Policy: Entitlements

UPDATED: Food stamp trafficking on the rise, rules as lax as ever

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Watchdog,Michal Conger,Entitlement Reform,Entitlements,Waste and Fraud,Tom Coburn

More Americans are trading their food stamps for cash, with $858 million trafficked between 2009 and 2011, according to a new report by the U.S. Department of Agriculture.

The Supplemental Nutrition Assistance Program, more popularly known as food stamps, cost taxpayers about $80 billion in 2012.

"SNAP trafficking," as the fraudulent exchange of benefits for cash is called, accounted for only about 1.3 percent of all benefit redemptions between 2009 and 2011, but that small number hides a huge increase in money wasted over the last decade.

The amount of money trafficked more than tripled from 2005 to 2011, a leap USDA officials blamed on soaring food stamp enrollment after the recession began in 2008. More than 47 million Americans receive food stamps.

Between 2002 and 2005, trafficking accounted for 1 percent of SNAP redemptions, about $241 million.

The USDA noted trafficking doesn't cost taxpayers more, but simply diverts funds away from helping low-income families buy healthy food.

Not all government watchdogs agree, however. Sen. Tom Coburn, R-OK, said the percentage of fraud doesn't show the whole picture.

"The statement may be true in the fiscal sense, but misses the point that if people are able to traffic their SNAP funds, they do not really need the benefit," a Coburn spokesman told the Washington Examiner.

"If they don't need the benefit, we can reduce the number of people using and abusing the SNAP system, translating into lower spending," the Coburn spokesman said.

Beyond the numbers, the problem is that the USDA isn't stopping fraud in the hugely expensive program, experts told the Examiner.

Convenience stores and small privately-owned grocery stores accounted for 85 percent of trafficking, even though those stores see only 15 percent of SNAP redemptions, according to the USDA.

Many of these stores only nominally meet requirements to offer fresh, healthy food, Robert Rector, a senior research fellow with the Heritage Foundation, said.

But instead of tightening requirements, the USDA points to the relatively small percent of benefits trafficked.

"They don't even acknowledge they're running a welfare program. Everything they do is designed to distract from the real issues in this program, which are its enormous cost, and its complete lack of any type of reform mechanism," Rector said.

Most trafficking occurs in low-income neighborhoods, according to the USDA, where chain grocery stores are less abundant and healthy foods are often harder to come by.

Calls for limiting SNAP to healthy purchases have come from several quarters this summer, with supporters hoping the change would increase the amount of benefits spent on their intended purpose.

Sens. Coburn and Tom Harkin, D-Iowa, wrote a letter to Agriculture Secretary Tom Vilsack in July asking USDA to set up pilot programs basing SNAP requirements on nutritional content.

A large coalition of health groups and doctors also wrote to Vilsack with a similar request earlier this month. One of those groups is Fair Food Network, which helps underserved communities gain access to healthy, local food.

Research indicates stricter requirements for retailers in low-income neighborhoods actually does increase the amount of affordable, healthy food, said Kate Fitzgerald, a policy consultant for Fair Food Network.

"The requirements right now are pretty cursory," she said.

Allowing places like gas stations and liquor stores with the minimal amount of qualifying foods to accept SNAP benefits "dilutes" the program's effectiveness, Fitzgerald said.

A 2012 Yale study showed marked improvement in healthy foods available in small private retailers in low-income neighborhoods in Connecticut after 2009 changes to the Special Supplemental Nutrition Program for Women, Infants and Children required more healthy foods at WIC-eligible stores.

After about eight months, the stores were offering more nutritious foods, especially whole grains, and competitors had also started offering healthier choices, according to the study.

"If the experience in Connecticut is typical of other states, national food policy that promotes consumption of healthy foods, but also requires changes in stores, can help to improve local food environments," the study concluded.

"The beneficial changes of the WIC food package revisions were seen in both higher- and lower-income areas, but they were more pronounced in low-income communities."

USDA said 1,387 stores were permanently disqualified from accepting SNAP benefits in 2012. Almost 550 more received temporary disqualifications, and about 160 more paid a fine for trafficking violations.

Read the full report here.

UPDATE: USDA IG says Ag Department rules don't stop SNAP trafficking

Hundreds of store owners previously disqualified for SNAP trafficking continue to participate in the food stamp program at new locations, and many store locations remain authorized even after multiple owners have been disqualified for fraud, according to a new report by the USDA Inspector General. 
 
"The integrity of SNAP is at risk because Food and Nutrition Services does not consistently provide deterrents for trafficking," according to the report released Tuesday, after this story first appeared online. 
 
Current penalties don't deter owners, and FNS can't disqualify a physical location, the IG said. One store in Camden, N.J., has had five owners disqualified since 1996. Another store in Patterson, N.J. had four owners disqualified in five years.  
 
Even when FNS knows multiple owners have committed fraud, the agency lacks the authority to prevent the store from being reauthorized under new ownership, and doesn't currently have strong enough protections to prevent new owners from continuing to traffick. 
 
FNS also spends too much of its budget on authorizing new retailers instead of preventing fraud among existing outlets, the IG said. FNS has seen a 41 percent increase in authorizations since 2007, approving 246,565 retailers in 2012 alone. Meanwhile, those resources aren't spent on investigating and penalizing retailers. 
 
You can read the new report here
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