USDA Lets Retailers Convicted of Food Stamp Fraud Stay in Food Stamp Program

By Edwin Mora | March 8, 2012 | 5:43pm EST

(AP Photo)

( -- The U.S. Department of Agriculture (USDA) does not have a policy to ban food stamp retailers from the food stamp program even when they have been convicted of defrauding the government of benefits because it is costly, according to government auditors.

The USDA’s Food and Nutrition Service (FNS) administers the food stamp program, also known as the Supplemental Nutrition Assistance Program (SNAP), which now serves 46.3 million individuals, according to the latest government estimates.

The  “FNS is also not making use of one of the most powerful tools available to keep bad actors away, not only from SNAP, but from other federal programs they might exploit. ‘Suspension and debarment’ is a legal tool that Federal agencies can use to protect programs from repeat abusers and ensure that the Government does business only with responsible parties,” USDA Inspector General Phyllis Fong told lawmakers in remarks prepared  for a hearing today before the House Oversight and Government Reform Committee. “If FNS took steps to debar retailers with a proven record of dishonesty, those individuals would be prevented from abusing other Federal programs.”

“However, in a recent audit, we determined that FNS did not debar any of the 615 wholesalers and retailers convicted in relation to 208 OIG cases, even though a conviction is adequate grounds for debarment,” testified Fong. “While we contend that FNS should consider disqualified SNAP retailers for suspension or debarment, it is not FNS’ policy to do so.”

USDA Inspector General Phyllis Fong. (USDA Photo)

“FNS asserts that it can exclude retailers under the Food Stamp Act, that disqualified retailers are unlikely to pursue other business with the Federal Government, and that debarring these individuals is costly,” said Fong.  “Rather than issuing a blanket rule that would exclude disqualified retailers from being suspended or debarred, FNS should consider suspension and debarment on a case-by-case basis. By doing so, FNS can help protect the entire Government by preventing convicted program abusers from entering into transactions with other agencies.”

Furthermore, the inspector general told lawmakers that the USDA does not review the criminal background check on food stamp retailers, which she said creates a problem. According to the USDA, there “are more than 230,000 food stores authorized to redeem benefits.”

“We found that FNS does not verify SNAP retailers’ criminal records and therefore cannot comply with its own requirement to deny SNAP authorization to any retailer with a criminal history (i.e., embezzlement, theft, forgery, etc.) reflecting on the business integrity of the owner,” said Fong. “We recommended that FNS begin reviewing retailers’ criminal records, but FNS concluded that our recommendation would need a regulatory change and may not be cost beneficial. We accepted this decision on the condition that FNS continue to seek other options to better ensure the integrity of retailers applying to participate in the program.”

“Although FNS compiles a ‘watch list’ of stores with suspicious transactions, we found that FNS did not have the information it needed to determine if stores on the list were violating requirements,” said Fong. “Further, the agency was not categorizing stores to maximize its ability to identify patterns of fraud. We recommended that FNS enhance the system to provide additional data, and develop plans to better compare stores. FNS agreed with our recommendations.”

The food stamp program is the largest in the USDA both in terms of participants and budget, the latter which currently is $75 billion annually.

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