Its 58 field offices assess financial penalties against storeowners who violate program regulations. FNS’ seven regional offices are responsible for collecting the financial penalties and related interest charges, which are recorded as debts in FNS’ accounting records. Furthermore, FNS and the courts collected $11.5 million from storeowners, and FNS waived, adjusted, or wrote off $49 million. During the 6-year period, the total penalties were $88.7 million, but they collected only $11.5 million, or about 13 percent. The dollar amount of penalty debt outstanding more than doubled from the end of year fiscal year 1993 to the end of fiscal year 1998 (from $12.3 million to $28.2 million), while the amount of collections increased slightly, from $1.8 million to $2.0 million. However, we found that FNS could have identified additional storeowners who violated program regulations if it more effectively used data on electronic benefits transfers. FNS Almost Always Assessed Financial Penalties When Warranted

FNS followed its procedures for assessing financial penalties in nearly all of the 259 cases we reviewed in which stores were found to have violated program regulations. FNS Has Had Problems Collecting Penalty Debts

Large amounts of debt owed by storeowners for Food Stamp Program violations go uncollected. According to agency officials, this small percentage reflects the difficulties involved in collecting this type of debt, such as problems in locating debtors as well as their refusal to pay. However, weaknesses in the agency’s debt collection procedures and practices also contributed to low collections. FNS expects to soon refer delinquent debt to the Department of the Treasury after it fully implements provisions of the Debt Collection Improvement Act of 1996. This law makes the Department of the Treasury primarily responsible for collecting debts delinquent for over 180 days and could help FNS better manage its collection activities. These practices include collecting debts aggressively; assessing interest on delinquent debts; collecting installment debt payments within 3 years; removing old uncollectible debts from accounts receivable; establishing procedures to identify the causes of delinquencies and developing the corrective actions needed; and referring delinquent debts to the Treasury Department, which can deduct the debt amounts from any federal payment due a storeowner and reporting to the Internal Revenue Service (IRS) debts written off, which are treated as taxable income to the storeowner. FNS has not consistently charged interest on debt that is not fully paid when due. However, it has made progress and will soon be in a position to implement this requirement. Recommendations

To improve the integrity of the Food Stamp Program, we recommend that the Secretary of Agriculture direct the Administrator, FNS, to develop guidance that specifies its field staff’s responsibilities, duties, and guidelines in reviewing data on electronic benefits transfers to identify and assess penalties against storeowners who violate the Food Stamp Program’s regulations; develop the corrective actions necessary, as required by the Federal Claims Collection Standards, to help prevent delinquencies and defaults, and determine the priority and resources it needs to assign to make debt collection more effective; and complete the actions needed to refer delinquent debts with storeowner taxpayer identification numbers to Treasury electronically in a timely manner. Scope and Methodology

To identify the dollar amount of financial penalties, collections, and debt reductions (waivers, adjustments, or write-offs) for storeowners in the Food Stamp Program during fiscal year 1993 through fiscal year 1998, we interviewed and obtained financial reports and debt management information from officials in the Food and Nutrition Service’s (FNS) Accounting Division.
Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on the Food and Nutrition Service's (FNS) efforts to maintain the integrity of the Food Stamp Program, focusing on the: (1) dollar amount of the financial penalties, collections, and debt reductions (waivers, adjustments, or write-offs) affecting storeowners violating program regulations during fiscal year (FY) 1993 through FY 1998; (2) effectiveness of the FNS' procedures and practices for assessing financial penalties against storeowners for program violations; and (3) effectiveness of FNS' procedures and practices for collecting financial penalties levied against storeowners.

What GAO Found

GAO noted that: (1) over the past 6 years, FNS and the courts have assessed or levied about $78 million in financial penalties and interest against storeowners for violating Food Stamp Program Regulations; (2) the penalties and interest are recorded as debts in FNS' accounting records; (3) during this period, FNS and the courts collected $11.5 million, or about 13 percent of the total penalties, and FNS reduced the amount owed by storeowners by about $49 million, or about 55 percent, through waivers, adjustments, or write-offs; (4) the dollar amount of penalty debt outstanding at the end of the year more than doubled, from $12.3 million in 1993 to $28.2 million in 1998; (5) in 7 FNS field offices, GAO reviewed 259 Department of Agriculture undercover investigations that identified program violations, and GAO found that FNS almost always assessed financial penalties against storeowners when warranted; (6) however, other storeowners who may have violated program regulations and could have been penalized were not identified; (7) FNS is not effectively using data on the electronic redemption of food stamp benefits to identify these storeowners; (8) FNS officials noted that the small percentage of debt collected reflected, in part, the difficulties involved in collecting this type of debt, including problems in locating debtors and their refusal to pay; (9) however, weaknesses in FNS' debt collection procedures and practices also have contributed to low collections; (10) FNS has not aggressively collected debt, consistently assessed interest on unpaid debt, and written off uncollectible debt in a timely manner; (11) FNS has not yet referred any delinquent debt to the Department of the Treasury, which could deduct the debt from any future federal payments due the storeowners; (12) FNS expects to soon be in a position to make such referrals as it completes the implementation of the provisions of the Debt Collection Improvement Act of 1996; and (13) this law makes the Treasury primarily responsible for collecting debts delinquent for over 180 days.