States face challenges in detecting SNAP fraud

‘SNAP recipient fraud can undermine the integrity of the program and the public’s
confidence in the program’

 WASHINGTON – The Government Accountability Office (GAO) provided testimony before the U.S. House of Representatives Subcommittee on Government Operations and the Interior, Committee on Oversight and Government Reform regarding development of enhanced detection tools and reporting to combat recipient fraud in the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps.

After studying 11 states, the GAO found, despite the range of tools employed to detect potential recipient fraud, states faced challenges, including inadequate staffing, limiting the effectiveness of their actions and Food and Nutrition Services (FNS) lacked data regarding the states’ efforts.
Even though FNS requires states to monitor SNAP households that request four replaced electronic benefits transfer (EBT) cards in a year, the GAO found that may not indicate increased risk of trafficking.

However, GAO stated multiple requests for replacement cards combined with suspicious activity could possibly detect potential fraud.

GAO found FNS’s recommended website monitoring tools to be less effective than manual searches for fraud detection and impractical for detecting internet posts indicative of SNAP trafficking and the misuse of program benefits to obtain non-food items.

In 2014, for example, 4,935 SNAP households in Michigan received at least four replaced EBT cards.

However, out of those households, GAO identified 39 households that both received multiple replacement cards and engaged in suspicious transactions, resulting in 10 or more trafficking flags.

Because FNS’s reporting requirements by states lack specificity, it did not have consistent and reliable data on states’ anti-fraud activities.

Kay E. Brown, GAO Director of Education, Workforce and Income Security Issues, testified, in 2015, the federal government provided more than $70 billion in benefits to assist approximately 46 million people in purchasing food through SNAP, averaging around $258 per household per month.

While the U.S. Department of Agriculture’s FNS, in partnership with states, is tasked with establishing proper agency controls to ensure SNAP benefits are used for their intended purpose, FNS program officials have had long-standing concerns that some recipients falsify information in order to receive benefits or they misuse their benefits to solicit or obtain non-food items, services and cash, practices otherwise known as trafficking.

Brown stated, “SNAP recipient fraud can undermine the integrity of the program and the public’s confidence in the program.”

She also noted how technology has not only provided new opportunities to combat fraud, but to commit fraud as well.

State agencies are directly responsible for detecting, investigating and prosecuting recipient fraud, while FNS is responsible for providing guidance to states and monitoring their activities.
FNS’s focus, on the other hand, has primarily been on pursuing retailer fraud.

GAO reported on FNS’s efforts to combat retailer fraud in 2006 and found it has made progress using electronic data to investigate trafficking. GAO also suggested better targeting of stores likely to traffic and increasing penalties.

FNS is responsible for promulgating regulations and ensuring states comply by issuing guidance and monitoring state activity through its seven regional offices.

FNS is also responsible for determining which retailers are eligible to accept SNAP benefits in exchange for food and investigates and resolves cases of retailer fraud.

Since that time the agency has directed its attention to the recipient side of trafficking.

According to a September 2012 USDA Office of Inspector General (OIG) report, the magnitude of program abuse due to recipient fraud is unknown because states do not have uniform ways of compiling data that would provide such information.

OIG recommended FNS look into the feasibility of creating a uniform methodology for states to calculate their recipient fraud.

FNS ultimately determined the recommendation was not feasible to implement as it would require legislative authority mandating significant state investment of time and resources in investigating, prosecuting and reporting fraud beyond current requirements.

Of the 11 states reviewed, all used the required Electronic Disqualified Recipient System when certifying or recertifying recipients for SNAP, all routinely matched applicants against a prisoner verification system to prevent the receipt of SNAP benefits by incarcerated individuals, and all checked the SSA’s Death Master File to prevent benefits being awarded to dead individuals.

Nine states reported data to detect unreported and underreported wages.

Six states verified information provided by applicants by matching with other data sources, such as local jails, schools and lists of lottery winners.

Two states paid a private company to do searches of numerous public and private databases to determine current wage and new hire data, child support, and residence information based on phone lines and motor vehicle registrations.

Florida and Texas used software requiring individuals to provide information confirming their identities when they set up or access an online SNAP Account.

Florida was the only state that provided case workers with a profile for applications that listed items to watch for that might indicate applicant fraud.

Michigan was the only state that used locator software to identify individuals applying for SNAP from a computer in another state.

Florida was among five states but the only state within the scope of the GAO’s review that participated in a pilot of the exchange of their most recent available SNAP enrollment data.

All 11 states provided fraud hotlines or online fraud referral.

At the time of the GAO’s 2014 review, most of the selected states reported difficulties in conducting fraud investigations due to either reduced or stagnant staff levels while SNAP recipient numbers increased substantially between 2009 through 2013.

The GAO also noted investigators in all 11 states were also responsible for pursuing fraud in other public assistance programs, such as Medicaid, Temporary Assistance for Needy Families, and child care and housing assistance programs.

At the time of the GAO’s report, some states suggested the federal government help support the costs of investigating potential SNAP fraud, since some investigative agencies were not rewarded for cost-effective, anti-fraud efforts preventing ineligible people from receiving benefits.

GAO indicated that although investigations are costly and resource-intensive, they can help deter fraud and save money in the long run.

One state pointed out when recipient fraud is detected, the state generally may retain 35 percent of the recovered overpayment.

However, when states detect fraud by an applicant and denies the application, the state receives nothing since there are no payments to recover.

FNS agreed with all of GAO’s recommendations, which included:
Explore ways that federal financial incentives can better support cost-effective state anti-fraud activities;

Establish additional guidance to help states analyze SNAP transaction data to better identify SNAP recipient households receiving replacement cards that are potentially engaging in trafficking;

Reassess the effectiveness of the current guidance and tools recommended to states for monitoring e-commerce and social media websites, and use this information to enhance the effectiveness of the current guidance and tools; and

Take steps, such as guidance and training to enhance the consistency of what states report on their anti-fraud activities.

According to GAO, although FNS agreed with the recommendations and is taking steps to address them, it has yet to fully develop the detection tools and improved methods that would address these recommendations.

FNS officials said it was targeting four additional states in 2016, including Arizona, for technical assistance in implementing models that incorporate predictive analytics to more effectively identify SNAP recipient trafficking.

According to FNS, after South Carolina implemented the new model, over 90 percent of its investigations of potential trafficking resulted in disqualifications from SNAP, which FNS officials stated was a 29 percent increase over the state’s investigation success rate prior to using FNS’s model.

In conclusion, GAO stated the challenges states have faced in financing and managing recipient anti-fraud efforts heighten the need for more efficient and effective tools for safeguarding SNAP funds.

However, in order to provide useful guidance to guide states in these efforts, FNS officials need reliable information on what can currently be done with available federal and state resources.
FNS officials have reported progress in studying current anti-fraud approaches and developing better data on them but are still in the process of developing the final tools and guidance for enhancing the integrity of the SNAP program.