WASHINGTON, April 19, 2017- Even as Congress prepares to write a new farm bill, the Supplemental Nutrition Assistance Program (SNAP) is snarled in an investigation of state mismanagement that raises questions about USDA’s oversight of the program.

The Justice Department announced settlements this month with two states, Wisconsin and Virginia, which were accused of doctoring quality control data in order to lower their SNAP error rates and qualify for USDA performance bonuses while avoiding penalties for excessive mistakes. Each state agreed to pay about $7 million to settle the charges.

USDA’s concerns go well beyond those two states, however. The department’s Office of Inspector General first raised questions in 2015 about the way that states were checking their payment data for errors. The OIG report led to an internal investigation by USDA’s Food and Nutrition Service. According to USDA documents obtained by Agri-Pulse, USDA has been withholding $31 million in state performance bonuses for fiscal 2013 and 2014 at the request of the Justice Department while the investigation is underway.

FNS’ own internal investigation found that 42 of 53 state and territorial agencies that administer SNAP were using “biased practices” to measure their error rates, according to the documents. The error rate measures the accuracy of SNAP eligibility determinations. Mistakes result in underpayments or overpayments to SNAP recipients.

As a result of the states’ quality-control issues, the accuracy of payments under the program is no longer clear. At the very least, the problems won’t help supporters of the program argue that it should be protected from cuts.

SNAP has been a target of Republican budget cutters for decades because of its sheer size: It is one of the largest federal welfare programs and accounts for 80 percent of farm bill spending. Critics have long claimed that SNAP is riddled with waste, fraud and abuse. Supporters have countered by pointing at the relatively modest error rates.

For fiscal 2014, FNS reported a nationwide average error rate of 3.66 percent. But as a result of the internal investigation, USDA didn’t release a national error rate for FY15 and reported individual error rates for only nine states, plus the territories of Guam and the Virgin Islands. For fiscal 2016, FNS plans to report a national error rate but no state rates.

Kevin Concannon, who served as USDA’s under secretary for food, nutrition and consumer services during the Obama administration, said that some state agencies have been “cooking the books” by filling in missing information or otherwise correcting errors found in cases that were selected for review. “It makes it look like you did a more accurate and fuller job than you actually did,” Concannon said.

As part of its internal investigation, the department sent teams to review every state agency’s quality control practices. Some were less than fully cooperative. “We even had instances where states would not allow us to sit in on the meeting with their consultants” who were advising the agencies on quality control practices, he said. “We’ve since made it clear that any consultant contracts have to be reviewed nationally.”

At the center of the Justice Department investigation is a consulting firm based in Pierre, S.D., Julie Osnes Consulting, that counseled agencies in ways to correct or offset errors that were uncovered as part of the agencies’ accuracy reviews. Under terms of the Osnes contract with Wisconsin, the consultants’ pay was contingent on the state getting a performance bonus from USDA for lowering the SNAP error rate.

In Wisconsin, the results were dramatic. In fiscal 2008, the year before the Osnes consultants were hired, Wisconsin’s SNAP error rate was 7.38 percent. In 2009 it dropped to 1.1 percent, one of the lowest in the country. According to the statement of facts attached to the settlement agreement in the Wisconsin case, the Osnes consultants trained state employees on its methods and then began combing through the state’s review cases where errors had been found. The consultants looked for ways to “reduce or overturn” the errors or to drop the cases from the review.

The methods the consultants recommended to the state included discouraging SNAP beneficiaries from cooperating with information requests when cases were under review. If the beneficiaries declined to cooperate, the cases could then be dropped from the review. The consultants – contractor Public Consulting Group and Julie Osnes Consulting, which acted as a subcontractor – ultimately received a 15 percent cut of the $2.86 million USDA bonus Wisconsin received for 2009, or about $429,000.

Some agency employees made a point of documenting the consultants’ instructions because the workers felt they “lacked integrity” and that USDA “would ultimately catch on” to what was happening, according to the statement of facts attached to the settlement agreement.

The Osnes firm didn’t respond to efforts by Agri-Pulse to get its response. The firm’s website was taken down on Monday. Justice Department statements about the Wisconsin and Virginia cases cited the consulting firm’s involvement but didn’t say whether the department was considering taking action against Osnes.

A spokeswoman for the state told the Milwaukee Journal-Sentinel the practices recommended by the consultants ended in 2011, the first year Scott Walker was governor. Bethanne Dinkins, special agent-in-charge of USDA’s Office of Inspector General, said the Wisconsin and Virginia settlements “send a strong message regarding the governments commitment to work across agency lines to protect the integrity of SNAP.”

A spokesman for House Agriculture Chairman Mike Conaway, R-Texas, would say only that the committee was monitoring the investigation. USDA’s review of the state agency practices came up briefly at a House Agriculture Committee hearing last July. Jessica Shahin, now acting administrator for the Food and Nutrition Service, told committee member Tim Walz, D-Minn., that the states’ quality control practices “gave us pause.”

Agriculture Secretary Tom Vilsack bragged as recently as 2015 about the SNAP error rate, arguing that it was one of the lowest in the federal government. A progressive think tank, the Center for Budget and Policy Priorities, said in 2015 that the relatively low error rates were evidence of SNAP’s “extensive quality control system.”

The error rate in fiscal 2014, the last year for which USDA reported a national rate, was 3.66 percent, down from 5.01 percent in 2008. Eight states that year reported an error rate of 1.16 percent or lower. Seven of those states had been clients of the Osnes consultants, according to a map on the consulting firm’s website. A subsequent USDA review found problems in all eight states, according to a 2016 FNS memo. One of the eight, Alaska, was found to have destroyed records.

In 2015, the nine states for which USDA reported error rates had rates ranging from 0.75 percent (South Dakota) to 5.98 percent (Minnesota).

In response to an inquiry from Agri-Pulse, an FNS spokesman said Tuesday that the agency has asked 42 states to submit plans for correcting their quality control programs. FNS issued a four-page memorandum to states in January 2016 laying out new requirements for their use of consultants. Among other things, states now must notify FNS of when training sessions are to take place, and FNS warned that it may attend the meetings without prior notice.

Concannon, the former USDA under secretary responsible for overseeing SNAP, stressed that the problem strictly involves management by state agencies and not mistakes or fraud on the part of SNAP beneficiaries. “We found no involvement, no misbehavior on the part of” SNAP recipients. “This was all the government agencies. That was what was troubling to us. The agencies were not following the rules.”