www.impaqint.com JANUARY 2016 Evaluating & Enhancing Public Programs & Policies 1

ANNA YEGO, HIT CLSSGB, JENNIFER POOLER, MPP, AND STEVEN GARASKY, PHD

ISSUE BRIEF

Current Efforts to Address SNAP Recipient Benefit Trafficking

ISSUE The federal government lost an estimated $261 billion, or 7 percent of total spending, to fraud and waste in 2012.2 Historically, Congress has established watchdogs such as the General Accounting Office (GAO) and the Office of the Inspector General (OIG) to reduce waste and improve program efficiency and integrity. In 2014, Congress passed bipartisan legislation through the Digital Accountability and Transparency Act (DATA Act) that aims to provide full disclosure of federal agency expenditures.3 For the first time, taxpayers and policy makers will have the ability to view complete accounting of agency spending. In addition, in 2015 alone, Congress introduced bills to increase accountability and combat fraud and abuse in the Department of Homeland Security,4 Department of Veterans Affairs,5 U.S. Postal Service,6 and Centers for Medicare and Medicaid.7

At the USDA, FNS has also increased efforts to combat fraud and waste, ramping up efforts to ensure that program recipients receive the correct amount of benefits, recipient eligibility determinations are accurate, and that SNAP benefits are used appropriately. While the vast majority of SNAP benefits are used appropriately to purchase foods and reduce hunger among low-income families, a small fraction of benefits are transacted illegally (“trafficked”) to obtain cash or other goods or services. By recovering funds spent inappropriately and removing participants who do so from the program, SNAP can use those savings to better serve participants who adhere to program rules and ultimately improve the nutritional status of low-income families. Further, SNAP trafficking and fraud cases that garner national and statewide attention have repercussions beyond fiscal accountability, including decreasing public and political support for SNAP, and increasing negative perceptions of those who need the nutritional support provided by the program.

The public sector is addressing fraud at all levels of government. Fraud, waste and abuse often have profoundly negative impacts on the perception and integrity of valuable social, health and welfare programs. The Supplemental Nutrition Assistance Program (SNAP; formerly the Food Stamp Program) is the nation’s largest food safety net program, providing food benefits to over 45 million Americans annually.1 The U.S Department of Agriculture (USDA), Food Nutrition Service (FNS), which administers SNAP, has taken steps in recent years to reduce fraud and increase accountability through improved investigative and claims processing.

This IMPAQ issue brief explores current efforts to improve prevention, detection, and prosecution of SNAP benefit trafficking by program recipients with particular emphasis on the potential challenges of implementing new SNAP recipient benefit trafficking procedures at the state level.

Access more issue briefs at http://www.impaqint.com/issue-briefs

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ISSUE BRIEF Current Efforts to Address SNAP Recipient Benefit Trafficking

POLICY The federal government defines trafficking of SNAP benefits to include intentionally purchasing, selling, stealing or exchanging SNAP benefits for cash or other considerations.8 Trafficking can include trading electronic benefit (EBT) cards for non-food items; selling EBT cards to SNAP retailers (i.e., grocery and convenience stores) or other persons for cash; or selling foods purchased with SNAP benefits for cash. SNAP retailers may also engage in trafficking by purchasing SNAP EBT cards at less than the participants’ monthly allotment and then charging the SNAP program for the full value of the participants’ benefits. FNS oversees investigation and prosecution of SNAP retailers suspected of trafficking, while state SNAP programs are charged with preventing, investigating, and prosecuting SNAP participants who are suspected of selling or otherwise profiting from their benefits. The 2008 Farm Bill authorized FNS to develop a competitive grant process for state agencies to strengthen activities related to program integrity. In FY2014, state agencies were encouraged to propose projects that would result in process improvements related to fraud oversight operations or to pilot innovative strategies to identify and investigate SNAP recipient trafficking. FNS awarded over $5 million to seven states for this purpose.9 Additionally, in FY2015 over $9 million was awarded to five state agencies for information technology (IT) improvements that will result in improved SNAP trafficking prevention, detection, and prosecution.

Exhibit 1. SNAP Agencies Receiving SNAP Integrity Grants

Project Highlight: IMPAQ Assists Tennessee Program Integrity Unit in Preventing SNAP Benefit Trafficking. Through an FY2014 SNAP Recipient Trafficking Prevention Grant, IMPAQ is working in partnership with the Tennessee Program Integrity Unit (PIU) to develop, test, and implement new processes for detecting, monitoring and prosecuting SNAP participants engaged in trafficking. To increase efficiencies, develop innovations and improve operations, IMPAQ is leading Tennessee SNAP modernization efforts through business process reengineering (BPR). BPR is an approach to rethinking and redesigning administrative processes, with the end goal of making entire systems more efficient, collaborative, and responsive to customer needs. In using this approach to enhance Tennessee’s SNAP trafficking investigations process, IMPAQ provides Tennessee with the requisite training and technical assistance to make program improvements. IMPAQ’s includes providing input on policy and regulations, organizational case load management, and restructuring and streamlining of key administrative processes and functions.

FY2014 SNAP Recipient Trafficking Prevention Grants: Florida, Kentucky, Michigan, Missouri, Nevada, Ohio, Oregon, Tennessee and Washington

FY2015 Recipient Integrity Information Technology Grants: Alaska, Maine, Mississippi, Nevada and New Jersey

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ISSUE BRIEF Current Efforts to Address SNAP Recipient Benefit Trafficking

CHALLENGES Conducting thorough SNAP benefit trafficking investigations takes time and requires sufficient resources. Consequently, state agencies face several challenges in addressing SNAP trafficking, specifically: • Retailer versus participant trafficking: Historically,

program integrity investigators centered their work on fraudulent retailers, but now there is a greater focus on identifying and disqualifying SNAP participants involved in trafficking. Proving that a SNAP participant sold their EBT card for cash or other goods is not as easy as catching a retailer in the act. While retailer transactions are captured electronically and closely monitored for suspicious activity, a SNAP participant must be shown to have intentionally engaged in trafficking activities. Even if a retailer is found with a SNAP EBT card, it is not certain that the participant sold the card to the retailer and engaged in trafficking.

• Identification of suspected SNAP traffickers: A number of tools exist to aid state agencies in identifying SNAP traffickers, including telephone hotlines, social media scans, and complex data mining techniques and algorithms that can be applied to SNAP EBT data. Hotlines, however, are largely unsuccessful at yielding adequate evidence of wrongdoing, while social media leads provide limited information and are often difficult to pursue. Additionally, while some large states have had success in identifying fraud by applying data mining techniques, setting up such complex systems may not be feasible for smaller state agencies, as the costs incurred may not be worth the return on investment.

• Burden of evidence: Building sufficient supporting

evidence to sustain a SNAP trafficking case can be difficult, especially when state agencies are required to prosecute those who violate program rules in a court of law. A higher standard of evidence is

required to prosecute a case versus proceeding with an administrative hearing to disqualify the trafficker from the program. Prosecutorial investigators must provide “clear and convincing” evidence, which can be difficult to define in this context and challenging in terms of the information needed to fulfill the requirement.

• Inadequate resources: Once ample evidence has

been collected to pursue a case against a participant suspected of SNAP trafficking, it is imperative that prosecutors are able to move the case through the court system. Anecdotal evidence indicates that some states face challenges in this area such as a backlog of court cases and inadequate staffing due to attrition, high turnover and the lack of funding. As such, SNAP trafficking cases may receive a lower priority in the court system, despite the state agencies’ best efforts.

While strengthening the integrity of the SNAP program is critical, it should not be done in a manner that makes the program less accessible to those who need it. For instance, restricting the number of EBT card replacements made in a year may adversely affect certain groups of participants such as the elderly, disabled, or homeless that may be more likely to lose or misplace cards or misunderstand that benefits are automatically loaded onto the card each month and therefore should not be thrown away after use. Any efforts to improve fraud detection and trafficking prevention must be implemented in ways that will not negatively affect participants’ access to food benefits. NEXT STEPS SNAP remains one of the most efficient and effective safety net government programs. Retailer trafficking has declined by nearly two-thirds over the last 15 years.10 State agencies continue to expand efforts to combat SNAP fraud by adopting the use of technology to prevent, identify, and prosecute trafficking. For example, several states including California, Kansas, New York,

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ISSUE BRIEF Current Efforts to Address SNAP Recipient Benefit Trafficking

Pennsylvania, South Carolina, Texas, and Wisconsin are collaborating on a comprehensive fraud development plan. In Michigan, FNS and state investigators are working together to probe trafficking attempts by clients and retailers.11. The continued support to states provided by FNS through competitive grants has already yielded positive improvements and will continue to do so in the years to come. SNAP trafficking has fallen significantly in recent years due to effective oversight, continuous quality improvements and the increased efficiency of program operations at state and local levels.

REFERENCES 1 Food Research & Action Center. (2015). Supplemental Nutrition Assistance Program (SNAP) Data Summary. Retrieved from http://frac.org/wp-content/uploads/2011/01/snapdata2015_jun.pdf 2 Petty, Angie (2013, March 10). Federal government continues to lose billions to waste, fraud and abuse. The Washington Post. Retrieved from https://www.washingtonpost.com/ 3 Data Transparency Coalition. Data Act (2014, November 25). Retrieved from http://www.datacoalition.org/what-is-data-transparency/data-act/ 4 Department of Homeland Security Headquarters Consolidation Accountability Act of 2015 (H.R 1640). (2015) Retrieved from https://www.govtrack.us/congress/bills/114/hr1640/ 5 U.S Department of Agriculture, Food Nutrition Service. (2015, June). Nutrition Assistance Programs Performance Report Summary. Retrieved from http://www.fns.usda.gov/sites/default/files/datastatistics/june-performance-report-2015.pdf 6 Edwards, J. (2015, September). Sen. Tom Carper Intros New Postal Service Reform Bill-Executive Gov. Retrieved from http://www.executivegov.com/2015/09/sen-tom-carper-intros-new-postal-service-reform-bill/ 7 U.S. Department of Health and Human Services. (2014, June 4). FY2015 Budget in Brief, Centers for Medicare & Medicaid (CMS): Program Integrity. Retrieved from http://www.hhs.gov/about/budget/fy2015/budget-in-brief/cms/program-integrity/index.html/ 8 Federal Register, Vol. 78, No. 35 (2013, February). Retrieved from http://www.gpo.gov/fdsys/pkg/FR-2013-02-

21/pdf/2013-04044.pdf/ 9 U.S Department of Agriculture, Food Nutrition Service. (2015, May 18). USDA Announces New Technology Grant to Combat SNAP Recipient Trafficking. Retrieved from http://content.govdelivery.com/accounts/USFNS/bulletins/104eaaf/ 10 Government Accountability Office (2010, July 28). Supplemental Nutrition Assistance Program: Payment Errors and Trafficking Have Declined, but Challenges Remain. Retrieved from http://www.gao.gov/assets/130/125138.pdf 11 U.S. Department of Agriculture, Food and Nutrition Service. (2014, March 25). SNAP Integrity Efforts Reduce Fraud. Retrieved from http://www.fns.usda.gov/pressrelease/2014/fns-000114/

ABOUT IMPAQ IMPAQ International evaluates and enhances public

programs and policy.

Our work ranges from rigorous evaluations to testing and redesigning complex government data management

processes, to providing technical assistance to community organizations, to helping schools implement nutrition policy.

For more information about this brief or how IMPAQ can help evaluate or enhance your programs and policies,

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