WASHINGTON, Sept. 14, 2017 - The Justice Department is investigating a “significant number” of states for allegedly hiding mistakes in food-stamp payments to win millions in federal performance bonuses, senators were told Thursday.
Two states, Virginia and Wisconsin, reached settlements this spring, but 42 states in all were using questionable practices to report error rates, according to the Department of Agriculture.
Anne Coffey, USDA’s assistant inspector general for investigations, declined to specify the number of states that are the subject of the ongoing DOJ probe, but she told the Senate Agriculture Committee that “it’s a significant number” and a “unique situation” in terms of the scale of the potential fraud.
USDA has not released a national error rate for SNAP payments since fiscal 2014 because the department lost confidence in state reporting, but Brandon Lipps, the acting deputy undersecretary for food, nutrition and consumer services, expressed confidence that an error rate for 2017 would be released next June.
He said the error rate for 2017 could be “significantly higher” than the relatively low, 3.66 percent error rate, USDA reported for 2016. The error rate measures the accuracy of SNAP eligibility determinations. Mistakes result in underpayments or overpayments to SNAP recipients.
Senate Agriculture Chairman Pat Roberts, R-Kan., said the investigation showed that states had been “gaming the system.”
“We have no idea how much taxpayer money was wasted," he said.
After the hearing, Roberts didn’t rule out trying to restrict or end the payment of performance bonuses to states for SNAP management, which the investigators said provided an incentive for the fraudulent practices. “We have to take a look at that,” Roberts told reporters.
Sen. John Boozman, R-Ark., unsuccessfully proposed an amendment to the 2014 farm bill that would have abolished the bonus payments and shifted the savings to food banks.
Gil Harden, USDA’s assistant inspector general for audits, told the senators that some state officials said they used the biased review methods because other states did: “It was a keeping up with the Joneses kind of thing. They knew they had to use the consultants to help get their error rates down or else they wouldn't be in line for the bonuses,” he said.
He said that allowing states to review error rates themselves and reward them for low rates created “a very inherent conflict in interest,”
The states made their error rates appear lower than they were in part by correcting mistakes that were found during reviews and then not reporting the errors to USDA. In other cases, states found ways to drop cases from their review. Lipps said some states also refused to turn over data to USDA when the department tried to review their quality-control practices.
At the heart of the ongoing investigation is a consulting firm that was 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.
Lipps said the problem may date back to 2004, when the consulting firm started working with the states.
Eight states reported an error rate of 1.16 percent or lower in 2016, and seven of those had been clients of the Osnes consultants.
The methods they recommended to Wisconsin 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.
Committee Democrats sought to emphasize that the fraud didn’t involve SNAP recipients.
“If the headline is fraud, the IG finds fraud in the SNAP program, people are going to automatically assume that was widespread fraud by applicants,” said Sen. Heidi Heitkamp, D-N.D.
The committee’s top Democrat, Debbie Stabenow of Michigan, emphasized that errors in SNAP eligibility can result not just in overpayments to SNAP recipients but also in needy people not getting the help to which they are entitled.
"What we have are states who want to get bonuses who have not been reporting as they should have been reporting,” she said.
USDA’s inspector general has recommended that the USDA’s Food and Nutrition Service do all of the state error reviews itself or contract the job to an independent firm.
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