Subcommittee reviews fraud, waste and abuse in USDA programs

By Sara Wyant

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WASHINGTON, June 2 - As members of the House Agriculture Committee look for ways to trim budgets and use federal dollars more efficiently, USDA's top watchdog provided an overview of how billions of dollars are wasted or spent improperly, often as a result of fraud or lack of strong management controls.


"Today's hearing is about good government. The OIG (Office of Inspector General) estimates that billions of dollars in improper payments are made each year. It's important to review the OIG's findings to ensure that taxpayer funds are protected from waste, fraud, abuse, and improper payments," said Chairman Jeff Fortenberry, R-Neb., Chairman of the House Agriculture Committee's Subcommittee on Department Operations, Oversight, and Credit.

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Inspector General Phyllis Fong highlighted several areas where her investigators found problems, including about $4 billion in improper rural housing loans and a wide variety of problems with payments under the Biomass Crop Assistance Program (BCAP). However, fraud in USDA's nutrition programs generated the most discussion from subcommittee members.


Fong pointed out that the SNAP (Supplemental Nutrition Assistance Program), formerly known as the Food Stamp program,  is USDA's largest program, both in terms of the dollars spent and the number of participants.


“In FY 2010, recipients redeemed close to $65 billion in benefits. SNAP is also an important part of the food safety net for Americans, especially during times of economic hardship. During the recent recession, SNAP participation increased by about 20,000 persons daily-the program helped feed one in eight Americans and one in four children,” she emphasized.


But a program that large is also likely to have its share of problems.


“The most prevalent crime against SNAP is benefits trafficking, which involves a recipient exchanging benefits for less than face value with someone who then claims reimbursement for the full amount,” Fong testified. “The money involved in this type of SNAP fraud can be significant. For example, our analysis of two Florida stores' SNAP transactions identified approximately $6.2 million in trafficking by their owners and other co-conspirators. Between March and May 2010, four defendants pled guilty to wire fraud and SNAP fraud, and were sentenced to prison terms ranging from 8 to 48 months along with restitution orders ranging from about $350,000 to $2.2 million.


Ranking Member Collin Peterson, D-Minn., questioned why more can't be done to stop people from gaming the system and questioned why store owners don't have to “ring up the groceries” to provide benefits.


OIG staff explained that most of the problems are happening in smaller stores that don't have electronic scanners so there is no easy way to track some of the transactions.  


Rep. Rick Crawford, R- Ark., asked why SNAP electronic benefit cards can't be designed to only buy food as one way to eliminate some of the fraud.


Fong said OIG audit staff conducted reviews to improve the Food and Nutrition Service's overall management controls for this program and has made progress.


“For example, after the President issued an executive order in 2009 to reduce improper payments in Federal programs, we evaluated FNS' compliance with reporting requirements as they relate to SNAP and the National School Lunch Program (NSLP). According to the Department, improper payments for these programs in FY 2009 cost taxpayers nearly $2.2 billion for SNAP and $1.5 billion for NSLP.


Fong said that FNS reported its improper payments correctly and has made significant progress in reducing them. At 4%, the fraud rate is “the best it's ever been,” she added.


Rep.  Jim McGovern said he understands the focus on stopping fraud, “but the bigger problem in this country is hunger and food security. There are many people eligible for SNAP benefits and don't know it.” He urged OIG to look at the effectiveness of the program in terms of President Obama's goal of eliminating childhood hunger by 2015.


Fong said management of nutrition programs could be improved by using better technology to manage data collected by each state. The OIG is currently looking at 11 different states to see how they are performing with program delivery and expects to have a report by this fall.


For Fong's full testimony:


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