Selected States Faced Challenges in Detecting Benefit Fraud, and FNS Lacked Reliable Data about State Efforts

		To Detect Fraud, Selected States Employed Tools Such As Data Matching, Referrals, Analysis of Transaction Data, and Website Monitoring

In the selected states we reviewed in 2014, officials told us they were  using well-known tools for detecting potential recipient eligibility fraud,  such as data matching and referrals obtained through fraud reporting  hotlines and websites. In 2014, Most Selected States Reported that Their Investigations’ Effectiveness was Hindered by Limited Staffing and Caseload Increases, but Some Leveraged Additional Resources

At the time of our 2014 report, most of the selected states reported  difficulties in conducting fraud investigations due to either reduced or  stagnant staff levels while SNAP recipient numbers greatly increased  from fiscal year 2009 through 2013. At the time of our report, some state officials suggested changing the  financial incentives structure to help support the costs of investigating  potential SNAP fraud because some investigative agencies were not  rewarded for cost-effective, anti-fraud efforts that could prevent ineligible  people from receiving benefits. In 2014, Selected States Reported Limited Effectiveness in Using Automated Monitoring Tools for Detecting Online Fraud and Replacement Card Data as a Detection Tool

In our 2014 report, we found that, upon testing, FNS’s recommended  approaches to detecting online fraud were of limited utility and selected  states had limited success with using FNS’s required approach to  replacement card monitoring. At the time of our review, FNS officials acknowledged that there were  limitations to the monitoring tools, and stated that they provided these  tools at the request of states to help with monitoring efforts. Specifically,  out of 1,180 postings we reviewed manually, we detected 28 postings  indicative of potential SNAP trafficking. However, we also considered the monthly benefit period of replacement  card requests by focusing on SNAP households receiving replacement  cards in four or more unique monthly benefit periods in a year. As a result, we determined  that additional replacement card requests in the same benefit period may  not indicate increased risk of trafficking. We identified  7,537 SNAP recipient households in these three selected states that both  received replacement cards in four or more monthly benefit periods in  fiscal year 2012, and made at least one transaction considered to be a  potential sign of trafficking around the time of the replacement card  issuance, as shown in the table below. For example, as  shown in the figure below, while there were 4,935 SNAP households in  Michigan that received an excessive number of replacement cards, we  identified just 39 households that received excessive replacement cards  and made transactions resulting in 10 or more trafficking flags. We  concluded in 2014 that while state SNAP officials may not want to limit  their investigations to such a small number of households, this type of  analysis may help provide a starting point for identifying higher priority  households for further review. Furthermore, we reported that our more  targeted approach may also be particularly helpful given that states had  limited resources for conducting investigations. Despite these efforts, at the time of our report, FNS did not have  consistent and reliable data on states’ anti-fraud activities because its  reporting guidance lacked specificity. According to state and federal officials we interviewed, this  information did not clearly establish a definition for what action constitutes  an investigation and should then be reported on this form. FNS Is Working to Address GAO Recommendations to Enhance Detection Tools and Reporting

As a result of our 2014 findings, we made several recommendations, and  FNS officials agreed with all of these recommendations and are taking  actions to address them. Specifically, we recommended that the  Secretary of Agriculture direct the Administrator of FNS to: 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, and  assess whether the use of replacement card benefit periods may  better focus this analysis on high-risk households potentially engaged  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. As of May 2016, 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.
Why GAO Did This Study

In fiscal year 2015, SNAP, the nation's largest nutrition support program, provided about 46 million people with $70 billion in benefits. Fraud has been a long-standing concern in the program, and state agencies are responsible for addressing SNAP recipient fraud. In 2014, GAO reviewed state and federal efforts to combat SNAP recipient fraud.
This testimony summarizes: (1) findings from GAO's 2014 report and (2) the steps FNS has taken since then to address GAO's recommendations. For its 2014 report, GAO reviewed relevant federal laws, regulations, guidance, and documents; interviewed officials in 11 states; interviewed federal officials; tested fraud detection tools using fiscal year 2012 program data, the most recent available at the time of GAO's report; and monitored websites for potential trafficking online. Although GAO's results are not generalizable to all states, the selected states served about a third of SNAP recipient households. For this statement, GAO reviewed FNS's actions to date on its recommendations.

What GAO Found

In 2014, GAO found that selected states employed a range of tools to detect potential Supplemental Nutrition Assistance Program (SNAP) recipient fraud, but they faced challenges, including inadequate staffing levels, that limited the effectiveness of their actions, and the Food and Nutrition Service (FNS) lacked data about the states' efforts. The 11 states GAO studied reported using detection tools required or recommended by FNS, among others, to combat SNAP recipient fraud. However, 8 of these states reported difficulties in conducting fraud investigations due to reduced or stagnant staff levels and funding despite program growth, and some state officials suggested changing the financial incentives structure to help support the costs of investigating potential fraud.
GAO also found limitations to the effectiveness of website monitoring tools and the analysis of card replacement data states used, under the direction of FNS, for fraud detection. Specifically, GAO found FNS's recommended website monitoring tools to be less effective than manual searches and impractical for detecting internet posts indicative of SNAP trafficking—the misuse of program benefits to obtain non-food items. Further, although FNS required states to monitor SNAP households that request at least four replaced electronic benefit transfer (EBT) cards in a year, GAO found that multiple EBT card requests in the same benefit period may not indicate increased risk of trafficking. GAO found that, by adjusting the analysis to focus on SNAP households that both requested cards in at least four different monthly benefit periods and engaged in suspicious transactions, states could possibly detect potential fraud more accurately. For example, in 2014, GAO found that 4,935 SNAP households in Michigan received at least 4 replaced EBT cards in a year. However, out of these householders, GAO identified 39 households that both received multiple replacement cards in at least four different monthly benefit periods and engaged in suspicious transactions indicative of SNAP trafficking, resulting in 10 or more trafficking flags. GAO reported that this type of targeted analysis may help provide states with a starting point for identifying higher priority households for further review, which can be particularly helpful given that states had reported having limited resources for conducting investigations.
GAO also found that, despite FNS's increased oversight efforts at that time, it did not have consistent and reliable data on states' anti-fraud activities because its reporting guidance lacked specificity. For example, the FNS guidance did not define the kinds of activities that should be counted as investigations, resulting in inconsistent data across states.
In 2014, GAO recommended, among other things, that FNS reassess current financial incentives, detection tools, and guidance to help states better combat fraud. As of May 2016, FNS reported progress in studying current anti-fraud approaches and developing better data on them, and is in the process of developing the final tools and guidance states need to help enhance the integrity of the SNAP program.

What GAO Recommends

In 2014, GAO recommended that FNS reassess its financial incentives for state anti-fraud efforts and tools for website monitoring; establish additional guidance related to EBT replacement card data; and enhance the reliability of state reporting. FNS agreed with GAO's recommendations and has been taking steps to address them. GAO is not making new recommendations in this testimony statement.