data to detect retailer trafficking activity.

The 2014 Farm Bill modified the FNA to require that all nonexempt retailers pay for their own

EBT equipment and services.

166

Since this change, most stores now work with third-party

companies that provide POS equipment and services for a fee. The introduction of these

unregulated intermediary entities has complicated USDA-FNS’s efforts to detect retailer

trafficking,

167

and has also facilitated new forms of fraud. For example, in 2017, an account

executive for a third party processor was sentenced to prison, to be followed by supervised

release, and was ordered to pay restitution for his role in illegally providing 50 unauthorized

stores with active SNAP EBT point-of-sale devices which were used to redeem about $6.5

million in benefits (at least eight of these stores were found to engaged in retailer trafficking).

168

Enhancing Retailer Stocking Standards

Since 1994, retailers applying to participate in the program have been required to meet stocking

standards which mandate a minimum of 12 food items.

169

In an October 2006 GAO report on

trafficking, these minimal stocking requirements were identified as a factor potentially

contributing to retailer trafficking, as the standards may make it easier for small, fraud-prone

retailers that do not primarily sell food to enter the program.

170

In addition, the September 2017

USDA-FNS Retailer Trafficking Study identified a correlation between an increase in small

stores (e.g., convenience stores) in the program and an increase in retailer trafficking (for more

information, see Appendix D). As a result, increasing stocking standards has been proposed as a

strategy to curb retailer trafficking. The 2014 Farm Bill modified the FNA to enhance retailer

stocking standards for participating stores.

171

The December 2016 USDA-FNS Final Rule

implemented these changes and included several other provisions that would have significantly

increased stocking standards for retailers; however, Section 765 of the Consolidated

Conduent, that contract with individual states or groups of states to provide EBT services such as routing transactions

and printing cards. These EBT host processors are subject to service contracts that reflect the statutory and regulatory

requirements of the EBT system and are overseen by USDA-FNS.

166

Section 4002(b)(1) of the Agricultural Act of 2014 (the 2014 Farm Bill, P.L. 113-79) modified Section 7(f)(2)(A) of

the FNA (codified at 7 U.S.C. §2016(f)(2)(A)). A small number of SNAP-authorized retailers were exempt from this

change, including military commissaries, nonprofit food purchasing cooperative ventures, group living arrangements,

direct-marketing farmers, farmers’ markets, and others. See also agency guidance, Supplemental Nutrition Assistance

Program Provisions of the Agricultural Act of 2014 - Implementing Memorandum, U.S. Department of Agriculture,

Food and Nutrition Service , March 21, 2014, pp. 1-3, https://fns-prod.azureedge.net/sites/default/files/

SNAP%20Provisions%20of%20the%20Agricultural%20Act%20of%202014%20-%20Implementing%20Memo.pdf.

167

These entities include independent sales organizations (ISOs) and third-party processors (TPPs). An ISO generally

works directly with a retailer by providing EBT equipment and helping to set up the retailer’s connection to a TPP. A

TPP generally provides transaction services between a retailer and an EBT host processor. TPPs and ISOs have no

contractual relationship with states and are not overseen by USDA-FNS.

168

USDA-OIG SARC 1

Half FY2017, pp. 29-30.

169

Section 201 of the Food Stamp Program Improvements Act of 1994 (P.L. 103-225) modified Section 3(o)(1) of the

FNA (codified at 7 U.S.C. §2018(a)(1) and implemented in 7 C.F.R. §271.2 and §278.1(b)(1)). See also U.S.

Department of Agriculture, Food and Nutrition Service, “Food Stamp Program: Revisions to the Retail Food Store

Definition and Program Authorization Guidance,” 66 Federal Register 2795, January 12, 2001.

170

U.S. Government Accountability Office, Food Stamp Trafficking: FNS Could Enhance Program Integrity by Better

Targeting Stores Likely to Traffic and Increasing Penalties, GAO-07-53, October 2006, p. 5, http://www.gao.gov/

assets/260/252570.pdf.

171

Section 4002(a)(1) and (2) of the 2014 Farm Bill P.L. 113-79 modified Section 3(o)(1)(A) of the FNA (codified at 7

U.S.C. §2012(o)(1)(A)).

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Appropriations Act of 2017 (2017 Omnibus, P.L. 115-31) prevented full implementation of this

rule.

172

On January 17, 2018, USDA-FNS began implementing the remaining provisions of the

December 2016 USDA-FNS Final Rule. Current implementation requires a modest increase to

the number of items stocked (from 12 to 36 food items) but not as much as would have been

required by the final rule before the 2017 Omnibus (84 food items).

Suspending “Flagrant” Retailer Traffickers

Some retailers have been found to have delayed the disqualification process for their stores,

enabling them to continue trafficking. Between the USDA-FNS official notification of trafficking

charges and the permanent disqualification for trafficking, there are a number of administrative

steps.

173

Until final implementation of a permanent disqualification, the retailer may continue to

participate in the program, accepting and redeeming SNAP benefits. According to USDA-FNS,

some charged retailers exploit the delay created by these administrative steps in order to continue

(or even accelerate) their trafficking of SNAP benefits, sometimes remaining in the program for

months.

174

The 2008 Farm Bill modified the FNA to require USDA-FNS to utilize the EBT

system to immediately suspend the payment of redeemed SNAP benefits to stores determined to

be engaged in this “flagrant” retailer trafficking.

175

A February 2013 USDA-FNS NPRM included

a provision to implement this 2008 Farm Bill requirement, but, as of the date of this report, this

rulemaking action is inactive (see Table B-1 in Appendix B).

Increasing Requirements for High-Risk Stores

When a store applies for authorization to participate in SNAP, USDA-FNS internally assigns that

store a risk status (i.e., high, medium, or low) based on retailer trafficking data for the location

and area.

176

If a new store applies at a physical address associated with past retailer trafficking,

that new store is more likely to be considered “high risk.” In a July 2013 report, USDA-OIG

noted that certain high-risk store locations evidence a pattern of retailer trafficking that continues

under new ownership.

177

USDA-OIG recommended requiring a bond or letter of credit as a

precondition of SNAP authorization at high-risk store locations, which would require statutory

changes.

172

For more information on this rulemaking, see CRS Report R44650, Updated Standards for SNAP-Authorized

Retailers, by Randy Alison Aussenberg.

173

These administrative steps include providing USDA-FNS with additional information, requesting agency

administrative review, and filing Freedom of Information Act (FOIA) requests that must be fulfilled before final

implementation of a permanent disqualification for trafficking may occur.

174

U.S. Department of Agriculture, Food and Nutrition Service, “Supplemental Nutrition Assistance Program:

Suspension of SNAP Benefit Payments of Retailers,” 78 Federal Register 12245, February 22, 2013 (hereinafter cited

as “February 2013 USDA-FNS NPRM”).

175

Section 4132 of the 2008 Farm Bill modified Section 12(h) of the FNA (codified at 7 U.S.C. §2021(h)).

176

Stores with higher-risk statuses may be subjected by USDA-FNS to more rigorous authorization processes,

including enhanced documentation requirements and more frequent inspections.

177

July 2013 USDA-OIG report, p. 16.

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Recipient Trafficking

Requiring Recipient Photographs on EBT Cards

While some have argued that placing recipient photographs on EBT cards would reduce

trafficking, specifically the sale of cards between recipients and unauthorized use of cards at

authorized stores, there are operational and access challenges to this strategy. Since 1996, state

agencies have had the option to require photographs of one or more SNAP household members

on the household’s EBT card(s).

178

This state option is known as “photo EBT.”

Like SNAP benefits, EBT cards are issued to households, not to individuals. Also, households

may appoint authorized representatives (outside of the household) to use their EBT cards to shop

on the households’ behalf.

179

As a result, a photo EBT card might only bear the image of the head

of a household despite the fact that all members of the household can use the card. Similarly, an

authorized representative may use a card that does not have the representative’s picture on it.

Retailers therefore cannot legally deny a SNAP transaction just because the user does not match

the photo on the card. Additionally, some advocates point out that photo EBT has shown some

adverse effects on recipient access.

180

A number of states have considered or implemented photo EBT since 1996. States’ evaluations of

photo EBT have generally concluded that the option has or would have little to no effect on

recipient trafficking.

181

Though evidence of reduced trafficking is lacking, two states, Maine and

Massachusetts, currently implement photo EBT. Maine contended that it “[strengthens] the

integrity of our public assistance programs.”

182

The implementation of photo EBT in a state requires both upfront and ongoing costs to the state

and federal government. Upfront costs generally exceed ongoing costs, and ongoing costs

generally increase over time. State estimates and actual expenditures on the cost of photo EBT

vary widely. As an example, in 2000, Missouri enacted a state law mandating photo EBT, and the

Office of the Missouri State Auditor evaluated the option in August 2001.

183

This audit

determined that in the first year of implementation, photo EBT effected no fraud reduction, cost

$1,801,858 ($947,280 federal costs and $854,578 state costs), and should be discontinued.

184

2001, Missouri discontinued its use of photo EBT.

178

Section 825(a)(9) of Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) modified

Section 7(h)(9) of the FNA (codified at 7 U.S.C. §2016(h)(9) and implemented at 7 C.F.R. §274.8(b)(5)).

179

For example, a household containing homebound senior citizens may give their EBT card and PIN to a neighbor and

authorize them to shop on the household’s behalf.

180

See, for example, a summary of Massachusetts client advocate experiences and concerns included in an Urban

Institute issue brief published in March 2015, “Assessing the Merits of Photo EBT Cards in the Supplemental Nutrition

Assistance Program.”

181

This includes state reports such as those conducted by Missouri in August 2001 (https://catalog.loc.gov/vwebv/

search?searchCode=LCCN&searchArg=2002435093&searchType=1&permalink=y), Rhode Island in September 2013

(https://lisaopdycke.files.wordpress.com/2014/03/ebt-feasibility-in-ri1.pdf), Pennsylvania in November 2012

(http://lbfc.legis.state.pa.us/Resources/Documents/Reports/450.pdf), and Massachusetts in April 2012

(http://archives.lib.state.ma.us/bitstream/handle/2452/213365/ocn885253047.pdf?sequence=1&isAllowed=y).

182

Maine Department of Health and Human Services Commissioner Mary Mayhew, Department of Health and Human

Services, Maine, “DHHS to Begin Putting Photos on Maine EBT Cards,” press release, April 17, 2014,

http://www.maine.gov/dhhs/archivednews_autosearch.shtml?id=618847.

183

See Section 208.182, RSMo 2000.

184

Office of Missouri State Auditor, Audit of Department of Social Services Electronic Benefit Security Card and

Electronic Benefit Transfer Benefit Delivery System, Report No. 2001-58, August 2001, p. 8, https://catalog.loc.gov/

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In reviewing 14 states that have considered photo EBT implementation since 2001, upfront costs

range from about $1.6 million in New Hampshire (2016) to about $25.1 million in North Carolina

(2011).

185

Estimates of ongoing annual costs vary across an even wider range, from

approximately $65,000 in Virginia (2017) to $8.4 million in Arizona (2016).

186

State Agency Reporting on Recipient Fraud

There is currently no single standard measurement of recipient fraud (neither recipient trafficking

nor recipient application fraud). In the absence of a national recipient trafficking rate, it is

difficult to observe trends and evaluate the effectiveness of enforcement strategies. Both GAO

187

and USDA-OIG

188

have commented on the significance of this shortcoming and recommended

changes to allow for the creation of a national recipient trafficking rate akin to the national

retailer trafficking rate. Based on USDA-FNS analysis, however, GAO found it is infeasible to

create a uniform methodology for states to calculate a national recipient trafficking rate without

statutory changes to require and enable USDA-FNS and state agencies to assign sufficient

resources to this issue.

189

USDA-FNS echoed these feasibility concerns in a May 2014

evaluation.

190

Additional authority and resources to develop a recipient trafficking rate might allow USDA-FNS

to do some or all of the following:

 conduct and publish a study of recipient trafficking of SNAP benefits using

currently existing data, including a national recipient trafficking rate;

 determine and document what changes must be made to current regulations,

forms, policies, and practices to standardize state agency reporting and

calculation of recipient trafficking, including at minimum the definition of

vwebv/search?searchCode=LCCN&searchArg=2002435093&searchType=1&permalink=y.

185

The cost estimate for New Hampshire in 2016 estimated an upfront cost of $1,554,634 and ongoing costs of about

$887,507 a year. The cost estimate for North Carolina in 2011 estimated an upfront cost of $25,050,000 and ongoing

costs of $2,450,000 a year. Department of Health and Human Services, New Hampshire, Fiscal Note: Senate Bill 529,

January 28, 2016, https://legiscan.com/NH/text/SB529/id/1318275; General Assembly of North Carolina, Legislative

Fiscal Note: House Bill 734, July 1, 2012, pp. 2-3, https://www.ncleg.net/Sessions/2011/FiscalNotes/House/PDF/

HFN0734v1.pdf.

186

The cost estimate for Virginia in 2017 estimated ongoing costs at approximately $65,000 per year and an upfront

cost of $1,836,935 (this estimate only included costs directly associated with card production and excluded other

ongoing photo EBT implementation costs); Joint Legislative Audit and Review Commission, 2017 General Assembly

Session, Fiscal Impact Review: House Bill 2208, February 6, 2017, p. 3, https://lis.virginia.gov/cgi-bin/legp604.exe?

171+oth+HB2208J110+PDF. The cost estimate for Arizona in 2016 estimated ongoing costs of $8.4 million per year

and an upfront cost of $12 million; Joint Legislative Budget Committee of Arizona, Fiscal Note: House Bill 2596,

February 17, 2016, p. 1, https://www.azleg.gov/legtext/52leg/2r/fiscal/hb2596.docx.pdf.

187

Government Accountability Office, Supplemental Nutrition Assistance Program: Enhanced Detection Tools and

Reporting to Combat Recipient Fraud Are in Development, GAO-16-719T, May 2016, pp. 4-15, https://www.gao.gov/

assets/680/677779.pdf (hereinafter cited as “June 2016 GAO report”).

188

September 2012 USDA-OIG report, p. 21.

189

June 2016 GAO report, p. 4-5.

190

As of May 2014, USDA-FNS evaluated the feasibility of calculating a national recipient trafficking rate and

determined that it would be necessary for USDA-FNS to create a system similar in nature to the SNAP Quality Control

system in order to calculate a recipient fraud rate. This system would, like the SNAP QC system, require statutory

authority and extensive regulations to standardize terminology, definitions, timelines, methodologies, data reporting,

and data formatting. The system would also require a significant investment of state and federal resources to establish

and operate. As no such authority or resources currently exist, USDA-FNS found that establishing the rate was

infeasible. Email from SNAP, USDA-FNS, November 24, 2017.

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relevant terms (e.g., definition of “investigation”), the annual timeframes, and the

data sources for compilation of recipient trafficking data; and

 implement the identified changes necessary to reliably and accurately document

the national recipient trafficking rate.

Enhancing Federal Financial Incentives for State Agencies to Fight Fraud

USDA-FNS provides financial incentives to state agencies to reward high performance.

191

These

bonuses reward states with low error rates but do not reward states that effectively detect and

penalize recipient trafficking. In April 2014, USDA-FNS published a Request for Information

(RFI) soliciting comment on ways to modify performance bonuses for state agencies, including

creating bonuses related to activities targeting recipient trafficking.

192

The July 2016 GAO report

also found that USDA-FNS does not sufficiently incentivize state agencies to pursue recipient

trafficking cases. The report stated, “to help address the increased caseloads and the resources

needed to conduct investigations, we recommended that USDA explore ways that federal

financial incentives could be used to better support cost-effective anti-fraud strategies. At this

time, FNS has decided not to pursue bonus awards for anti-fraud and program integrity

activities.”

193

Establishing a standard to measure performance for these bonuses would likely

require the establishment of a national recipient trafficking rate as discussed earlier in this

section.

Additionally, as stated earlier, state agencies establish and collect claims against recipients who

traffic SNAP benefits. If a state agency collects on a claim resulting from fraud, such as recipient

trafficking, the state agency is entitled to retain 35% of the amount collected.

194

The August 2014

GAO report suggested that increasing this retention rate and restricting the use of retained funds

to state agency anti-fraud activities could significantly enhance efforts to combat recipient

trafficking, noting that the strategy “may result in a net savings for SNAP if increased collections

in payment recoveries outweigh the increased amount states receive in retentions.”

195

Implementation of this strategy may require statutory change.

Federal Oversight of State Agencies—Management Evaluations (MEs)

USDA-FNS oversees state agency administration of SNAP, and one of the primary tools used in

this federal oversight is the management evaluation (ME). USDA-FNS conducts annual

management evaluations on high priority areas and triennial reviews on lower priority areas.

196

a state agency is found to be out of compliance with SNAP rules, then a corrective action plan

(CAP) will be developed and USDA-FNS will work with the state agency to improve

191

Section 16(d) of the FNA (codified at 7 U.S.C. §2025(d) and implemented at 7 C.F.R. §275.24).

192

U.S. Department of Agriculture, Food and Nutrition Service, “Request for Information: Supplemental Nutrition

Assistance Program (SNAP) High Performance Bonuses,” 79 Federal Register 22788, April 23, 2014.

193

July 2016 GAO report, p. 29.

194

Section 16(a) of the FNA (codified at 7 U.S.C. §2025(a) and implemented at 7 C.F.R. §273.18(k)(1)).

195

August 2014 GAO report, pp. 15-34.

196

See 7 C.F.R. §275.3(a). In FY2017, for example, management evaluations included the administration of policies

and programs related to Able-bodied Adults without Dependents (ABAWD), SNAP Employment and Training (E&T),

Program Access Review (PAR), and photo EBT. U.S. Department of Agriculture, Food and Nutrition Service,

Supplemental Nutrition Assistance Program - Fiscal Year 2017 National Target Areas for Management Evaluations,

June 2018, pp. 1-2, https://fns-prod.azureedge.net/sites/default/files/snap/

SNAP%20FY17%20National%20Target%20Areas%20for%20Management%20Evaluations%20%282%29.pdf.

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compliance. A January 2012 USDA-OIG report noted that USDA-FNS did not utilize

management evaluations to assess the effectiveness of state agencies’ efforts to detect and

penalize recipient trafficking.

197

In response, USDA-FNS created a “recipient integrity”

management evaluation in FY2012 which it currently uses to evaluate state agencies every three

years.

198

Delayed State Agency Notification of Retailer Trafficking Cases

State agencies are responsible for investigating recipient trafficking, and USDA-FNS is

responsible for investigating retailer trafficking. A large share of trafficking, however, results

from collusion between recipients and retailers. If a state agency is made aware that a store in its

jurisdiction is engaged in retailer trafficking, it can place the store under surveillance and build

cases against recipients engaged in trafficking at that location.

199

Usually, however, state agencies

have no such opportunity. USDA-FNS provides retailer trafficking cases to state agencies only

after completing the agency administrative and appeal process. By the time the state agency is

made aware of a retailer trafficking case, the store has ceased accepting SNAP and has often

closed. At that point, meaningful surveillance of the store cannot be performed and EBT

transaction data cannot be corroborated with other forms of hard evidence. It is important to note,

however, that providing state agencies with advance notification regarding ongoing USDA-FNS

investigations of retailers may jeopardize these investigations.

200

Difference in Burden of Proof for Retailer Trafficking versus

Recipient Trafficking

Retailer and recipient trafficking proceedings have different burdens of proof; therefore,

governments will not necessarily prevail in both cases with the same evidence. Accepting SNAP

benefits as a form of payment is not an entitlement for retailers. To disqualify a SNAP retailer for

a violation of SNAP rules, USDA-FNS must only meet a lower-level burden of proof—the

“preponderance of the evidence” standard.

201

Receiving SNAP benefits is an entitlement for

eligible individuals. To disqualify a SNAP recipient for fraud, a state agency must meet a higher-

level burden of proof—the “clear and convincing evidence” standard.

202

This means that evidence

197

U.S. Department of Agriculture, Office of the Inspector General, State Fraud Detection Efforts for the Supplement

Nutrition Assistance Program, Audit Report 27703-0002-HY, January 2012, p. 2, https://www.usda.gov/oig/webdocs/

27703-0002-HY.pdf.

198

For more information about these management evaluations, see https://www.fns.usda.gov/snap/snap-program-

improvement.

199

Surveillance helps identify the SNAP recipients who frequent the store and, paired with EBT transaction data, can

provide evidence of recipient trafficking. If, for example, a SNAP recipient enters a trafficking store, swipes his/her

EBT card for a large transaction amount, and then leaves the store without bags of groceries, it is extremely likely that

the recipient is engaged in trafficking.

200

Email from SNAP, USDA-FNS, January 5, 2018.

201

Under the preponderance standard, if more than 50% of the evidence favors a party, then that party prevails. In the

context of a retailer administratively sanctioned by USDA-FNS for trafficking, the retailer must satisfy the

preponderance standard to prove that the USDA-FNS administrative sanction was invalid. If the retailer is unable to

meet this burden of proof, then the court will sustain USDA-FNS’s administrative sanction. See USDA-FNS Final

Agency Decisions at https://www.fns.usda.gov/snap/retailer-sanctions-final-agency-decisions-fads.

202

The clear and convincing standard is met if the plaintiff/prosecutor proves that their position is substantially more

likely than not to be true (i.e., if more than 70-75% of the evidence favors the plaintiff/prosecutor, then the

plaintiff/prosecutor will win the case). The applicability of this burden of proof for SNAP recipients is established in

regulation at 7 C.F.R. §273.16(e)(6).

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deemed sufficient to prove retailer trafficking may not be sufficient to prove recipient trafficking.

Indeed, over 84% of the USDA-FNS retailer trafficking cases that resulted in a permanent

disqualification in FY2016 relied primarily on an analysis of suspicious transaction patterns based

on Anti-fraud Locator using EBT Retailer Transactions (ALERT) system data.

203

These EBT

transaction data, on their own, are not generally considered sufficient grounds for the

disqualification of SNAP recipients. For this reason, state agencies often have difficulty

disqualifying recipients whose EBT cards were used in transactions flagged as trafficking by

ALERT transaction data analysis, absent other evidence of recipient trafficking.

Best Practices for Fighting Recipient Fraud—the SNAP Fraud Framework

Grants to states for integrity activities, established by Section 4029 of the 2014 Farm Bill, were

awarded in FY2014 and FY2015 but not in FY2016 or FY2017.

204

USDA-FNS is currently

developing a “SNAP Fraud Framework,” which combines best practices for fraud prevention

gathered by USDA-FNS over several years from federal, state, and private partners. USDA-FNS

plans to launch the SNAP Fraud Framework in FY2018 and to offer states grant opportunities

using this funding to implement the framework.

205

Retailer Application Fraud

USDA-FNS is responsible for reviewing the applications submitted by retailers and ensuring that

retailers authorized to participate in SNAP meet all eligibility requirements. Included in these

applications are store owners’ personal information, including but not limited to owners’ Social

Security Numbers (SSNs), but USDA-FNS is statutorily limited in how it can use these SSNs.

Restrictions on the Use of Retailers’ Social Security Numbers (SSNs)

When a retailer applies to participate in SNAP, they must provide to USDA-FNS the SSNs of all

owners of the applicant store. Per the Social Security Act, USDA-FNS may only legally use these

SSNs for one purpose: “the establishment and maintenance of a list of the names and social security

account numbers of such individuals for use in determining those applicants who have been

previously sanctioned or convicted under section 12 or 15 [of the FNA].”

206

Due to this restriction,

USDA-FNS is unable to use these SSNs to perform background checks or match with federal

databases.

Verification and Use of Retailer Submitted Social Security Numbers (SSNs)

During the application process, retailers provide USDA-FNS with the SSNs of all store owners.

USDA-OIG compared these retailer-submitted SSNs to the Social Security Administration’s

Death Master File to identify store owners using SSNs that matched the SSNs of deceased

individuals. In a January 2017 USDA-OIG report, 3,394 stores were found to have at least one

owner using an SSA-DMF matched SSN, and 346 of these stores were found to have all owners

203

CRS calculation based on data from December 2016 USDA-FNS Retailer Management Report, p. 8.

204

For state activities under this grant, see, for example, U.S. Department of Agriculture, Food and Nutrition Service,

FY 2015 SNAP Recipient Integrity Information Technology Grant Summaries, October 2015.

https://www.fns.usda.gov/snap/fy2015-snap-recipient-integrity-information-technology-grant-summaries.

205

U.S. Department of Agriculture, Office of Budget and Program Analysis , 2019 USDA Budget Explanatory Notes:

Food and Nutrition Service , pp. 32-91, https://www.obpa.usda.gov/32fns2019notes.pdf.

206

Section 205(c)(2)(C)(iii)(I) of the Social Security Act (codified at 42 U.S.C. §405(c)(2)(C)(iii)(I) and implemented

at 7 C.F.R. §278.1(q)(3)).

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using SSA-DMF matched SSNs.

207

USDA-OIG recommended that USDA-FNS follow up with

these 3,394 retailers and implement a new workflow process to check retailer-submitted SSNs on

an ongoing basis. In the agency response to the report, USDA-FNS addressed these 3,394

identified retailers, but also identified the statutory barrier to this proposed change, stating: “FNS

recognizes the value in conducting a DMF match on an on-going basis. As such, should FNS be

granted future authority to use SSN for matching purposes, FNS will match to the SSA DMF

using SSN on an on-going basis.”

208

As of the date of this report, USDA-FNS does not verify

retailer-submitted SSNs or match against the SSA-DMF due to this statutory restriction.

209

Implementation of this change would require modification to the Social Security Act.

Other Verification of Retailer Submitted Information

In the July 2013 report, USDA-OIG recommended that USDA-FNS use other methods to verify

applicant retailer information such as memoranda of understanding (MOUs) with state licensing

agencies. USDA-FNS proposed instead to test the use of data brokers to complement existing

techniques used to verify retailer applicant information.

210

In 2014, USDA-FNS conducted four

pilots testing the use of data brokers and determined that it had low return on investment, in part

due to USDA-FNS’s inability to utilize applicant retailers’ SSNs in data matches.

211

Mandating Background Checks on High-Risk Retailer Applications

Store owners who have been convicted of certain crimes will be denied authorization to

participate in SNAP for lack of business integrity if they declare the past conviction when

applying. However, USDA-FNS is not currently able to verify the information provided by the

retailer if he/she chooses to falsify the application and conceal past criminal convictions. A

September 2008 USDA-OIG report

212

suggested that USDA-FNS utilize the Interstate

Identification Index (III) of the National Crime Information Center (NCIC) to perform

background checks on retailers applying to participate in SNAP.

213

The July 2013 USDA-OIG

report repeated this recommendation, finding three owners who failed to disclose past criminal

convictions on their application for SNAP authorization out of a sample of 212 owners (all three

were later permanently disqualified for retailer trafficking).

214

In response, USDA-FNS agreed to

207

U.S. Department of Agriculture, Office of the Inspector General, Detecting Potential SNAP Trafficking Using Data

Analysis, Report 27901-0002-13, January 2017, https://www.usda.gov/oig/webdocs/27901-0002-13.pdf, pp. 3-8.

208

January 2017 USDA-OIG report, p. 6.

209

Section 205(c)(2)(C)(iii)(I) of the Social Security Act (codified at 42 U.S.C. §405(c)(2)(C)(iii)(I) and implemented

at 7 C.F.R. §278.1(q)(3)).

210

A data broker, or information broker, collects information on individuals from private and public records and

provides access to this information to customers for a fee.

211

Email from SNAP, USDA-FNS, January 5, 2017.

212

U.S. Department of Agriculture, Office of the Inspector General, Audit Report: Food Stamp Program Retailer

Authorization and Store Visits, Report No. 27601-15-AT, September 2008, pp. 6-8, https://www.usda.gov/oig/

webdocs/27601-15-At.pdf.

213

The III, or “triple-I”, is a national database of individuals’ criminal histories which can be used for individual

criminal background checks. The III database is accessible through the system used to access the DOJ-FBI-NCIC and

maintained by the FBI. The NCIC is the country’s central repository for a range of criminal information, facilitating

information flow between federal, state, and local law enforcement agencies. USDA-FNS, and other non-criminal

justice agencies, do not have access to the NCIC, but can obtain NCIC data when authorized by statute and approved

by the U.S. Department of Justice (DOJ). Although individuals may obtain their own NCIC records, agencies like

USDA cannot compel individuals to submit their own NCIC records without statutory authority and DOJ approval.

214

September 2008 USDA-OIG report, pp. 4-8.

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initiate a proposed rulemaking action to require retailer applicants and currently authorized

retailers deemed “high risk”

215

to provide USDA-FNS with a self-initiated background check.

216

However, USDA-FNS does not currently have the statutory authority to compel retailer

applicants to submit background checks. As of the date of this report, this rulemaking action is

“inactive” (see Table B-1 in Appendix B).

Additional Retailer Application Vulnerabilities Identified in 2012 and 2013

USDA-FNS Proposed Rules

The August 2012 and February 2013 USDA-FNS NPRMs contained four provisions addressing

shortcomings in existing retailer application regulations. These proposed rules are currently

“inactive” (see Table B-1 in Appendix B). Proposed changes included the following:

Retailers failing to report changes in ownership—Currently, authorized retailers are required

to report any changes in the ownership of their stores, but there is currently no penalty for

noncompliance. To deter retailer noncompliance, USDA-FNS proposed to subject to a six-month

disqualification any retailer that failed to report ownership changes to USDA-FNS within 10 days

of the change.

217

Disqualified SNAP recipients applying to become SNAP-authorized retailers—Under current

SNAP rules, USDA-FNS may not deny the application of a retailer who was permanently

disqualified from SNAP as a recipient for fraud on business integrity grounds. USDA-FNS

proposed to add recipient fraud to the definition of business integrity standards, “because a

person, who violates program rules as a recipient, lacks the necessary business integrity and

responsibility expected of a store owner who must train employees and oversee operations to

ensure that SNAP EBT transactions are conducted in accordance with Department rules.”

218

Data

matches with the USDA-FNS electronic Disqualified Recipient System (eDRS) are needed to

determine whether individuals are disqualified from receiving SNAP benefits, and such matches

rely on the use of individuals’ SSNs; therefore, USDA-FNS would have difficulty implementing

this provision due to statutory restrictions on allowable uses of applicant retailers’ SSNs.

219

Illegal retailer-to-retailer transfers of SNAP authorization—Authorized retailers are

prohibited from transferring the SNAP authorization of their stores to a new owner in the event of

a sale, and retailers are prohibited from accepting SNAP benefits without first applying for and

obtaining SNAP authorization. Under current regulations, if a retailer sells the authorization and a

retailer buyer uses it, USDA-FNS penalizes the buyer but not the seller.

220

To address illegal

collusion on the part of the seller and curtail unauthorized SNAP redemptions, USDA-FNS

215

When a store applies for authorization to participate in SNAP, USDA-FNS internally assigns that store a risk status

(i.e., high, medium, or low) based on retailer trafficking data for the location and area. Stores with higher-risk statuses

may be subjected by USDA-FNS to more rigorous authorization processes, including enhanced documentation

requirements and more frequent inspections.

216

July 2013 USDA-OIG report, pp. 10-14.

217

February 2013 USDA-FNS NPRM, pp. 12249-12250.

218

August 2012 USDA-FNS NPRM, p. 48464.

219

Section 205(c)(2)(C)(iii)(I) of the Social Security Act (codified at 42 U.S.C. §405(c)(2)(C)(iii)(I) and implemented

at 7 C.F.R. §278.1(q)(3)).

220

The fine for unauthorized acceptance of SNAP benefits is $1,000 for each violation plus an amount equal to three

times the face value of the illegally accepted SNAP benefits. Section 12(f) of the FNA (codified at 7 U.S.C. §2021(f)

and clarified at 7 C.F.R. §278.6(m)).

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proposed to subject the seller to two penalties: permanent SNAP retailer ineligibility (for all

current and future stores) and a fine equal to that of the buyer (under current regulations).

221

Retailers’ failure to pay fines, claims, or fiscal penalties—Current SNAP regulations allow

USDA-FNS, on the basis of business integrity, to deny or withdraw the authorization of retailers

who fail to pay certain fiscal claims or fines.

222

USDA-FNS proposed to allow the agency to deny

or withdraw the authorization of retailers who fail to pay any fine, claim, or fiscal penalty

assessed against them under 7 C.F.R. §278 when such debts become delinquent.

223

Recipient Application Errors and Fraud

Establish Federal Incentives to Conduct Pre-certification Investigations

In the June 2016 GAO report, GAO recommended that federal financial incentives should be

restructured to encourage effective pre-certification investigations “because some investigative

agencies were not rewarded for cost-effective, anti-fraud efforts that could prevent ineligible

people from receiving benefits.”

224

As this report noted, “when fraud by a recipient is discovered,

the state may generally retain 35 percent of the recovered overpayment, but when a state detects

potential fraud by an applicant and denies the application, there are no payments to recover.”

225

According to FY2016 State Activity Report data,

226

about half of the state agencies dedicated

minimal resources to pre-certification investigations.

227

The five state agencies that engaged in

the most extensive pre-certification investigation activity represented 96% of these investigations

despite serving only 32% of all SNAP participants in FY2016.

228

Together, the five states reported

about $369 million in prevented improper federal expenditure through these efforts.

229

With

incentives, it is possible that more states would dedicate resources to conducting pre-certification

investigations to find error and fraud on a regular basis.

Difficulties in Collecting Amounts Overpaid to or Trafficked by Recipients

As one might expect, it is challenging to recover overpayments from poor and near-poor

households.

230

Establishing and collecting claims is the primary way that overpayments are

recovered; and, while state agencies have improved the rate of claims establishment since

221

February 2013 USDA-FNS NPRM.

222

Section 9(a)(1)(D) of the FNA (codified at 7 U.S.C. §2018(a)(1)(D) and implemented 7 C.F.R. §278.1(k)(7)).

223

February 2013 USDA-FNS NPRM.

224

June 2016 GAO report, p. 9.

225

Ibid., pp. 9-10.

226

The following CRS calculations are based on state data from the FY2016 SAR, pp. 5-36. Calculations are based on

total FY2016 issuance of $66,539,351,219 and average monthly participation of 44,219,363 persons.

227

Of the 53 states that administer SNAP (including the District of Columbia, Guam, and the U.S. Virgin Islands), 19

states did not initiate pre-certification investigations in FY2016 (Alabama, Georgia, Guam, Hawaii, Idaho, Illinois,

Louisiana, Maine, Massachusetts, Mississippi, Missouri, Montana, New Mexico, Oklahoma, Oregon, South Carolina,

Tennessee, Texas, and Wyoming) and 7 states initiated fewer than 100 pre-certification investigations in FY2016

(Colorado, the District of Columbia, Maryland, Nebraska, North Dakota, South Dakota, and Vermont).

228

These five states are California, Florida, Michigan, New York, and Pennsylvania.

229

FY2016 SAR, pp. 23-37.

230

About 41% of claims are collected through the Treasury Offset Program (TOP) and about 39% of claims are

collected through recoupment (i.e., partial reduction of an active SNAP household’s monthly benefit to gradually

collect overpayments). The remaining collections are conducted through other methods. This CRS calculation is based

on FY2016 SAR, p. 35.

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FY2005, states’ efforts to actually collect on these claims have not likewise improved. From

FY2005 to FY2014:

 the total annual dollar value of claims established has increased from about 20%

to about 28% of the total annual dollar value of estimated overpayments; this

improvement indicates increased claims establishment activity by state agencies.

 the total annual dollar value of claims collected has remained around 16% of the

total annual dollar value of estimated overpayments; this reflects persistent

difficulties in claim collection.

Figure 5 reflects these trends.

Figure 5. Claims Established and Claims Collected as Shares of Estimated Dollars

Overissued, FY2005-FY2014

Sources: CRS graphic made using data from SNAP State Activity Reports and Annual Quality Control Reports.

Notes: Claims are not always established in the same year as the overpayment or trafficking occurs, and claims

are not always collected in the same year that they were established. Totals for claims establishment and claims

collection are actual amounts established and collected, while total overpayments are estimates calculated using

the SNAP Quality Control review system.

This was a finding in the August 2014 GAO report and, furthermore, “[s]tates’ difficulty

collecting overpayments compounds their concerns about having adequate resources for

investigations because some states use recovered overpayments for this purpose.”

231

The GAO

report did not provide strategies for how states might address this concern.

Duplicate Enrollment and the National Accuracy Clearinghouse (NAC)

Individuals are not allowed to apply for or receive benefits from more than one state agency at a

time. It is important to note, however, that duplicate enrollment may be indicative of either an

231

August 2014 GAO report, p. 16.

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error or fraud depending on the circumstances of the case. Duplicate enrollment (or “dual

participation”) results in a 10-year disqualification from SNAP if it is due to intentional fraud.

232

Some state agencies detect duplicate enrollment through exchanging enrollment data with

neighboring states. As of the October 2016 GAO report, Massachusetts and New York, for

example, had such an arrangement.

233

The National Accuracy Clearinghouse (NAC) is a significant effort to detect and prevent

duplicate enrollment. The NAC was funded as a pilot by the U.S. Office of Management and

Budget (OMB) Partnership for Program Integrity and Innovation from April 2013 until May

2015. The NAC gathers and analyzes SNAP state enrollment data from five participating states.

234

Since the conclusion of the pilot in May 2015, these five states have continued NAC operations.

In practice, the NAC is another data match performed during certification. NAC matches are not

considered verified upon receipt, so additional steps are necessary to confirm matches.

235

An evaluation of NAC published in October 2015

236

documented several elements of NAC’s

performance, outcomes, and costs, including the following:

237

 In May 2014, prior to implementation, 10,076 instances of duplicate enrollment

across the five states were identified. One year later, in May 2015, duplicate

enrollment in these five states had been reduced by almost 50% (5,464 instances

identified).

 Using NAC is estimated to have prevented about $548,336 in monthly

overpayments during the pilot year,

238

with monthly state agency work effort

costs totaling $81,913 (resulting in about $6.69 in monthly overpayments

prevented for every $1.00 spent monthly).

239

 In the first year, using NAC produced an estimated annualized savings of

$5,597,076 (less the $669,331 spent on one-time startup costs).

 Nationalizing NAC has been estimated to result in $114,072,753 in annual

savings.

232

Sections 6(j) and 11(e)(18) of the FNA (codified at 7 U.S.C. §2015(j) and §2020(e)(18)(A) and implemented at 7

C.F.R. §273.16(b)(5)).

233

October 2016 GAO report, p. 22.

234

These five states are Florida, Georgia, Alabama, Louisiana, and Mississippi.

235

The most common outcome of this process is preventing accidental dual participation, a recipient error, when a

household failed to report that it moved to a different state. For example, an applicant household resides in Mississippi

and is deemed eligible for and receives SNAP in Mississippi. Halfway through the year, the household moves to

Louisiana and applies for SNAP benefits there. When a match is detected through NAC, the ultimate result would be

the closure of the household’s SNAP case in Mississippi followed by certification in Louisiana.

236

PCG Human Services, National Accuracy Clearinghouse (NAC) Evaluation, Final Report, October 2015, pp. 22-38,

https://risk.lexisnexis.com/-/media/files/government/report/

b7de1d11976a4bdd82a039a8f272265busdareportonnac2016117614-pdf.pdf (hereinafter cited as “NAC October 2015

report”). PCG completed this evaluation under a contract with Mississippi Department of Human Resources. The

following CRS calculations are based on data from this NAC October 2015 report.

237

The following are CRS calculations based on data from the NAC October 2015 report.

238

Total overpayments in FY2014 in these five states are estimated at about $200 million. This CRS calculation is

based on data from the FY2014 QC report, p. 11.

239

This estimate is based on a comparison of duplicate enrollment levels in these five states prior to implementation

(September 2013 to May 2014) with levels in the last four months of the pilot (February 2015 to May 2015).

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 Costs of setting up and utilizing NAC for the first year came to about $1,652,287

for all five participating states.

240

USDA-FNS provides federal matching funds

for states’ program administration costs, including costs of NAC participation.

During the 115

Congress, the House passed an emergency supplemental appropriations bill,

which included a provision that would have required the expansion of NAC to all states (Section

3003 of H.R. 4667; however, this provision was not included in the emergency supplemental

appropriations which became law (Bipartisan Budget Act of 2018, P.L. 115-123).

241

Considerations for Data Matching

As discussed earlier, states are required to conduct certain data matches to verify household

application information, and many opt to include additional data sources. There are arguments for

and against expanding states’ use of additional data matches. While verifying household data to

high-fidelity sources seems compelling, the use of matching to less authoritative data can require

additional employee hours and might introduce the errors it seeks to prevent.

Implementing new data matches may require large upfront investments and ongoing costs to state

agencies. Non-verified upon receipt data matches may necessitate additional manual follow-up,

which can create even more cost and delay. As a result, state agencies prefer to use verified upon

receipt data matches whenever possible. However, only one of the six federally required

databases is considered verified upon receipt. In comments published in response to USDA-FNS

rulemaking implementing the statutorily mandated data matches, some states pointed out that the

implementation of these data matches is burdensome on state agencies while providing minimal

cost avoidance due to the rarity of matches and the effort needed to verify them.

242

A range of

anecdotal evidence also points to the limited return on investment for the non-verified upon

receipt of federally mandated data matches.

243

In a 2017 series of USDA-OIG audits of five

states’ compliance with federal requirements for state agencies, USDA-OIG found that all five

were improperly handling a mandatory SSA-PVS data match.

244

At least one state explicitly

stated that it elected not to perform the mandatory match due to perceived low return on

investment.

245

240

NAC October 2015 report, p. 22. Generally, USDA-FNS pays 50% of state agencies’ costs for program

administration.

241

The FY2019 President’s Budget also proposes to require all states to participate in NAC, estimating that this policy

change would save $1.1 billion over 10 years (FY2019-FY2028). FY2019 USDA-FNS Budget Justification,

http://www.obpa.usda.gov/32fns2019notes.pdf, p. “32-87.”

242

With respect to the mandating of the SSA-PVS for example, the New York state agency noted that it piloted use of

the system prior to the December 2006 USDA-FNS NPRM and concluded that less than 1% of matches were useful,

while the Iowa state agency noted that it implemented use of the system in June 2000 and, as of March 2007, had never

had a single confirmed match through it.

243

According to the October 2016 GAO report, p.19, 41 of the 51 state agencies surveyed (50 states plus D.C.)

identified the work hours needed to verify data matches as moderately or extremely challenging, and 35 of the 51

surveyed identified the untimeliness of data matches as moderately or extremely challenging.

244

This audit series focused on compliance with regulations at 7 C.F.R. §272. States audited include Washington,

South Carolina, Pennsylvania, Nebraska, and Georgia.

245

For Washington, USDA-OIG noted, “During our testing, WA DSHS [the state agency] acknowledged that the State

agency does not perform matches against SSA’s PVS at application and recertification. This occurred because WA

DSHS believes the data from SSA’s PVS is neither current nor reliable and instead uses data from the State’s

[Department of Corrections] DOC database to identify individuals who are incarcerated, which the State believes is

more reliable.” U.S. Department of Agriculture, Office of the Inspector General, Washington’s Compliance with SNAP

Requirements for Participating State Agencies (7 CFR, Part 272), Audit Report 27601-0012-10, September 2017, p.

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Some optional data matches are widely used and considered worthwhile by state agencies, while

other verified upon receipt and useful non-verified upon receipt data matches are arguably

underutilized. Although not federally mandated, SSA benefit program databases were utilized and

considered useful by all state agencies surveyed in the October 2016 GAO report, because these

data matches provide verified upon receipt data on unearned income. Matches with state systems

that provide verified upon receipt data on eligibility and income were used by many, but not all,

state agencies.

246

In some cases, statutory obstacles prevent using existing federal data sources,

such as the Centers for Medicare and Medicaid Services (CMS) federal data services hub (the

Hub), which consolidates various sources of earned and unearned income data matching.

247

Some

state agencies were concerned that the same data match services are being paid for twice, once for

SNAP and once for Medicaid, often for the same beneficiaries.

248

In 2017, certain states have

piloted data sharing agreements to utilize these federal data services hubs for SNAP.

249

Earned income may be especially difficult to verify through data matching, and the costs

associated with these matches may be prohibitive.

250

Currently, state agencies contract

individually with The Work Number, but USDA-FNS has proposed negotiating a single contract

that would make the service available for all state agencies at a greatly reduced cost per match.

251

According to the October 2016 GAO report, USDA-FNS has not done enough to encourage state

agencies to adopt best practices in data matching. This includes explaining technical

improvements such as unifying data sources into a centralized portal (data brokering) and

publicizing the methods and successes of pilot projects like NAC.

State Agency Errors and Fraud

Modifying State Involvement in the Quality Control System

The September 2015 USDA-OIG report stated that the primary vulnerability of the QC system

was its “two-tier” structure.

252

USDA-OIG argued that because a state calculates its own SPER, it

has the means to manipulate the outcome of the QC process, and because a state stands to benefit

from a low SPER, it has the motive to commit this fraud. USDA-OIG recommended the adoption

of a “one-tier” QC process conducted exclusively by USDA-FNS. USDA-FNS noted that a one-

tier QC system could create additional federal cost.

11, https://www.usda.gov/oig/webdocs/27601-0012-10.pdf.

246

This can include data matches of income (such as child support payments and unemployment insurance benefits)

and eligibility (such as state department of corrections records of incarceration and state department of health records

of death)—all of which are generally considered verified upon receipt. October 2016 GAO report, pp. 10-20.

247

The Patient Protection and Affordable Care Act (ACA), the Privacy Act of 1974, the Fair Credit Reporting Act, and

other statutes, as well as the current terms of certain CMS contracts with private databases, were all cited as preventing

the full utilization of CMS’s the Hub and other data sources for SNAP certification determinations. October 2016 GAO

report, pp. 23-27.

248

October 2016 GAO report, p. 24

249

U.S. Government Accountability Office, Federal Low-Income Programs: Eligibility and Benefits Differ for Selected

Programs Due to Complex and Varied Rules, GAO-17-558, June 2017, p. 38, https://www.gao.gov/assets/690/

685551.pdf.

250

According to the October 2016 GAO report, p. 27, costs associated with data matches, especially private data match

services like The Work Number, limited state agency usage of systems that they considered effective in preventing

overpayments, with 34 of the 42 respondents identifying upfront costs and 30 of the 42 respondents identifying ongoing

costs as challenging.

251

October 2016 GAO report, pp. 27-33.

252

September 2015 USDA-OIG report, p. 10.

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Appendix A. Glossary of Abbreviations

ACF

Administration for Children and Families (HHS)

ALERT

APT

CAP

CAPER

CMS

DHS

DMF

DMS

DOJ

EBT

eDRS

FAD

FBI

FDPIR

FNA

FNS

GAO

GSA

HHS

IEVS

IHE

III

IPV

LOC

NAC

NCIC

NDNH

NPER

NPRM

OASDI

OIG

OMB

OPM

PARIS

PDQ

POS

PVS

RIN

agency error

Anti-Fraud Locator using EBT Retailer Transactions (USDA-FNS)

Application Processing Timeliness (USDA-FNS-SNAP)

administrative review

corrective action plan

Case and Procedural Error Rate (USDA-FNS-SNAP)

Centers for Medicare & Medicaid Services (HHS)

U.S. Department of Homeland Security

Death Master File (see DMS)

Deceased Matching System (see DMF)

U.S. Department of Justice

Electronic Benefit Transfer

electronic Disqualified Recipient System (USDA-FNS-SNAP)

final agency determination

Federal Bureau of Investigations (DOJ)

Food Distribution Program on Indian Reservations (USDA-FNS)

Food and Nutrition Act of 2008

Food and Nutrition Service (USDA)

Government Accountability Office

General Services Administration

U.S. Department of Health and Human Services

Income and Eligibility Verification System

inadvertent household error

Interstate Identification Index (DOJ-FBI)

intentional program violation

judicial review

letter of credit

management evaluation

National Accuracy Clearinghouse (USDA-FNS-SNAP)

National Crime Information Center (DOJ-FBI)

National Directory of New Hires (HHS-ACF)

National Payment Error Rate (USDA-FNS-SNAP)

notice of proposed rulemaking

Old-Age, Survivors, and Disability Insurance (SSA)

Office of the Inspector General

Office of Management and Budget

Office of Personnel Management

Public Assistance Reporting Information System (HHS-ACF)

permanent disqualification

point of sale

Prisoner Verification System (SSA)

Quality Control

Regulatory Identification Number

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SAM

SAR

SARC

SAVE

SLEB

SNAP

SPER

SSA

SSI

SSN

TANF

TCP

TOCMP

TPP

UIB

UPV

USCIS

USDA

VUR

WIC

state agency

System for Award Management (GSA)

State Activity Report (USDA-FNS-SNAP)

Semiannual Report to Congress (USDA-OIG)

Systematic Alien Verification for Entitlements (DHS-USCIS)

state law enforcement bureau

Supplemental Nutrition Assistance Program (USDA-FNS)

State Payment Error Rate (USDA-FNS-SNAP)

Social Security Administration

Supplemental Security Income (SSA)

Social Security Number (SSA)

Temporary Assistance for Needy Families (HHS)

Trafficking Civil Penalty

Transfer of Ownership Civil Money Penalty

third-party processor

Unified Agenda

unemployment insurance benefits

unintentional program violation (see IHE)

U.S. Citizenship and Immigration Services (DHS)

U.S. Department of Agriculture

U.S. Department of Veteran Affairs

verified upon receipt

Special Supplemental Nutrition Program for Women, Infants, and Children

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Appendix B. “Inactive” USDA-FNS Rules

In the last 10 years, the U.S. Department of Agriculture Food and Nutrition Service (USDA-FNS)

had started to draft new rules in response to direction in federal law and USDA Office of the

Inspector General (USDA-OIG) audit findings, and at their own initiative. Currently, none of the

regulatory initiatives discussed in this appendix have been completed. Before USDA-FNS’s

actions were suspended, they were in various stages of the regulatory process, which occurs as

follows:

In order to codify a federal regulation in the Code of Federal Regulations (C.F.R.), the following

steps must generally be completed:

 a regulatory work plan must be submitted to the Office of Management and

Budget (OMB) and OMB must assign the rulemaking action a Regulatory

Identification Number (RIN), adding the RIN to OMB’s Unified Agenda (UA);

253

 a notice of proposed rulemaking (NPRM) generally must be published by the

rulemaking agency in the Federal Register (FR) with a comment period open to

the public; and

 the rulemaking agency must consider the comments, make necessary changes to

the rulemaking action, and then publish the final rule in the FR.

Along with other rulemaking actions, USDA rules had been in a “pending” status and had not

been made available to the public.

254

The Trump Administration made these rules public in July

2017 and termed them “inactive.”

255

Table B-1. Inactive USDA-FNS Rulemaking Actions Related to SNAP Integrity

RIN

Full Title

First in

Proposed

Cited in Report

0584-AE22

Supplemental Nutrition Assistance

Program: Suspension of SNAP Benefit

Payments to Retailers

2012

02/22/2013

78 FR 12245

February 2013

USDA-FNS NPRM

0584-AD88

Supplemental Nutrition Assistance

Program: Farm Bill of 2008 Retailer

Sanctions

Spring 2009

08/14/2012

77 FR 48461

August 2012

USDA-FNS NPRM

0584-AE37

Modernizing Supplemental Nutrition

Assistance Program (SNAP) Benefit

Redemption Systems

Spring 2015

n/a

USDA-FNS Benefit

Redemption

Modernization Rule

0584-AE46

Supplemental Nutrition Assistance

Program: Definition of “Benefit" as it

Pertains to Retail Owners

Fall 2016

n/a

USDA-FNS

Definition of

Benefit Rule

253

The UA is a government-wide publication of upcoming regulations and is generally published twice each year on

https://www.reginfo.gov.

254

The “pending” list included rules that were not actively being worked on by the agencies.

255

See CRS Report R45032, The Trump Administration and the Unified Agenda of Federal Regulatory and

Deregulatory Actions, by Maeve P. Carey and Kathryn A. Francis.

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RIN

Full Title

First in

Proposed

Cited in Report

0584-AE47

Supplemental Nutrition Assistance

Program: National Crime Information

Center Background Check Requirement

for Retailer Authorization and

Reauthorization

Fall 2016

n/a

USDA-FNS

Background Check

Rule

0584-AD98

Supplemental Nutrition Assistance

Program: Major System Failures

Fall 2009

08/18/2011

76 FR 51274

n/a

Source: Follow the FR links to view the proposed rules. The full inactive list is available online at

https://www.reginfo.gov/public/jsp/eAgenda/InactiveRINs_2017_Agenda_Update.pdf.

a. See https://www.federalregister.gov/documents/2013/02/22/2013-04037/supplemental-nutrition-assistance-

program-suspension-of-snap-benefit-payments-to-retailers. For the history of this RIN, see

https://www.reginfo.gov/public/do/eAgendaViewRule?RIN=0584-AE22.

b. For the history of this RIN, see https://www.reginfo.gov/public/do/eAgendaViewRule?RIN=0584-AD88;

https://www.federalregister.gov/documents/2012/08/14/2012-19773/supplemental-nutrition-assistance-

program-farm-bill-of-2008-retailer-sanctions.

c. This RIN appears on the OMB inactive list; see https://www.reginfo.gov/public/jsp/eAgenda/

InactiveRINs_2017_Agenda_Update.pdf.

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Appendix C. Optional Income Data Matches

Data matching is used during the SNAP certification process to help make SNAP eligibility

determinations and, if appropriate, designate the benefit allotment amounts for applicant

households. In addition to the mandatory data matches discussed earlier in this report, states have

many additional federal, state, and local data sources that they might use to verify household

income data. This appendix lists some additional data matches that are discussed in related audit

reports and state-specific policy manuals. Their verified upon receipt status varies.

Optional Federal Income Data Matches

256

 Social Security Administration (SSA) Benefit Programs Databases

257

—State

agencies can match with SSA databases to verify an applicant’s unearned income

from these SSA programs.

258

These are verified upon receipt data matches. They

are conducted and considered moderately or extremely useful by 51 of the 51

state agencies surveyed (50 states plus D.C.) in October 2016.

 SSA Beneficiary Earnings Exchange Record (BEER)—State agencies can match

with SSA-BEER to verify income based on Internal Revenue Service (IRS)

earnings and tax data. This is a non-verified upon receipt data match. It is

conducted by 24 of the 51 state agencies and considered moderately or extremely

useful by only 10 of those using it.

 U.S. Department of Health and Human Services Administration for Children and

Families (HHS-ACF) Public Assistance Reporting Information System

(PARIS)

259

—State agencies can match with HHS-ACF-PARIS to verify an

applicant’s earned and unearned income from public assistance and federal

employment or retirement. These are non-verified upon receipt data matches. The

HHS-ACF-PARIS Interstate Match File is conducted by 40 of the 51 state

agencies and considered moderately or extremely useful by 31 of those using it.

The HHS-ACF-PARIS Federal/VA File matches are conducted by 31 of the 51

state agencies and considered moderately or extremely useful by 20 of those

using them.

 The Work Number—State agencies can match with this commercial verification

service operated by Equifax, Inc. (for a fee) to obtain payroll information from

participating retailers (covering about 35%-40% of working population) to verify

an applicant’s earned income. This is a non-verified upon receipt data match. It is

used by 45 of the 51 state agencies and considered moderately or extremely

useful by 43 of those using it.

256

All survey numbers are from the October 2016 GAO report, cited elsewhere in this report, https://www.gao.gov/

assets/690/680535.pdf.

257

SSA benefit programs covered include Old Age, Survivors, and Disability Insurance (OASDI), Retirement

Survivors and Disability Insurance (RSDI), and Supplemental Security Income (SSI).

258

SSA databases for these programs that are used include the State On-Line Query (SOLQ), State Verification and

Exchange System (SVES), Beneficiary and Earnings Data Exchange (BENDEX), and State Data Exchange (SDX).

259

The HHS-ACF-PARIS Interstate Match File compiles public assistance beneficiary information from states, HHS-

ACF-PARIS Veterans Affairs (VA) File includes VA beneficiary information, and the HHS-ACF-PARIS Federal File

includes military and federal employees’ and retirees’ wage and retirement information gathered from Department of

Defense (DOD) and Office of Personnel Management (OPM).

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Congressional Research Service R45147 · VERSION 7 · UPDATED 51

 HHS-ACF National Directory of New Hires (NDNH) Unemployment Insurance

and Quarterly Wage Files—These data matches are distinct from the mandatory

HHS-ACF-NDNH New Hire File match. The Unemployment Insurance File

compiles information from state workforce agencies regarding unearned income,

and the Quarterly Wage File compiles information from state workforce agencies

regarding earned income. These are non-verified upon receipt data matches. The

former is used by 9 of the 51 state agencies and the latter by 4 of the 51.

Optional State Income Data Matches

260

 State Unemployment Insurance Benefits (UIB) Database—State agencies can

match with state workforce agencies that administer UIB to verify applicants’

unearned income. This is generally a verified upon receipt data match. It is

conducted by 49 of the 51 state agencies surveyed in October 2016 and

considered moderately or extremely useful by 48 of those using it.

 Child Support Payments Database—State agencies can match with state human

or social services agencies that administer and enforce child support payments to

verify applicants’ unearned income. This is generally a verified upon receipt data

match. It is conducted by 47 of the 51 state agencies and considered moderately

or extremely useful by 46 of those using it.

 State Wage Information Collection Agency (SWICA) Database—State agencies

can match with SWICAs that gather quarterly wage and new hire data from

employers to verify applicants’ earned income. This is the state equivalent of the

HHS-ACF-NDNH. These are non-verified upon receipt data matches. The former

is conducted by 45 of the 51 state agencies and considered moderately or

extremely useful by 31 of those using it; the latter is conducted by 36 of the 51

state agencies and considered moderately or extremely useful by 23 of those

using it.

 State Day Care License Database—State agencies can match with state human or

social services agencies that license day care workers and facilities to verify

applicants’ earned income. This is generally a verified upon receipt data match. It

is conducted by 11 of the 51 state agencies.

 State Taxpayer Database—State agencies can match with state taxation agencies

to verify applicants’ unearned and earned income. This is generally a verified

upon receipt data match. It is conducted by 7 of the 51 state agencies.

 Database of Income Verified by Other State Programs—State agencies can match

with state human or social services agencies that administer other means-tested

programs

261

to verify applicants’ unearned and earned income. This is generally a

verified upon receipt data match. It is conducted by 42 of the 51 state agencies

and considered moderately or extremely useful by 38 of those using it.

260

All survey numbers are from the October 2016 GAO report.

261

These include TANF, old age pensions, aid to the disabled, state SSI supplement, etc.

Errors and Fraud in the Supplemental Nutrition Assistance Program (SNAP)

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Appendix D. Trends in Retailer Trafficking and

Convenience Store Participation in SNAP

The following three tables include CRS calculations based on data from U.S. Department of

Agriculture Food and Nutrition Service (USDA-FNS) Retailer Management Reports, the last

three Retailer Trafficking Studies, and other agency sources. Table D-1 compares the growth in

total stores participating in SNAP with the growth of convenience stores (“c-stores”) participating

in the program. From FY2007 to FY2016, convenience stores have grown from about 36% of all

stores in the program to about 46%.

Table D-1. Convenience Stores as a Percentage of All Stores in SNAP

Year

C-Stores

Change in

C-Stores

All Stores

Change in All

Stores

C-Stores as a

Percentage of

All Stores

FY2007

58,669

—

162,672

—

36.07%

FY2008

61,968

+5.62%

172,094

+5.79%

36.01%

FY2009

66,809

+7.81%

190,334

+10.60%

35.10%

FY2010

78,754

+17.88%

212,834

+11.82%

37.00%

FY2011

87,857

+11.56%

227,190

+6.75%

38.67%

FY2012

96,769

+10.14%

242,325

+6.66%

39.93%

FY2013

101,059

+4.43%

248,666

+2.62%

40.64%

FY2014

105,742

+4.63%

256,670

+3.22%

41.20%

FY2015

106,531

+0.75%

254,593

-0.81%

41.84%

FY2016

117,591

+10.38%

255,931

+0.53%

45.95%

Source: USDA-FNS data from annual Retailer Management Reports, https://www.fns.usda.gov/snap-retailer-

data; and email from SNAP, USDA-FNS, January 5, 2018.

The national retailer trafficking rate represents the proportion of SNAP benefits redeemed that

were trafficked at stores, and the national store violation rate represents the proportion of

authorized stores that were estimated to have engaged in trafficking. Table D-2 compares these

two rates for all stores with these rates for convenience stores. Across the nine years examined in

the three studies, the convenience store retailer trafficking rates have been more than 1000% of

the national retailer trafficking rates, and the convenience store violation rates have been more

than 150% of the national store violation rates.

Table D-2. Trafficking Rates in Convenience Stores Compared to the

National Trafficking Rates

Report Years

National Retailer

Trafficking Rate

C-Store Retailer

Trafficking Rate

National Store

Violation Rate

C-Store

Violation Rate

2006-2008

1.03%

12.93%

8.25%

15.52%

2009-2011

1.34%

14.07%

10.47%

17.68%

2012-2014

1.50%

17.67%

11.82%

19.42%

Source: USDA-FNS data from Retailer Trafficking Studies, https://www.fns.usda.gov/report-finder.

Errors and Fraud in the Supplemental Nutrition Assistance Program (SNAP)

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Table D-3 displays data regarding the convenience store share of total redemptions and data

regarding the estimated convenience store share of total trafficking. Across the nine years

examined in these three studies, convenience stores’ shares of redemptions have not exceeded 5%

of total redemptions and convenience store shares of trafficking have averaged more than half of

total trafficking.

Table D-3. Convenience Store Redemptions and Trafficking as a Percentage of

All Redemptions and Trafficking

Report Years

C-Store Redemptions as

% of Total Redemptions

C-Store Trafficking as % of

Total Trafficking

2006-2008

4.05%

50.91%

2009-2011

4.38%

45.80%

2012-2014

4.84%

57.24%

Source: USDA-FNS data from Retailer Trafficking Studies, https://www.fns.usda.gov/report-finder.

Errors and Fraud in the Supplemental Nutrition Assistance Program (SNAP)

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Appendix E. Payment Error Rate Information

This appendix provides a state-by-state summary of payment-error related data from FY2010-

FY2014, including state payment error rates (SPERs), high-performance bonuses, and liabilities

for low performance. Table E-1 shows the states’ annual rates and whether the state received an

award or a sanction, while Table E-2 displays the amounts of awards and sanctions. Using

Alabama as an example, according to the first table the state received a bonus in FY2012 based

on a 1.85% SPER, and according to the second table that award amount was approximately $1.9

million.

Table E-1. State Payment Error Rates, FY2010 to FY2014

State

FY2010

FY2011

FY2012

FY2013

FY2014

Alabama

3.75%

5.10%

1.85% (+)

1.70%

2.03%

Alaska

2.15% (+)

0.76% (+)

1.07% (+)

1.27% (+)

0.89% (+)

Arizona

6.69% (-)‡

6.34% (-)‡

5.60% (-)

5.48% (-)

5.18% (-)

Arkansas

5.64%

5.79% (-)

4.76% (-)

4.34%

5.58%

California

4.81%

4.58%

3.98%

3.63%

5.13%

Colorado

3.18%

4.45%

4.55%

5.59% (-)

4.26%

Connecticut

7.66% ‡

6.46% (-)‡

5.99% (-)

7.13% (-)‡

5.84% (-)

District of

Columbia

4.47%

3.03%

3.91%

6.87% (-)‡

7.38% (-)‡

Delaware

1.52% (+)

2.53% (+)

3.41%

3.53%

2.78%

Florida

0.78% (+)

0.87% (+)

0.77% (+)

0.81% (+)

0.42% (+)

Georgia

1.99% (+)

2.71%

3.18%

5.11%

6.49% (-)

Guam

5.42%

6.25% (-)‡

7.33% (-)‡

6.65% (-)‡

7.08% (-)‡

Hawaii

3.04%

3.37%

4.84%

4.39%

4.13%

Idaho

3.32%

2.52% (+)

2.49%

1.86%

2.74%

Illinois

1.70% (+)

3.15%

1.74% (+)

4.27%

5.27%

Indiana

2.60% (+)*

3.29%

3.02%

3.72%

4.76%

Iowa

3.36%

3.97%

3.43%

4.12%

4.60%

Kansas

4.79%

5.00%

5.45%

3.99%

0.75% (+)

Kentucky

4.09%

4.50%

4.93%

5.78% (-)

6.00% (-)

Louisiana

5.03%

3.97%

1.45% (+)

1.44% (+)

1.55%

Maine

3.49%

3.28%

2.16%

2.48%

2.52%

Maryland

7.68% (-)‡

6.06% (-)‡

3.40% (+)*

2.12%

3.41%

Massachusetts

5.90%

4.40% (+)*

4.03%

2.87%

5.09%

Michigan

3.31%

3.12%

3.55%

2.70%

2.99%

Minnesota

4.76%

5.02%

5.07%

4.08%

6.87% ‡

Mississippi

1.92% (+)

2.83%

2.10%

1.48% (+)

1.16% (+)

Missouri

5.65% (-)

5.88% (-)

7.18% (-)‡

1.62% (+)*

1.50%

Montana

4.12%

3.10%

2.71%

6.00%

7.25% (-)‡

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Congressional Research Service R45147 · VERSION 7 · UPDATED 55

State

FY2010

FY2011

FY2012

FY2013

FY2014

Nebraska

3.52%

4.50%

3.19%

2.87%

2.98%

Nevada

6.57% ‡

6.29% (-)‡

6.01% (-)‡

5.51% (-)

7.61% (-)‡

New Hampshire

5.31%

4.82%

5.09%

3.82%

4.72%

New Jersey

4.62%

4.33%

3.49%

1.32% (+)

1.43%

New Mexico

4.50%

4.35%

3.73%

4.55%

6.22% (-)‡

New York

5.51%

4.32%

5.09%

4.79% (-)

5.23% (-)

North Carolina

2.70%

2.65% (+)

2.32%

4.75%

4.98% (-)

North Dakota

4.38%

4.34%

2.94%

2.30%

1.73%

Ohio

3.31%

3.40%

3.39%

4.12%

4.67%

Oklahoma

4.22%

3.94%

4.94%

3.99%

5.58%

Oregon

4.88%

3.99%

4.66%

4.17%

5.11%

Pennsylvania

3.93%

3.30%

3.08%

3.56%

4.27%

Rhode Island

5.98%

7.89% (-)‡

7.36% (-)‡

8.25% (-)‡

5.97% (-/+)*

South Carolina

5.14%

3.14% (+)*

1.59% (+)

1.75%

1.09% (+)

South Dakota

1.31% (+)

1.59% (+)

1.37% (+)

0.99% (+)

1.26%

Tennessee

4.39%

5.46%

3.25%

1.32% (+)

1.08% (+)

Texas

2.13% (+)

3.48%

3.63%

1.44% (+)

0.63% (+)

Utah

4.33%

4.19%

2.39%

2.11%

2.79%

Vermont

6.59% ‡

8.53% (-)‡

6.96% (-)‡

9.66% (-)‡

2.76% (+)*

Virgin Islands

3.10%

4.77%

4.20%

3.58%

3.18%

Virginia

5.87%

3.41% (+)*

1.76% (+)

0.44% (+)

4.73%

Washington

3.30%

3.81%

2.49%

1.71%

0.77% (+)

West Virginia

7.14% ‡

6.31% (-)‡

7.06% (-)‡

5.24% (-)

4.90%

Wisconsin

1.97% (+)

2.02% (+)

2.07% (+)

2.40%

2.55%

Wyoming

4.76%

9.63% ‡

7.18% (-)‡

4.99% (-/+)*

5.19%

NPER

3.81%

3.80%

3.42%

3.20%

3.66%

Source: USDA-FNS data, https://www.fns.usda.gov/pd/snap-quality-control-annual-reports.

Notes:

(+) represents years in which states were awarded a high-performance bonus for the years’ best state payment

error rates (SPERs).

* represents years in which states were awarded a high-performance bonus for the years’ most improved SPERs.

(-) represents years in which states were assessed liabilities for SPERS that exceed Quality Control standards.

(+/-) represents years in which states were awarded a high-performance bonus for most improved payment

error rate, but still incurred a liability.

‡ represents years in which states’ SPERs exceeded the liability threshold of 6%.

Italicized figures represent years in which states’ SPERs exceeded the liability level (105% of the national payment

error rate).

Bold figures represent years in which states’ SPERs were fraudulently misreported (according to U.S.

Department of Justice (DOJ) settlement documents, as these SPERs are associated with DOJ False Claims Act

cases).

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Congressional Research Service R45147 · VERSION 7 · UPDATED 56

Table E-2. State Bonuses and Liabilities, FY2010 to FY2014

In thousands of dollars

State

FY2010

FY2011

FY2012

FY2013

FY2014

Alabama

–

+$1,898

–

Alaska

+$233

+$290

+$266

+$236

+$247

Arizona

-$1,096

-$561

-$0

Arkansas

LLE

-$0

–

LLE

California

–

Colorado

–

LLE

-$0

–

Connecticut

LLE

-$298

-$0

-$800

-$0

District of

Columbia

–

LLE

-$307

Delaware

+$321

+$435

–

Florida

+$6,084

+$9,088

+$8,072

+$7,015

+$7,742

Georgia

+$3,077

–

LLE

-$1,386

Guam

LLE

-$26

-$151

-$77

-$117

Hawaii

–

LLE

–

Idaho

–

+$622

–

Illinois

+$3,484

–

+$4,092

–

LLE

Indiana

+$1,619*

–

Iowa

–

Kansas

LLE

–

LLE

–

+$628

Kentucky

–

LLE

-$0

Louisiana

LLE

–

+$1,946

+$1,614

–

Maine

–

Maryland

-$1,475

-$62

+$1,674*

–

Massachusetts

LLE

+$2,522*

–

LLE

Michigan

–

Minnesota

–

LLE

–

LLE

Mississippi

+$1,182

–

+$1,185

+$1,302

Missouri

-$0

-$1,725

+$1,656*

–

Montana

–

LLE

-$220

Nebraska

–

Nevada

LLE

-$144

-$5

-$0

-$870

New Hampshire

–

LLE

–

New Jersey

–

+$1,638

–

New Mexico

–

LLE

-$138

New York

LLE

–

LLE

-$0

North Carolina

–

+$4,079

–

LLE

-$0

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Congressional Research Service R45147 · VERSION 7 · UPDATED 57

State

FY2010

FY2011

FY2012

FY2013

FY2014

North Dakota

–

Ohio

–

Oklahoma

–

LLE

–

LLE

Oregon

–

LLE

–

Pennsylvania

–

Rhode Island

LLE

-$519

-$394

-$683

-$0 / +$502*

South Carolina

LLE

+$2,218*

+$1,892

–

+$1,672

South Dakota

+$275

+$336

+$297

+$261

–

Tennessee

–

LLE

–

+$2,456

+$2,687

Texas

+$6,243

–

+$6,056

+$6,497

Utah

–

Vermont

LLE

-$341

-$136

-$549

+$293*

Virgin Islands

–

Virginia

LLE

+$2,304*

+$2,021

+$1,724

–

Washington

–

+$2,428

West Virginia

LLE

-$154

-$530

-$0

–

Wisconsin

+$1,484

+$2,106

+$1,842

–

Wyoming

–

LLE

-$61

-$0 / +$158*

–

Source: SNAP Quality Control Annual Reports FY2010 to FY2014; https://www.fns.usda.gov/pd/snap-quality-

control-annual-reports.

Notes:

+$ represents high-performance bonuses awarded to states for the years’ best state payment error rates

(SPERs).

* represents years in which states were awarded a high-performance bonus for the years’ most improved SPERs.

-$ represents liability amounts assessed against states for SPERS that exceed QC standards; if a state exceeded

the liability level for two consecutive years but did not exceed the liability threshold of 6%, they were assessed a

$0 liability (value noted as “-$0”).

-$/+$ represents years in which states were awarded a high-performance bonus for most improved payment

error rate, but still incurred a liability.

LLE (liability level exceeded) represents the first year that the liability level was exceeded by a state.

Bold figures represent years in which states’ SPERs were fraudulently misreported (according to U.S.

Department of Justice (DOJ) settlement documents, as these SPERs are associated with DOJ False Claims Act

cases).

Errors and Fraud in the Supplemental Nutrition Assistance Program (SNAP)

Congressional Research Service R45147 · VERSION 7 · UPDATED 58

Author Contact Information

Randy Alison Aussenberg

Specialist in Nutrition Assistance Policy

[email protected], 7-8641

Acknowledgments

Daniel R. Cline, formerly a Research Associate with CRS, researched and authored the original version of

this report. Jameson A. Carter, a Research Assistant in CRS’s Domestic Social Policy division, assisted

with this report’s data and figures.