Appendix D OIG Audit

United States Department of Agriculture

OFFICE OF INSPECTOR GENERAl

FNS Quality Control Process for
SNAP Error Rate

27601-0002-41

September 2015
10401-0001-22

FNS Quality Control Process 
for SNAP Error Rate 
Audit Report 27601-0002-41 
What Were OIG’s
Objectives
Our objective was to
determine if FNS and States
have controls in place to
ensure the integrity of SNAP
error rate determination.
What OIG Reviewed
We audited the FNS and State
QC processes used to
determine SNAP error rates
for fiscal years 2011 and 2012.
We performed our audit from
March 2013 to January 2015
at FNS’ national and regional
offices, and at State agencies
in California, Connecticut,
Florida, Maryland, Nebraska,
Texas, Vermont, and
Wisconsin.
What OIG Recommends
FNS should consider changing
QC from a two-tier process
reliant on State error rates to a
one-tier process in which FNS
or a third party reviews cases,
and establish a timeline for
making this change, if cost
beneficial. FNS needs to
reiterate policies regarding the
proper use of error review
committees, QC staff’s
variable treatment of error
cases, and issue guidance to
States on appropriate use of
private consultants. FNS
should amend and enforce
policies to ensure error rates
are accurate and determined in
compliance with regulations.

OIG reviewed the quality control process 
that FNS and States use to determine SNAP 
error rates. 
What OIG Found
The Food and Nutrition Service’s (FNS) Supplemental Nutrition
Assistance Program (SNAP) is the nation’s largest food assistance
program. It allows eligible, low-income households to afford a more
nutritious diet. Since fiscal year (FY) 2010, FNS’ SNAP has served
on average more than 45 million people per month and paid out more
than $71 billion annually in benefits.
States determine household eligibility for SNAP and calculate and
issue benefits. FNS and State agencies’ have quality control (QC)
processes to review these determinations. States review a sample of
their SNAP cases and FNS verifies a sub-sample of these. The results
are used to calculate State error rates; the national error rate is a
weighted average of State rates.
We found that States weakened the QC process by using third-party
consultants and error review committees to mitigate individual QCidentified errors, rather than improving eligibility determinations; QC
staffs also treated error cases non-uniformly. FNS’ two-tier QC
process is vulnerable to State abuse due to conflicting interests
between (1) accurately reporting true error rates and incurring
penalties or (2) mitigating errors and receiving a bonus for exceeding
standards. Further, States’ QC reviews did not meet SNAP regulatory
requirements and Federal oversight of State QC was inadequate.
Finally, FNS’ Broad-Based Categorical Eligibility (BBCE) policy to
determine eligibility was not consistent with SNAP regulations.
Thus, FNS’ QC process understated SNAP’s error rate.
We accepted management decision on 10 recommendations; the
remaining 9 are under review.

United States Department of Agriculture
Office of Inspector General
Washington, D.C. 20250

DATE:

September 23, 2015

AUDIT
NUMBER:

27601-0002-41

TO:

Audrey Rowe
Administrator
Food and Nutrition Service

ATTN:

Mark Porter
Director
Office of Internal Controls, Audits and Investigations

FROM:

Gil H. Harden
Assistant Inspector General for Audit

SUBJECT:

FNS Quality Control Process for SNAP Error Rate

This report presents the results of the subject review. Your written response to the official draft
is included in its entirety at the end of the report. We have incorporated excerpts from your
response, and the Office of Inspector General’s (OIG) position, into the relevant sections of the
report. Based on your written response, we have accepted your management decision on
Recommendations 1-7, 10, 13, and 15. Please follow your internal agency procedures in
forwarding final action correspondence to the Office of the Chief Financial Officer (OCFO).
Based on your written response, management decision has not been reached on
Recommendations 8, 9, 11, 12, 14, and 16-19. The information needed to reach management
decision on the recommendations is set forth in the OIG Position section following each
recommendation. In accordance with Departmental Regulation 1720-1, please furnish a reply
within 60 days describing the corrective actions taken or planned, and timeframes for
implementing the recommendations for which management decisions have not been reached.
Please note that the regulation requires management decision to be reached on all
recommendations within 6 months from report issuance, and final action to be taken within
1 year of each management decision to prevent being listed in the Department’s annual Agency
Financial Report.
Your written response to the official draft report expressed concerns with some aspects of our
report. Your concerns, along with our comments on your concerns, are listed below:

Audrey Rowe

2

1. Some of our findings were a result of a misunderstanding of SNAP Quality Control (QC)
Policy.
OIG Comment – We disagree. The audit team obtained a complete and thorough
understanding of the SNAP QC process by interviewing key staff at FNS’ National
Office (NO) and at all seven of FNS’ regional offices. A representative from the NO also
participated in our interviews with the QC staff at five of the seven regional offices to
ensure that our questions regarding the QC process were fully addressed by the regional
offices’ QC staff. The audit team further enhanced its understanding of the SNAP QC
process by reviewing 140 selected QC cases.
2. At no point did the audit document other factors in a State that may have contributed to a
reduction in the State’s error rate.
OIG Comment – We disagree. OIG acknowledged in the first finding that “Although
other factors may have contributed to the drop in the States’ error rates, actions taken
based on recommendations of the outside consultants have an immediate and significant
impact on the States’ error rates. Given that the significant drop in the States’ error rates
did not generally occur until after they hired a consultant, we attributed the change in the
error rates primarily to the consultant.” Furthermore, we found no evidence that training,
improved eligibility systems, expanded data matching, etc., were the reasons for the
immediate and significant drop in the error rates for the States we reviewed that hired an
outside consultant.
3. The report fails to prominently indicate in the summary and throughout the report that
the reported conditions are based on a review of 80 cases out of 8,936 (less than
1 percent) and of 60 out of 3,167 cases (less than 2 percent).
OIG Comment - We statistically (randomly) selected the cases we reviewed so that any
conclusions drawn from the sample would be representative of the universe. Please see
Exhibit D for further details on our sampling methodology. Furthermore, we expanded
our sample to include other cases when warranted. For example, in the first finding, we
found additional cases outside our original sample where States were submitting their
active error cases to error review committees to mitigate the errors. In the fourth finding,
we were able to base our finding on the entire universe of QC cases since the information
that was needed to support the finding was contained in FNS’ QC database.
4. OIG expanded the audit to encompass FNS policies that are outside the operations of the
QC system.
OIG Comment - We disagree with FNS’ contention that the policies OIG reviewed were
outside the operations of the QC system. For example, FNS’ Broad Based Categorical
Eligibility (BBCE) policy, which in our view does not comply with the Federal
regulations, impacts the error rate because BBCE cases are not adequately reviewed

Audrey Rowe

3

during the QC process. There is a false assumption that another program would have
already assessed the SNAP recipient’s eligibility for SNAP benefits. The SNAP
recipient’s eligibility would therefore not be assessed during the QC process, even though
the recipient is clearly no longer eligible to receive SNAP benefits (e.g., the SNAP
recipient’s gross income exceeded the State’s BBCE gross income limitation).
5. Assertions were made without information that would allow FNS to adequately
understand the issues presented or follow up on the concerns raised.
OIG Comment - FNS noted in its response to the draft report that it would be helpful if
OIG added an appendix to the report that individually identifies each case it reviewed, the
determination of the Federal reviewer, OIG’s observation, and an explanation of what
OIG found wrong with FNS’ review of the case. FNS also noted that States and State
officials were referenced, but not identified in the report. Details such as these are
generally not included in the report due to the sensitivity of the information or privacy
concerns. However, we will provide this information to FNS separate from the report.
6. Exhibit A presents the summary of monetary results in a manner that implies these costs
represent underreported improper payments.
OIG Comment - Exhibit A’s summary of monetary results represents questioned costs
that resulted from FNS’ noncompliance with the SNAP regulations. Any increase in the
error rate as a result of our reported findings equates to an understatement in the amount
of improper payments reported in the SNAP program. We included the methodology for
calculating the amounts presented in Exhibit A in footnotes within the corresponding
findings in the report. If requested, we can provide additional information on the
methodology used to calculate the monetary results separate from the audit report.
7. FNS does not agree with the flowchart in Exhibit C comparing the allotment test that
FNS currently uses described in FNS Handbook 310 versus the Federal regulations.
OIG Comment - We disagree with FNS’ contention that the allotment test described in
FNS Handbook 310 complies with the Federal regulations. In our view, the flowchart in
Exhibit C illustrates a clear and distinct difference between the processes described in the
FNS Handbook 310 and the Federal regulations.
We are available to meet with you and your staff at your convenience to further discuss these
matters. As was previously noted, we cannot provide the specific names and titles in the report
due to privacy issues, but are willing to share this information with you separately.
We appreciate the courtesies and cooperation extended to us by members of your staff during our
audit fieldwork and subsequent discussions. This report contains publically available
information and will be posted in its entirety on our website (http://www.usda.gov/oig) in the
near future.

Table of Contents
Background and Objectives ................................................................................... 1
Section 1: SNAP QC Process ................................................................................ 4
Finding 1: States Weakened the Integrity of the QC Process to Lower Error
Rates ......................................................................................................................... 4
Recommendation 1 ......................................................................................11
Recommendation 2 ......................................................................................12
Recommendation 3 ......................................................................................12
Recommendation 4 ......................................................................................13
Recommendation 5 ......................................................................................13
Recommendation 6 ......................................................................................14
Recommendation 7 ......................................................................................15
Finding 2: QC Reviews Did Not Determine Payment Errors in Accordance
with SNAP Regulations ........................................................................................ 16
Recommendation 8 ......................................................................................22
Recommendation 9 ......................................................................................22
Recommendation 10 ....................................................................................23
Recommendation 11 ....................................................................................24
Recommendation 12 ....................................................................................24
Recommendation 13 ....................................................................................25
Finding 3: FNS’ Review of States’ QC Results Inadequate.............................. 27
Recommendation 14 ....................................................................................33
Recommendation 15 ....................................................................................34
Section 2: Payment Accuracy ............................................................................. 35
Finding 4: SNAP Households’ Eligibility Questionable Under BBCE ............ 35
Recommendation 16 ....................................................................................40
Recommendation 17 ....................................................................................41
Finding 5: Inaccurate Conversion Factors Used to Determine SNAP
Recipients’ Monthly Income ................................................................................ 42
Recommendation 18 ....................................................................................43
Recommendation 19 ....................................................................................45

Scope and Methodology ........................................................................................ 46
Abbreviations ........................................................................................................ 48
Exhibit A: Summary of Monetary Results ......................................................... 49
Exhibit B: Audit Sites Visited ............................................................................. 50
Exhibit C: FNS Allotment Test Flowchart ........................................................ 52
Exhibit D: Sampling Methodology ..................................................................... 53
Agency's Response ................................................................................................ 55

Background and Objectives 
Background
The Supplemental Nutrition Assistance Program (SNAP), formerly known as the Food Stamp
Program, was authorized initially by the Food Stamp Act of 1964.1 SNAP was designed to
increase the food purchasing power of eligible, low-income households and help them afford a
more nutritious diet. It was reauthorized by the Agricultural Act of 2014 2 and is the nation’s
largest food and nutrition assistance program. Since fiscal year (FY) 2010, SNAP has served on
average more than 45 million people per month and paid out more than $71 billion annually in
benefits.
SNAP is jointly administered by the Food and Nutrition Service (FNS) and State agencies. FNS
is responsible for establishing regulations governing SNAP and ensuring that States implement
them when administering the program. States are responsible for determining whether the
recipient’s household meets the program’s eligibility requirements, calculating monthly benefits
for qualified households, and issuing benefits. FNS and State agencies conduct independent
quality control (QC) reviews to measure the accuracy of the States’ eligibility and benefit
determinations.
FNS and State QC reviews are performed to determine SNAP recipient eligibility for benefits at
a given point in time and, if determined to be eligible, whether or not the recipient received the
correct benefit amount. The reviews consist of an examination of recipients’ households’ nonfinancial and financial circumstances (e.g., household size, income, deductions, etc.), and they
are conducted in accordance with standards established by the Food and Nutrition Act of 2008
and Federal regulations (taking into account any FNS-approved waivers or State options to
deviate from specific provisions). QC reviews must also follow the FNS procedures outlined in
the Quality Control Review Handbook (FNS Handbook 310) and FNS policy memoranda. These
procedures include specific guidelines on how to review the QC cases, analyze the information,
determine the error amounts, and report the findings.
Every year, States conduct QC reviews for a random sample of participating SNAP households
and report all findings to FNS. FNS subsequently performs QC reviews for a sub-sample of the
States’ reviews to verify the States’ findings. The results of both reviews (State and FNS) are
combined to calculate the States’ error rates. The national SNAP error rate is then determined by
calculating the weighted average of all the States’ error rates.
The SNAP error rate is an important measurement used for two primary purposes. First, it is the
basis for awarding State bonuses for high payment accuracy and assessing State penalties for
poor performance.3 Since 2004, FNS has awarded States over $220 million in bonuses and
assessed almost $27 million in penalties. Second, it serves as the improper payment rate for
1

Pub. L. No. 88-525, 78 Stat. 703. In 2008, the Food Stamp Act was renamed the Food and Nutrition Act of 2008.
See Pub. L. No. 110-246, § 4001, 122 Stat. 1651, 1853.
2
Agricultural Act of 2014, Pub. L. No. 113-79, 128 Stat. 649 (2014 Farm Bill).
3
Bonuses are awarded annually to States with the most improved error rates and the lowest error rates.
AUDIT REPORT 27601-0002-41

1

SNAP. The Improper Payments Elimination and Recovery Act of 2010,4 as well as Office of
Management and Budget guidance,5 requires that high-risk Federal programs identify and
measure improper payments, and develop annual reduction goals. Federal agencies use the
improper payment rate for each program to identify the root causes of payment errors and
implement corrective actions to better detect and prevent improper payments in subsequent years
without compromising program access for beneficiaries and recipients entitled to payment.
Given the magnitude of SNAP, efficient and effective program administration is essential. In
FY 2013, SNAP had the highest participation level (an average of 47.6 million participants per
month) and the lowest SNAP error rate in the history of the program.6 FNS reported a national
payment error rate of 3.2 percent, which represented more than $2.4 billion in improper
payments.7 FNS said,
[T]he 3.2 percent was the seventh year in a row that the SNAP error rate had been lower
than the previous year, and the tenth year in a row that it was been below the 6 percent
rate established in the Food and Nutrition Act of 2008 as the standard for State payment
error rates. Over 99 percent of those receiving SNAP benefits were eligible, and payment
accuracy was 96.8 percent, a historic high.8
FNS policies and QC procedures contributed to the trend of lower SNAP error rates during times
of higher program participation. For example, in 2012, FNS raised its QC error tolerance
threshold from $25 to $50 due, in part, to perceived benefits from a prior temporary increase
Congress made pursuant to the American Recovery and Reinvestment Act of 2009,9 so only
errors that exceeded $50 were included in the SNAP error rate.10 FNS also implemented other
policies to simplify program administration, which helped reduce the SNAP error rate. For
example, there are several options available to States, such as simplified reporting, which allows
for longer reporting periods, and Broad-Based Categorical Eligibility (BBCE), which eliminates
the limitation on assets. Both policies reduce the potential number of errors.11 GAO noted,

4

Improper Payments Elimination and Recovery Act of 2010, Pub. L. No. 111-204, 124 Stat. 2224.
OMB, Increasing Efforts to Recapture Improper Payments by Intensifying and Expanding Payment Recapture
Audits, Memorandum M-11-04 (November 16, 2010).
6
In FY 2014, SNAP participation fell to 46.5 million participants. At the time of our report, the national error rate
was not available for FY 2014.
7
The SNAP payment error rate represents overpayments and underpayments to program recipients.
8
SNAP Quality Control, http://www.fns.usda.gov/snap/quality-control, (last visited 2/24/2015)
9
In 2009, Congress had temporarily increased the error tolerance threshold from $25 to $50 through
September 30, 2009. Pub. L. No. 111-5, § 101(b)(5), 123 Stat. 115, 120. The threshold automatically returned to
$25 on October 1, 2009. Effective January 3, 2012, FNS administratively raised the threshold to $50 again. See
76 Fed. Reg. 67,315, 67,317 (Nov. 1, 2011) (direct final rule) (codified at 7 C.F.R. § 275.12(f)(2) (2013)).
10
In 2014, Congress statutorily established the error tolerance threshold, set a base threshold of $37, and then
allowed for the threshold to be adjusted each year by tying it to the thrifty food plan. See Agricultural Act of 2014,
Pub. L. No. 113-79, § 4019, 128 Stat. 649, 798 (codified at 7 U.S.C. § 2025(c)(1)(A)(ii)). In 2015, FNS increased it
to $38 to account for inflation.
11
Simplified reporting reduces the potential for errors by minimizing the number of income changes that SNAP
recipients must report between certifications. This reduces the potential for errors associated with caseworker
inaction and SNAP recipients not reporting changes. BBCE reduces the potential for errors by eliminating the need
for State eligibility workers to verify SNAP applicants’ assets.
5

2

AUDIT REPORT 27601-0002-41

however, that other aspects of the program, such as recipient-caused errors that historically
accounted for one-third of all errors, remained difficult to prevent.12

Objectives
OIG’s objectives were to determine whether FNS and the State agencies responsible for
administering SNAP have adequate controls in place to ensure that SNAP error rates were
accurately determined, the appropriate actions were taken to reduce the error rates, and State
officials corrected any identified errors in a timely manner.

12

GAO-05-245, States Have Made Progress Reducing Payment Errors, and Further Challenges Remain,
May 2005.
AUDIT REPORT 27601-0002-41

3

Section 1:  SNAP QC Process 
Finding 1: States Weakened the Integrity of the QC Process to Lower Error
Rates
In all eight States we visited, we found that private consultants and/or State error review
committees used methods to mitigate case errors found during the QC review process rather than
report those cases to FNS as errors. FNS had not identified these conditions because it
conducted limited reviews of the States’ QC processes. In the past 10 years, FNS had conducted
full reviews of the QC process at only 3 of the 8 States in our audit.13,14 Overall, the QC
processes used by the States in our audit led us to question the reported error rates, which FNS
used to calculate the national error rate.
FNS requires that the State QC system treat all reviewed cases consistently and “eliminate bias”
that can be introduced through various sources, including “lack of objectivity on the part of the
reviewer, inconsistent application of policy, and inappropriate involvement by error review
committees in the review process.”15 If this is not done, “the resulting [error rate] will not be
valid and will have little use in planning corrective actions.”16
Federal statute states that FNS shall “carry out a system that enhances payment accuracy and
improves administration . . . .”17 In order to comply with this requirement, FNS established a QC
system for measuring payment accuracy to help the States improve administration when planning
corrective actions. This QC system is comprised of two separate reviews. Each State performs
the initial review of SNAP throughout the year by drawing a random statistical sample. These
SNAP cases are reviewed to determine if the recipient’s benefit allotment is correct, according to
SNAP policy. After these cases are completed, FNS takes a random subsample of them and
performs its own review, which is intended to validate and strengthen the results of the States’
QC reviews. This process of having the States and FNS review the cases is known as the “twotiered” review.
We found that the States weakened the integrity of the QC process through a number of factors.
The most significant factor was the States’ use of third-party consultants and error review
committees to examine error cases identified by the QC staffs. We also concluded that another
factor, the inherent conflict of interest in allowing States to perform QC reviews of State

13

At one of the States in our audit, FNS found issues similar to ours; however, it did not follow up to ensure that the
State took corrective action.
14
FNS also had conducted limited reviews of States’ QC processes; however, we did not include these reviews since
their scope was too narrow to identify the deficiencies discussed in this finding. For example, the more limited
reviews would generally focus only on the States’ case completion rate or sampling process.
15
FNS Handbook 310, Part 154 – Avoiding Bias.
16
A bias introduced during data collection leads to invalid statistical results. More specifically, data collection bias
leads to non-sampling error, which is error not related to the sample size and sampling method. Non-sampling and
sampling errors should be minimized as much as possible to provide valid statistical results. Any time sampling or
non-sampling errors, or both, are introduced, the sample results are biased. Dan M. Guy et al., Audit Sampling: An
Introduction 9-10, 33 (5th ed. 2002).
17
7 U.S.C. § 2025(c)(1)(A).

4

AUDIT REPORT 27601-0002-41

operations, contributed to the lower error rates. In our view, any errors identified by the States
would adversely affect them by either increasing the chances for penalties or reducing the
chances for bonuses. The following sections provide details regarding our findings and
conclusions:
Outside Consultants Used to Eliminate Identified Errors
FNS encourages States to take corrective actions on the root causes of errors that are
identified, but the outside consultants hired by the States did not focus on the root causes
of errors (i.e., mistakes made by State eligibility workers or recipients). Instead, the
consultants trained the States’ QC staff in techniques that took advantage of the
subjectivity inherent in the QC review process. While FNS has guidance regarding the
States’ responsibility in avoiding bias in their QC process, it does not have guidance on
the appropriate use of outside consultants.
We reviewed contracts describing the outside consultants’ work for some of the States we
reviewed, as well as reports the consultants issued to the States detailing
recommendations for changes to the QC process that would result in lower error rates.
The consultants’ reports focused mostly on the QC workers and how they could mitigate
errors, rather than on process improvements on the part of the eligibility workers whose
work quality is the basis for the accuracy of the SNAP recipient’s benefit amount. The
consultants did not attempt to reduce SNAP payment errors by analyzing and addressing
root causes of errors (i.e., mistakes made by State eligibility workers or recipients).
Instead, the consultants focused on reducing State error rates by training QC staff that
their function was to determine that sampled cases were “correct” by mitigating the errors
found in the cases to reduce or eliminate the originally identified error.
In 2 States, we identified 23 instances (of 103 cases reviewed) where QC reviewers
attempted to mitigate the errors they identified in the cases as recommended by the
consultants. One common step QC reviewers took was to search for information that was
not originally provided to the eligibility worker at the time of certification. The goal was
to find an error that would offset the result of the identified error. This action is contrary
to FNS policy, which states that QC reviewers cannot seek out information to offset
identified errors by using information that was not reported at certification.18 In one
instance, the QC reviewer identified an over issuance of benefits due to a higher verified
net income than the amount reported to the eligibility worker at certification. In order to
reduce this error, the QC reviewer worked with the recipient to identify prescription costs
that were not originally reported to the eligibility worker. In another instance, the
QC reviewer also looked for ways to adjust income to create a new error amount to offset
the original error by adding household expenses that were not originally reported to the
eligibility worker. In the notes obtained by OIG, State staff wrote that the QC reviewer

18

USDA FNS Policy Memorandum QC-09-01, Consideration of Deductions Not Received at Certification
(November 5, 2008).
AUDIT REPORT 27601-0002-41

5

“tried to eliminate the error by using [additional expenses] that [were] not reported.”19
By taking the additional steps recommended by the consultants, QC reviewers were able
to mitigate the errors in 13 of the 23 cases. Due to the QC reviewers’ actions, one of the
States was able to reduce its reported error rate from 3.86 percent to 3.45 percent. We
were unable to determine the impact on the other State’s error rate because the
QC reviewers did not document the full extent of their mitigation efforts.
The consultant used in five of the States we reviewed recommended in her report to one
State, “To promote and ultimately obtain a successful transition to a new review culture
with a goal of arriving at a correct case disposition, QC reviewers should be commended
for each review finding that confirms a correct case.” A major principle taught by the
outside consultant is that QC reviewers should take a “proactive approach [to] not [be]
satisfied that an error exists on a case until every opportunity to arrive at a correct case
disposition has been explored.” In order to accomplish this approach, State QC reviewers
apply extra levels of scrutiny to cases in which they identify an error that they would not
apply to cases initially identified as not having an error.
If an error is initially identified, the QC reviewers and their supervisors attempt to
mitigate the error through multiple varied methods suggested by the outside consultants.
The simplest method is described as income averaging. Income averaging is done by
requesting more pay checks than normal with the hope that the additional pay checks will
shift the average income over that extended time period in the direction that eliminates or
reduces the originally identified error. For example, in one error case, the consultant
recommended that the State is “not restricted to the . . . checks that the [eligibility
worker] used. . . . [W]e could look at the [previous two months’ checks] and see if we
have enough fluctuation to bring the income down some.” After employing this method,
the QC reviewer was able to reduce the error on the case from $91 to $74. While
applying extra scrutiny to a case to ensure the determination made by the QC reviewer is
correct is encouraged by FNS, applying extra scrutiny to an error case with the goal of
finding a way to finalize the case without an error biases the sample results. A bias
introduced during data collection leads to invalid statistical results.
Consultants taught many other methods designed to validate the correctness of a case.
The use of these methods is prohibited when used on specific cases with the sole
intention of reducing or eliminating errors, as described in the previous paragraph. FNS
guidance also requires that the same policy must be applied to all cases consistently
within the State, and not on an individual basis, to ensure every recipient is treated the
same.20 Such individualized treatment of error cases creates QC reviewer bias and
invalidates the goal of statistically sampling SNAP cases to objectively represent the
SNAP universe as a whole.

19

Only two of the eight States in our audit provided notes on the methods its QC reviewers used that the consultants
had recommended. For those two States, the notes were not always consistent in documenting the full extent of the
mitigation efforts.
20
FNS Handbook 310, Part 154 – Avoiding Bias.

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AUDIT REPORT 27601-0002-41

QC staff in three of the States we reviewed expressed opposition to the practices
employed by the outside consultants and felt that some of the practices taught by the
consultants were contrary to their understanding of a QC’s purpose. Officials in one
State openly disagreed with the outside consultant’s recommendations for error
mitigation, since they felt that the practice would be unallowable by FNS. A QC
supervisor in another State expressed concern that the outside consultants inappropriately
biased the QC review process.
We noted that those States that hired outside consultants tended to see an immediate and
significant drop in reported error rates. The error rates for 7 of the 8 States in our audit
dropped an average of 55 percent from the year before compared to the year after they
hired a consultant.21 This drop in the error rate represents over $413.5 million in
improper payments22 (see Table 1 below).23,24
Table 1 – Percentage Change in Selected States’ Error Rates after Hiring Outside Consultants

State

CT

NE

FL

WI

TX

MD

VT

Fiscal Year Consultant Was
Hired

2004

2005

2007

2009

2010

2012

2014

Error Rate Prior to Consultant

8.77

5.60

8.59

7.38

6.90

6.06

9.66

Error Rate After Consultant

4.94

4.45

4.15

1.11

2.13

3.40

2.5825

Change in Reported Error Rate

3.83

1.15

4.44

6.27

4.77

2.66

7.08

Percentage Decrease in Error
Rate

44%

21%

52%

85%

69%

44%

73%

QC review officials in two of the States in our audit stated that they needed to hire an
outside consultant as a way to keep up with other States already using outside consultants
to reduce error rates. The SNAP Director at one of these States told us, “the bias in the
QC process was an inevitable consequence of States competing against each other for
21

We did not include the State of California in this calculation because it did not hire an outside consultant, although
some of its counties hired one. Comparing the partial effect of the consultant on the State’s error rate to the effect
the consultant had on the seven other States in our sample would not be a direct comparison.
22
We calculated the over $413.5 million by multiplying the change in the reported error rate by the total benefits
paid in each State in the year it hired the consultant. Data for Vermont’s benefit issuance in 2014 have yet to be
released, so the previous year’s benefit issuance was used in the calculation. The specific amounts for each State
were as follows: Connecticut ($7,565,413), Florida ($62,166,831), Maryland ($29,375,381),
Nebraska ($1,374,519), Texas ($259,840,857), Vermont ($10,623,835), and Wisconsin ($42,634,189).
23
The year to year change in the error rate averages 52 percent for the seven States when adjusted for changes in the
national error rate.
24
Although other factors may have contributed to the drop in the States’ error rates, actions taken based on
recommendations of the outside consultants have an immediate and significant impact on the States’ error rates.
Given that the significant drop in the States’ error rates did not generally occur until after they hired a consultant, we
attributed the change in the error rates primarily to the consultant.
25
This is not an official error rate. This error rate is comprised of State reported data that are subject to further
review and revision by FNS. The official error rates have yet to be released by FNS for FY 2014.
AUDIT REPORT 27601-0002-41

7

bonus money.”26 We determined four of the seven States presented above received
bonuses totaling over $15 million shortly after hiring an outside consultant, due to the
significant reduction in error rates.27 Each State we reviewed ultimately hired an outside
consultant.28
Error Review Committees Inappropriately Used to Eliminate Identified Errors
We found that seven of the eight States in our audit used error review committees, or a
similar process, to review individual error cases in order to reduce or eliminate the errors
identified by the QC reviewers before finalizing the results and transmitting them to
FNS.29 FNS Handbook 310 states that the role of an error review committee is “primarily
one of reviewing cases to assess for future corrective action planning, not to review
individual error cases to assess the potential for reducing or eliminating errors in a
sampled individual case.”30 We determined the outside consultants promoted the use of
error review committees in this manner to mitigate individual active error cases prior to
submitting them to FNS. The website of one of the consultants presented a description of
its services that conflicted with FNS’ guidance regarding the use of error review
committees. The website stated the “consulting team will staff potential error cases with
your QC review staff . . . . The goal is to attempt to mitigate all potential errors and
immediately and rapidly reduce your State’s error rate.”
In its report to one of the States we reviewed, the outside consultant provided its view on
the benefits of using error review committees to review and eliminate individual error
cases. The report stated,
This important step should occur early in the error identification process, before it
is even finalized, with the stated purpose of arriving at a correct case disposition
which could mean overturning the error, reducing it by identifying offsetting
variances, or recommending that the review be dropped if the FNS Handbook 310
allows for a drop disposition.
This practice is contrary to FNS’ policy regarding error review committees in that they
should be used “to assess for future corrective action planning, not to review individual
error cases to assess the potential for reducing or eliminating errors in a sampled
individual case.”31
In a contract with one State, the consultant stated its first task was to review potential
QC error cases, thereby addressing the usefulness of error review committees.
26

Bonus funds are awarded annually to States for most improved error rate and lowest error rate.
The four States received the following bonus amounts: Florida ($5,481,910), Maryland ($1,674,189),
Texas ($6,243,012), and Wisconsin ($1,894,828).
28
As was previously noted, although the State of California did not hire an outside consultant, some of its counties
hired one.
29
The State of California QC review staff told us that error review committees were used to analyze cases only after
QC results were finalized.
30
FNS Handbook 310, Part 154 – Avoiding Bias.
31
Id.
27

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AUDIT REPORT 27601-0002-41

Specifically, “the [consultant] will review the cases for an alternate disposition to the
error citation. This team approach enhances our ability to mitigate errors.” The
consultant stated that it also would participate in teleconferences with the State as part of
the State’s error review committee “to discuss current potential error citations with the
objective of identifying opportunities to reduce the dollar amount of the error or to arrive
at a correct case disposition.” These statements all conflict with FNS guidance.
We were provided documentation by State officials from two of the States in our audit
that described the mitigation work performed by error review committees on active error
cases and the results of these mitigation activities on reported errors. One of the States
submitted 53 active error cases to its error review committee in FY 2012 and was able to
mitigate the errors on 16 of them. Due to the actions taken by the error review
committee, the State was able to reduce its reported error rate from 3.45 percent to
2.91 percent. Similarly, the other State submitted 40 active error cases to its error review
committee in FY 2011 and was able to mitigate the errors on 10 of them. Due to the
actions taken by the error review committee, the State was able to reduce its reported
error rate from 2.23 percent to 1.89 percent.
The documentation for one case in one of the States indicated the QC reviewer identified
an over issuance of $164. The case was submitted to the error review committee to
investigate opportunities for reducing or eliminating the error amount. The outside
consultant, participating as a member of the error review committee, reviewed the case
and recommended that the State find an offsetting error by averaging child support
income over a longer period of time than it normally would and “hav[e] a discussion with
the [recipient] regarding the possibility of some expenses related to child-care” that were
not reported to the eligibility worker. After acting on the consultant’s recommendations,
the State was able to adjust its error determination on the case and reduce the reported
error amount to $84, an $80 reduction. As was previously discussed, the method
recommended by the consultant was contrary to FNS policy.
In October 2013, one of FNS’ regional offices issued a letter to its States reiterating the
importance of integrity in the QC review process. The letter noted that the
appropriateness of some error review committees’ activities was questioned and
reiterated that the error review committee’s role is not to review individual error cases to
assess the potential for reducing or eliminating errors reported to FNS. It further stated,
“error review committees should incorporate and maintain procedures that minimize the
likelihood of unacceptable bias being introduced in the QC review process.” The memo
also noted, “if a State agency’s error rate becomes questionable due to the introduction of
unacceptable bias, FNS has the authority to assign an error rate to a State agency.” One
of the States we reviewed received the letter, but was still inappropriately using its error
review committee to lower its error rates.
Conflict of Interest in the QC Process
FNS’ QC system is vulnerable to State abuse due to a conflict of interest between either
accurately reporting the true error rate and incurring a penalty, or finding ways to
AUDIT REPORT 27601-0002-41

9

mitigate errors and receiving a bonus from FNS for exceeding error rate standards. In our
view, this conflict of interest contributed to the States’ decisions to use private
consultants and error review committees to focus on mitigating individual errors
identified by the QC review process, rather than methodologies that would improve the
overall eligibility determination process.
In 1987, the National Academy Panel (Panel) performed a study that highlighted this
inherent conflict of interest.32 The Panel described the system of having States perform
QC reviews as “an inherent tension created by having State employees (QC reviewers)
represent a Federal government interest that is potentially adverse to the State agency’s
interest.” The Panel’s report recommended that FNS discontinue the use of State
agencies in performing QC reviews and instead switch to a “one-tiered” review system
where only FNS reviewed SNAP cases for QC purposes. The Panel’s report also stated
that switching to a “one-tiered” system would “properly maintain accountability to those
respective interests” between FNS and the State agencies. While the Panel’s report is
almost 30 years old, it is our conclusion, based on our audit findings, that it is as relevant
today as it was in 1987. Thus, in our view, FNS needs to discontinue the “two-tiered”
system and implement a “one-tiered” system where FNS or an unaffiliated third party
reviews cases for errors.
We discussed these issues with FNS national officials on January 26, 2015. FNS officials agreed
that it was important to protect the integrity of the QC system and stated it had plans to review
the States’ QC processes this year. FNS officials also stated it issued a memorandum reiterating
its policy for ensuring the integrity of the QC process. The policy memorandum specifically
addressed States’ use of error review committees, but was issued nearly 10 years ago.33
To restore the integrity of the QC process and the validity of its reported error rates, FNS needs
to analyze the costs and benefits of changing the QC process from a two-tier process (that relies
on the States to make error determinations) to a one-tier process (where only FNS or an
unaffiliated contracted third party reviews cases for errors). In light of this report’s findings, if
determined cost beneficial, FNS needs to establish a timeline for implementing the change.
In the interim, FNS needs to enforce its policy of prohibiting States from using error review
committees to reduce or eliminate errors. It also needs to issue guidance to States on the
appropriate use of private consultants during the QC process, specifically excluding the use of
these consultants to inappropriately advise States’ QC staff, to bias sample results, and to review
selected active QC error cases to assess the potential for reducing or eliminating errors. FNS
also needs to issue guidance to States that prohibits mitigating QC errors by inconsistently and
incorrectly applying policy. Specifically, the guidance should promote consistency and prohibit
(1) using different income averaging periods to manipulate income, (2) creating off-setting
deductions, and (3) applying other techniques specifically designed to inappropriately reduce
and/or eliminate QC errors.
32

National Research Council, Rethinking Quality Control: A New System for the Food Stamp Program 130-31
(Dennis P. Affholter & Fredrica D. Kramer eds., 1987).
33
USDA FNS Policy Memorandum QC-05-01, Integrity of the Quality Control Review Process (August 1, 2005).

10

AUDIT REPORT 27601-0002-41

FNS also needs to evaluate the QC process administered at those States whose error rates
significantly dropped after using error review committees and/or private consultants to ensure
that the QC reviews were performed in compliance with FNS’ QC review requirements. FNS
does have management evaluation reviews that evaluate States’ QC process, but these reviews
have been both infrequent and ineffective in identifying and resolving the issues described in this
finding. At a minimum, the reviews should determine whether States are treating sampled cases
consistently during the QC process and not using error review committees and private
consultants to mitigate errors on active QC cases. In addition, FNS needs to evaluate the QC
process administered by all States, on a periodic basis, to ensure they comply with FNS’ QC
review requirements and that reviewer bias is absent from the QC process.

Recommendation 1
Perform an analysis of the cost/benefit of changing the quality control (QC) process from a twotier process that relies on the States to make error determinations to a one-tier process where only
FNS or an unaffiliated contracted third party reviews cases for errors. If determined cost
beneficial, establish a timeline for implementing the change.

Agency Response
In its August 31, 2015, response FNS stated:
FNS concurs with this recommendation. However, the audit refers to the 1987 National
Academy Panel study that recommended FNS adopt a one-tier QC system. The audit did
not recognize that FNS commissioned an evaluation study done by the Urban Institute
following the 1987 recommendation. That report found: 1) there was no strong evidence
that the error rates would be any different under a one-tier QC system, 2) there was little
evidence that there is a difference in the quality of the reviews between the one-tier and
two-tier system, and 3) under comparison of equal sample size, a Federal one-tier system
would cost the Federal government 16% more than the two-tiered system. After
receiving the results of that study, no change was made by the Agency to institute a onetier system. Nevertheless, we will pursue a reexamination of a one-tier QC alternative to
the current two-tier system.
FNS provided an estimated completion date of September 30, 2016, for this action.

OIG Position
We accept FNS’ management decision on this recommendation. Regarding the study conducted
by the Urban Institute, it was completed in 1989, prior to the States’ use of outside consultants.
It would not have considered the impact of States’ use of outside consultants and error review
committees on the QC process discussed in this report.

AUDIT REPORT 27601-0002-41

11

Recommendation 2
Enforce FNS’ policy prohibiting States from using error review committees to review selected
active error cases to assess the potential for reducing or eliminating errors.

Agency Response
In its August 31, 2015, response FNS stated:
FNS concurs with this recommendation. As stated in the report, current FNS guidance
addresses the use of error review committees and provides guidelines for the use of error
review committees to prevent bias. FNS had already implemented a review process to
evaluate the processes used by States to avoid bias and maintain the integrity of the
Quality Control system. FNS advised OIG of this process in our discussion on
January 26, 2015; however, it was not noted in the draft report. FNS conducted its first
review in Virginia in April 2015 and its second review in Vermont in July 2015.
Additional reviews are planned for the next year. Upon completion of the reviews, FNS
will take appropriate action to enforce FNS policy if it is determined that a State is using
an error review committee to reduce or eliminate potential errors.
FNS provided an estimated completion date of September 30, 2015, for this action.

OIG Position
We accept FNS’ management decision on this recommendation. FNS did inform OIG on
January 26, 2015, of its plans to review States’ QC processes this year, which we noted in the
final report.

Recommendation 3
Issue guidance to States on the appropriate use of private consultants during the QC process.
The guidance should prohibit States from using private consultants to advise States’ QC staff to
review selected QC error cases that are still active in order to assess the potential for reducing or
eliminating errors.

Agency Response
In its August 31, 2015, response FNS stated:
FNS concurs with this recommendation on the condition that the guidance is specific to
State’s compliance with Federal regulations and policies. FNS has previously issued
guidance to States with the expectation that they prevent unacceptable bias from affecting
the results of Quality Control case reviews. We will reissue this guidance and provide
technical assistance as necessary. The fact that private consultants may be involved in
providing improper advice does not absolve the State of its responsibility in this area.

12

AUDIT REPORT 27601-0002-41

Therefore, our focus will remain on States implementing appropriate processes. In
addition, FNS is requesting clarification from OIG as its determination of the legal
authority the Federal government possesses to restrict State agencies from using private
consultants.
FNS provided an estimated completion date of September 30, 2015, for this action.

OIG Position
We accept FNS’ management decision on this recommendation. On July 21, 2015, we informed
FNS officials that we were not recommending that FNS restrict State agencies from using private
consultants. We recommended that FNS prohibit practices used by the private consultants that
did not comply with Federal regulations and policies.

Recommendation 4
Issue guidance to States that prohibits QC reviewers from inconsistently and incorrectly applying
policies in order to mitigate QC errors. The guidance should prohibit (1) using different income
averaging periods to manipulate income, (2) creating off-setting deductions, and (3) applying
other techniques specifically designed to inappropriately reduce and/or eliminate QC errors.

Agency Response
In its August 31, 2015, response FNS stated:
FNS concurs with this recommendation. FNS guidance and policies already provide
guidelines on income averaging and deductions discovered during the QC review, and
there is existing guidance on eliminating bias in the QC review process. We will revise
and reissue this guidance to include discussion of the practices that the auditors
encountered, and stipulate that mitigating errors is an inappropriate approach to doing the
QC work. The revisions will make clear that States must follow their standard averaging
rules and those rules are to be consistently applied to all cases. It will also stress the rules
for allowances of deductions and when a reviewer is allowed to apply deductions relative
to the actual circumstances of the case.
FNS provided an estimated completion date of September 30, 2015, for this action.

OIG Position
We accept FNS’ management decision on this recommendation.

Recommendation 5
Review the QC process administered at those States whose error rates significantly dropped after
using error review committees and/or private consultants to ensure that the QC reviews were
AUDIT REPORT 27601-0002-41

13

performed in compliance with FNS’ QC review requirements. At a minimum, the reviews
should determine whether States are treating sampled cases consistently during the QC process
and not mitigating errors on active QC cases.

Agency Response
In its August 31, 2015, response FNS stated:
FNS concurs with this recommendation. FNS already has an existing process to monitor
and review integrity of State QC systems. FNS uses a data driven approach to identify
states for review. FNS will continue to review QC processes in those States where the
data indicates warranted attention.
FNS provided an estimated completion date of September 30, 2015, for this action.

OIG Position
We accept FNS’ management decision on this recommendation.

Recommendation 6
Review the QC process administered at all States on a periodic basis to ensure compliance with
FNS’ QC review requirements and that reviewer bias is absent from the QC process.

Agency Response
In its August 31, 2015, response FNS stated:
FNS concurs with this recommendation. FNS already has QC management evaluation
review modules. We will enhance these modules to put a greater focus on QC integrity
using what we have learned through our reviews.
FNS provided an estimated completion date of September 30, 2016, for this action.34

OIG Position
We accept FNS’ management decision on this recommendation.

34

FNS subsequently changed its estimated completion date from December 31, 2016, to September 30, 2016.

14

AUDIT REPORT 27601-0002-41

Recommendation 7
If inappropriate QC review practices are found at the selected States reviewed pursuant to
Recommendations 5 and 6, correct the identified review deficiencies and adjust the States’ error
rates as appropriate.

Agency Response
In its August 31, 2015, response FNS stated:
FNS concurs with this recommendation. If determined that any State agency is using
unacceptable QC review practices, FNS will take action based on regulatory and statutory
authority.

OIG Position
We accept FNS’ management decision on this recommendation.

AUDIT REPORT 27601-0002-41

15

Finding 2: QC Reviews Did Not Determine Payment Errors in Accordance
with SNAP Regulations
QC reviewers did not correctly identify and calculate payment errors during their reviews of
selected SNAP cases. These mistakes occurred because the QC reviewers used FNS guidance
that was either inadequate or contrary to the Federal regulations. Specifically, FNS guidance did
not ensure QC reviewers used verified information, correctly determined error amounts, or
timely reported and acted upon QC information affecting SNAP recipient benefits. As a result,
errors were inappropriately excluded from the SNAP error rate and SNAP recipients’ future
benefits were not adjusted within required timeframes.
Federal regulations require that QC reviewers determine whether SNAP households are eligible
for benefits and, if eligible, whether the households are receiving the correct benefit amount.35
Specifically, QC reviewers must (1) use verified information to calculate the SNAP recipient’s
benefit amount, (2) not apply the error tolerance threshold (currently $38) when calculating the
SNAP recipient’s reportable error amount until all variances (including those permitted by SNAP
policy) have been properly identified and accounted for, and (3) report all information
determined to be incorrect during the QC review to the State agency for appropriate action.
Federal regulations also require SNAP recipients to report certain changes in their financial
circumstances depending on their designated reporting period and that State agencies act on
those changes within specified timeframes.
We found that FNS’ guidance did not ensure QC reviews met these requirements. A summary of
each issue is below.
FNS’ Guidance for Verifying Household Information Contrary to Federal Regulations
QC reviewers in the States we visited did not verify SNAP recipients’ household
information, as required. Rather, they relied on statements from the SNAP recipients,
made assumptions, or used unrelated information in lieu of obtaining the required
information for verification. SNAP regulations require QC reviews to “be based on an
examination and verification of all elements of eligibility” (e.g., income and
deductions).36 The SNAP regulations further define verification as “the use of
documentation or a contact with a third party to confirm the accuracy of statements or
information.”37 However, FNS Handbook 310, which QC reviewers are required to use
when conducting their QC reviews, provided guidance that did not comply with
regulatory requirements. Consequently, QC reviewers were not obtaining the support
they needed to verify the SNAP recipient’s information. QC staff, at all eight States in
our audit, stated that they were only required to follow the guidelines outlined in
FNS Handbook 310. Specific examples of what we found are provided below.

35

7 C.F.R. § 275.12(a).
Id.
37
7 C.F.R. § 273.2(f).
36

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AUDIT REPORT 27601-0002-41

·

FNS Handbook 310 did not comply with the regulatory verification requirements
because it did not require that QC reviewers obtain appropriate verification for some
elements and allowed QC reviewers to “accept the household’s statement” as
verification for other elements. For example, FNS Handbook 310 described
verifications that could be obtained for a SNAP recipient who stated he or she had no
self-employment income;38 however, it did not require that these verifications be
obtained. Consequently, QC reviewers accepted the SNAP recipient’s statement
without obtaining additional documentation or confirmation from a third party, as
required by the Federal regulations. Additionally, FNS Handbook 310 specifically
allowed QC reviewers to accept a SNAP recipient’s statement for other elements
(e.g., a recipient’s statement that they had no other earned income) as verification
without obtaining additional documentation such as bank statements or confirmation
from a third party, as required by the Federal regulations. In total, 24 of the 48 QC
elements (or 50 percent) could be self-declared by a SNAP household without
providing additional documentation or confirmation from a third party.39

·

FNS Handbook 310 also did not comply with the regulatory verification requirements
because it allowed QC reviewers to use a method referred to as “likely conclusion,”
in which a QC reviewer assumes that a SNAP household’s circumstances had not
changed since the information was last reported. For example, a QC review in our
sample was completed by using the justification of “likely conclusion” to verify most
of the elements (e.g., household composition, self-employment income, other earned
income, shelter expense, etc.)—even though no interview was conducted with the
SNAP recipient and no documentation or confirmation from a third party was
obtained, as required by the Federal regulations. The QC reviewer “likely concluded”
that the SNAP recipient’s information remained the same as originally reported
because they found “no evidence to the contrary," even though no verification was
obtained. In total, we found that 43 of the 48 QC elements (or nearly 90 percent)
could be based on the “likely conclusion” drawn by the QC reviewer.40

·

FNS Handbook 310 did not ensure that the regulatory verification requirements were
met. Although it outlined the minimum verification requirements for each element of
eligibility, it did not mandate that they be followed. For example, FNS Handbook
310 states, “participation in employment and training may be verified by contact with
the appropriate operating Employment and Training [E&T] offices or by reports from
the appropriate office” (emphasis added). However, we found QC reviewers did not

38

The FNS Handbook 310 explains,
If the household states that it received no earned income during the appropriate month, the reviewer shall
further investigate household circumstances to ensure that the household did not have any earned income . .
. . Information obtained while verifying other elements of eligibility, with individuals such as relatives,
school officials, landlord, etc., may show the participant is frequently absent from the home [which] may
be an indication of the participant's employment.
39
These elements include citizenship, job availability, acceptance of employment, and negative assertions for
elements such as self-employment income, other earned income, veterans’ benefits, workers’ compensation, etc.
40
The five elements where “likely conclusion” cannot be used are non-citizen status, Income Eligibility Verification
System checks for employment, Department of Motor Vehicles for vehicles, social security number, and work
requirements.
AUDIT REPORT 27601-0002-41

17

verify this element. Specifically, the reviewers did not verify SNAP recipients’
participation in E&T programs as suggested in the FNS Handbook 310, but, rather,
verified only that the SNAP recipients were coded correctly in the State systems (i.e.,
QC reviewers ensured mandatory E&T participants were coded as mandatory, exempt
participants were coded as exempt, etc.).
FNS’ Guidance for Identifying and Calculating Payment Errors Contrary to Federal
Regulations
The process QC reviewers used to determine reportable errors did not comply with
Federal regulations. We found that QC reviewers did not properly identify payment
errors as required in the cases they reviewed because FNS Handbook 310 directed the QC
reviewers to perform an inappropriate allotment test to identify and calculate errors for
inclusion in the SNAP error rate. Federal regulations require an error analysis that
includes all variances, except those specifically excluded.41 The QC reviewer must
determine whether changes in household circumstances were “reported by the participant
and handled by the agency” correctly.42 After the variances have been determined, QC
reviewers are required to apply FNS’ error tolerance threshold (currently $38) to the
amount, so only variances that exceed the threshold are used to calculate the SNAP error
rate.43 The allotment test prescribed by FNS Handbook 310, however, was contrary to
the regulations because it prematurely applied the error tolerance threshold, ending the
QC review before all variances (including those permitted by SNAP policy) had been
properly identified and accounted for by the QC reviewer.
As described below, the allotment test prescribed by FNS Handbook 310 consisted of two
comparisons referred to as Comparison I and Comparison II. See also Exhibit C for
flowcharts comparing the allotment test QC reviewers used to determine reportable errors
versus the process required by the Federal regulations.
·

FNS Handbook 310 requires QC reviewers to first complete Comparison I, which is a
calculation of the SNAP recipient’s allotment based on their current circumstances as
of the review date. This allotment is then compared with the SNAP recipient’s
authorized allotment (i.e., the SNAP benefit amount they are currently receiving).
The review is complete with no error cited if the amounts are the same or the
difference is less than or equal to the error tolerance threshold (currently $38). For
example, a QC reviewer would cite no error if the reviewer determined that a SNAP
recipient’s allotment should be $150 (based on their current circumstances as of the
review date) and the SNAP recipient’s authorized allotment was $115, because the
difference ($35) was less than the error tolerance threshold. Since the error tolerance
threshold was applied before QC determined whether participant changes (as
indicated by a variance) were reported and the State agency handled them correctly,

41

7 C.F.R. § 275.12(d)(1)-(2). Variances are differences in the SNAP recipient’s income, expenses, or other
elements found during the QC review. Those variances that are not required to be reported are excluded from the
error determination process.
42
7 C.F.R. § 275.12(a).
43
7 C.F.R. § 275.12(f)(2).

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AUDIT REPORT 27601-0002-41

the Comparison I process was not compliant with the regulations. Nationally, in
2012, the QC reviewers inappropriately stopped their review after completing
Comparison I because the variances fell below the error tolerance threshold for
12,146 of the 56,747 (or more than 20 percent) of the QC cases. We were unable to
determine the reportable error amounts for these cases because the QC reviewers did
not complete Comparison II. However, we found that when Comparison II was
appropriately performed, more than 16 percent of QC cases resulted in reportable
errors above the error tolerance threshold. The errors in these cases averaged $153.44
·

FNS Handbook 310 requires QC reviewers to complete Comparison II if Comparison
I results in a difference greater than the error tolerance threshold. Comparison II is a
calculation of the SNAP recipient’s allotment based on their current circumstances as
of the review date, excluding any differences that are allowed by policy. For
example, a SNAP recipient’s income may have changed since last certified, but that
difference would be excluded if the SNAP recipient was not required to report the
change. This calculated allotment is then compared with the SNAP recipient’s
authorized allotment, and the review is complete with no error cited if the difference
is less than or equal to the error tolerance threshold. However, if the difference is
greater than the error tolerance threshold, the QC reviewer must select the lesser error
from the two comparisons as the final reported error amount. For example, if a QC
reviewer determined that there was a difference in Comparison I of $45, the reviewer
would complete Comparison II. If the QC reviewer then determined there was a $65
difference in Comparison II, the reviewer would select the lesser amount ($45) as the
final reported error amount, since both differences were greater than the error
tolerance threshold. The Comparison II process was not compliant with the
regulations because it required the QC reviewer to select the lesser of the two error
amounts, which artificially lowered the error rate and is not allowed by FNS’
regulations. In FY 2012, QC reviewers selected the lesser of the two error amounts in
1,299 of the 56,747 (or more than 2 percent) QC cases nationwide. The QC
reviewers, by selecting the lesser of the two error amounts, understated SNAP’s
FY 2012 national error rate by at least 0.22 percent. That percentage equates to more
than $5.5 million in improper payments.45

When questioned about the allotment test, QC staff at seven of the States in our audit
stated that they were required to follow the guidelines outlined in FNS Handbook 310.
44

The amounts cited here are based on our analysis of the FY 2012 nationwide QC cases recorded in FNS’ Regional
Office Quality Control Tracking System (ROQCTS). We found that 12,801 of the QC cases used Comparison II
appropriately. These cases had a variance in Comparison I and Comparison II was performed and the results
recorded. Of these cases, 2,076 (or more than 16 percent) had errors above the error tolerance threshold. The errors
in these cases averaged $153.
45
The minimum additional error amount for these cases totaled at least $1,299 since the Comparison II amount
would have been at least $1 greater in each case. Using the State reported amounts, we utilized FNS’ methodology
to determine the impact on the error rate. Considering that the error amount in each case was understated by at least
$1, the weighted average of each State’s additional error amount was about 0.01 percent, which equated to an
understated error rate of 0.22 percent [0.01 percent rounded divided by the FY 2012 error rate of 3.42 percent plus
0.01 for the additional error amount]. Using this information, we calculated the amount of improper payments to be
$5,568,534 (0.01 percent rounded multiplied by the $74,619,344,626 in SNAP benefits for FY 2012).
AUDIT REPORT 27601-0002-41

19

However, for the process to be compliant with the Federal regulations, QC reviewers
should have performed Comparison II any time a change in household circumstances was
found in Comparison I, regardless of the error tolerance threshold. The QC reviewer
should then have ensured that the difference was reported by the recipient and handled by
the State agency correctly by completing Comparison II. FNS’ error tolerance threshold
should only be applied after this error determination process is complete.
FNS’ Guidance on Identifying Recipient Reporting Errors Inadequate
QC reviewers had not properly identified SNAP recipient reporting errors, as required by
the Federal regulations. This lack of identification occurred because FNS Handbook 310
directed the reviewers to apply an “exclusionary timeframe” that was longer than the
regulatory reporting requirements. The SNAP regulations require SNAP recipients to
report certain changes (e.g., when their income exceeds the income limitation) within
specific timeframes established by their State’s reporting system.46 The regulations also
require State agencies to act on the reported information within specific timeframes.47
Guidelines in FNS Handbook 310 were contrary to the Federal regulations because the
“exclusionary timeframe” did not differentiate between the SNAP recipient’s required
timeframe to report and the State’s required timeframe to act. QC reviewers only
identified SNAP recipient reporting errors and included them in the error determination if
they occurred after the two timeframes were combined. During our review of sampled
QC cases, we found five cases that included changes SNAP recipients were required to
report.48 In each case, the QC reviewers applied FNS’ “exclusionary timeframe” and
never separately assessed whether the SNAP recipients met their reporting requirements.
For example, a SNAP recipient in our sampled QC cases exceeded the gross income
limitation (130 percent of the FPL) in June, and was required to report the change
between June 21st and July 10th under the simplified reporting rules.49 However, the
QC reviewer did not determine whether the SNAP recipient met this requirement.
Rather, the QC reviewer excluded the change from the August review because the time
period since the change occurred (2 months) was within FNS’ “exclusionary timeframe”
that included the State’s time period to take action. Had the QC reviewer assessed the
SNAP recipients’ reporting requirements, they still would have applied the longer
timeframe prescribed by FNS Handbook 310 that did not comply with the Federal
regulations, which could extend up to 4 months for simplified reporting households.
When questioned about it, QC staff at seven of the States in our audit stated they
followed the guidelines outlined in FNS Handbook 310. We were unable to quantify this
46

7 C.F.R. § 273.12(a).
7 C.F.R. § 273.12(c).
48
SNAP recipients are required to report certain information outside of their reporting periods based on the
reporting rules. SNAP recipients subject to simplified reporting rules must report when their gross monthly income
exceeds 130 percent of the Federal Poverty Level (FPL) (as long as they did not exceed the limitation at
certification). SNAP recipients subject to change reporting rules must report changes in income under specific
guidelines.
49
The required reporting date is dependent on the exact date of the change, which was not included in the QC case
file.
47

20

AUDIT REPORT 27601-0002-41

condition’s impact on the error rate because the QC reviews did not document whether
the SNAP recipient reporting requirements were met.
FNS’ Guidance for Acting on QC Information Inadequate
We found that QC reviewers did not always report information identified during their
reviews of SNAP cases as required by the Federal regulations because FNS Handbook
310 did not provide guidance to do so. When QC reviewers did report information,
States did not have a formal system to ensure SNAP recipients’ benefits were adjusted
accordingly within the required timeframes. The SNAP regulations require that all
information verified as incorrect during a QC review of an active case “be reported to the
State agency for appropriate action on an individual case basis[, which] includes
information on all variances in elements of eligibility and basis of issuance in both error
and nonerror cases.”50
In two of the States in our audit, QC reviewers did not always communicate to eligibility
workers the changes they identified in the SNAP household’s circumstances, such as
income, household members, etc. In the remaining six States in our audit, QC reviewers
made notes of changes they identified in the SNAP household’s circumstances in the QC
files; however, subsequent action was at the eligibility workers’ discretion and it was not
monitored. For example, our sampled QC cases included a SNAP recipient who had no
income at the time of certification, but was receiving employment income as of the
review date. This increase in income was not required to be reported under the simplified
reporting rules and, consequently, did not result in a QC error. Nevertheless, QC was
still required to report the change in the SNAP recipient’s income to the eligibility worker
and the State was required to act on the change within 1 to 2 months.51 In this case, the
increased income should have decreased the SNAP recipient’s future benefit amount by
$278 per month, had the information been communicated by the QC reviewer and acted
upon by the State. However, the SNAP recipient continued to receive the excess benefit
amount for the remainder of their certification period (8 months). We found at least
13 instances in the 45 cases we reviewed where SNAP recipients continued to receive
incorrect benefit amounts, even though the QC information clearly showed the amounts
were incorrect and should have been adjusted.52 QC staff at the eight States in our audit
stated they were either not aware the information needed to be communicated, or it was
not their responsibility to ensure the information was acted upon once it was
communicated.

50

7 C.F.R. § 275.12(f).
State agencies that opt to act on all changes for simplified reporting households must issue a notice of adverse
action to decrease benefits within 10 days from the date of the change, and the decrease in the benefit level must be
effective no later than the allotment for the month following the month in which the notice of adverse action period
has expired, provided a fair hearing and continuation of benefits have not been requested. Therefore, the required
timeframe for States to act is dependent upon when the State became aware of the change.
52
We reviewed future allotments for QC cases in our sample that had information which should have affected the
SNAP recipients’ allotments. There was no direct correlation for many of the cases due to certification periods or
adjustments that did not match the amounts identified in the QC information. Consequently, we only included
examples that clearly showed the information had not been used to adjust the SNAP recipients’ future benefits.
51

AUDIT REPORT 27601-0002-41

21

FNS needs to amend its QC policies and procedures (including FNS Handbook 310) to ensure
that they are consistent with the SNAP regulations. Specifically, FNS needs to ensure that the
QC reviewers obtain adequate verification, properly identify errors, and use the appropriate
timeframes for both identifying and correcting errors. FNS also needs to implement policies to
ensure QC information that affects SNAP recipients’ benefits is reported and acted upon by
States within required timeframes.

Recommendation 8
Amend FNS QC policies and procedures (including FNS Handbook 310) to ensure QC reviewers
base their conclusions on information verified through documentation or contacts with third
parties who confirmed the accuracy of the information.

Agency Response
In its August 31, 2015, response FNS stated:
FNS does not concur with this recommendation. “Likely conclusion” policy was
implemented specifically to assist States in using reliable information to complete more
cases, provide more accurate reporting to FNS, and prevent the bias that has been
identified earlier in this report. Removing the use of likely conclusion would increase the
number of dropped cases, jeopardize integrity, and may allow State agencies to use
dropped cases to under report errors.

OIG Position
We do not accept management decision on this recommendation. As noted in the report, FNS’
QC policies and procedures do not currently comply with the Federal regulatory verification
requirements because they allow QC reviewers to make determinations based on unverified
information. Rather, FNS’ policies and procedures allowed State officials to rely on statements
from SNAP recipients, assumptions, and the use of unrelated information in lieu of obtaining
information for verification required by Federal regulations. To reach management decision on
this recommendation, FNS needs to amend its QC policies and procedures to comply with the
Federal regulations and provide an estimated completion date for this action.

Recommendation 9
Amend FNS QC policies and procedures (including FNS Handbook 310) to limit the use of
“likely conclusion.”

Agency Response
In its August 31, 2015, response FNS stated:

22

AUDIT REPORT 27601-0002-41

FNS does not concur with this recommendation. As indicated in our response to
Recommendation 8, removing the use of likely conclusion would increase the number of
dropped cases, jeopardize integrity, and allow State agencies to use dropped cases to
under report errors. We will strengthen language about the appropriate use of likely
conclusion in FNS Handbook 310 to provide more structure on the use of this policy to
States.
FNS provided an estimated completion date of September 30, 2016, for this action.

OIG Position
We do not accept management decision on this recommendation. We disagree with FNS’
contention that limiting the use of likely conclusion would provide more inaccurate reporting to
FNS, prevent the bias that had been discussed earlier in the report, or jeopardize the integrity of
the QC process. In our view, it would likely have the opposite effect assuming that QC
reviewers took the required steps to verify the circumstances surrounding each case. As noted in
the report, a QC reviewer in one of the cases we reviewed used “likely conclusion” to verify
most of the elements of the case (e.g., household composition, self-employment income, other
earned income, shelter expense, etc.) even though no interview was conducted with the SNAP
recipient and no documentation or confirmation from a third party was obtained by the reviewer,
as required by the Federal regulations. To reach management decision on this recommendation,
in addition to strengthening language about the appropriate use of likely conclusion in FNS
Handbook 310 to provide more structure on the use of this policy to States, FNS needs to also
specify those circumstances where it would be appropriate to use “likely conclusion” considering
that the Federal regulations generally require that the State QC reviewer verify all information.

Recommendation 10
Amend FNS QC policies and procedures (including FNS Handbook 310) to mandate that
employment and training program participation be verified during the QC process.

Agency Response
In its August 31, 2015, response FNS stated:
FNS does not concur with this recommendation. Under current review procedures, QC
reviewers already check for non-compliance with Employment and Training (E&T)
program requirements. We will review procedures to identify opportunities to strengthen
the rules on how reviewers must verify compliance with E&T requirements.
FNS provided an estimated completion date of September 30, 2016, for this action.

OIG Position
We accept FNS’ management decision on this recommendation.
AUDIT REPORT 27601-0002-41

23

Recommendation 11
Amend FNS QC policies and procedures (including FNS Handbook 310) to require the error
tolerance threshold not be applied when calculating the SNAP recipient’s reportable error
amount until all variances (including those permitted by SNAP policy) have been properly
identified and accounted for during the QC process.

Agency Response
In its August 31, 2015, response FNS stated:
FNS does not concur with this recommendation. We believe this finding may be a result
of a misunderstanding of SNAP Quality Control policy. The current two-step process
was developed to adequately account for statutory eligibility rules as well as regulatory
policy flexibilities. The procedure proposed in this recommendation would eliminate a
step in the current process and result in undue penalties on States as errors would be
called in some instances where the State issued the correct amount of benefits following
statutory rules.

OIG Position
We do not accept management decision on this recommendation. As discussed in the report, the
Federal regulations provide a detailed description of the QC review process, which consists of a
case record review, a field investigation, a variance identification, an error analysis, and the
reporting of review findings. Per the regulations, the error tolerance threshold is only applied
during the reporting of review findings after all variances have been properly identified and
accounted for following the error analysis. Thus, FNS’ current two-step process is not compliant
with Federal regulations. To reach management decision on this recommendation, FNS needs to
amend its QC policies and procedures to comply with the Federal regulations and provide an
estimated completion date for this action.

Recommendation 12
Amend FNS QC policies and procedures (including FNS Handbook 310) to require that
(1) SNAP recipient reporting errors identified during the QC process are considered separately
from the State agency’s failure to act on the errors and (2) SNAP recipient reporting errors and
State agency failure to act on the errors are individually assessed against their respective
regulatory timeframes.

Agency Response
In its August 31, 2015, response FNS stated:
FNS does not concur with this recommendation. We believe that the finding is based on
a misunderstanding of SNAP policy.

24

AUDIT REPORT 27601-0002-41

Quality Control reviews each sampled case to ensure payment accuracy in the sample
month. As long as the sample month benefits are reviewed, we find that considering the
client’s time to report separately from the State agency’s time to act irrelevant.
Furthermore, it would be difficult for reviewers to determine a clear timeline of who took
what action in all cases. Reviewing the final benefit determination in the sample month
is the issue. To determine a payment error based on reporting does not make sense. FNS
believes we are appropriately measuring the certification requirement as established by
regulations and changing the review procedures as suggested would unfairly bias the
review process. Just as importantly, it has no impact on the benefit amount and,
therefore, is irrelevant to improper payment assessment.

OIG Position
We do not accept management decision on this recommendation. According to FNS Handbook
310, the QC reviewer shall “determine whether a variance resulting from a change in the
household’s circumstances must be included or excluded from the error determination due to
reporting and processing time considerations.” OIG’s recommendation is that the recipient
reporting timeframe requirements and the processing timeframe requirements must be assessed
separately to accurately measure whether the sample month variance is an error. If the State
agency corrected a recipient reporting error prior to the sample month, there would be no
variance and no impact on the benefit amount. However, when a variance is identified in the
sample month, each timeframe must be assessed separately to ensure legitimate recipient
reporting errors or the State agency’s failure to timely act errors are included. Currently, the QC
review does not accurately assess improper payments because variances due to legitimate
recipient reporting errors are excluded from the error determination process based on a longer,
combined timeframe. To reach management decision on this recommendation, FNS needs to
amend its QC policies and procedures to separately assess whether recipient reporting and State
agency time to act requirements were met and provide an estimated completion date for this
action.

Recommendation 13
Implement QC policies and procedures to ensure the States report and act upon information
obtained during the QC process affecting SNAP recipients’ benefits within required timeframes.

Agency Response
In its August 31, 2015, response FNS stated:
FNS does not concur with this recommendation as we believe we already have an
established policy to address this concern. It is current policy for States to follow up on
the results of the review and, where appropriate, to establish claims when they should be
established. We will reissue guidance and expand upon it to make clear that it is the
responsibility of State staff to report to the eligibility worker that information has been
uncovered by a Quality Control case review.

AUDIT REPORT 27601-0002-41

25

FNS provided an estimated completion date of September 30, 2016, for this action.

OIG Position
We accept FNS’ management decision on this recommendation.

26

AUDIT REPORT 27601-0002-41

Finding 3: FNS’ Review of States’ QC Results Inadequate
The States’ QC results in 27 of the 60 cases we reviewed were unsupported, questionable, and/or
inaccurate. These results occurred because FNS did not ensure its reviewers conducted
independent reviews of the States’ QC cases. Specifically, FNS did not obtain and review SNAP
participants’ complete case files, or its reviewers did not adequately follow up on any identified
discrepancies. The reviews were generally cursory, relying on the limited information the States
provided. As a result, FNS lacked the assurance needed to validate the accuracy of States’
reported error rates, which serve as the primary basis for determining SNAP’s national error rate.
SNAP regulations require FNS regional offices to annually validate each State agency’s payment
error rate.53 FNS procedures specify that Federal reviewers must conduct independent
examinations of sub-sampled State QC cases sufficient to ensure (1) the integrity of State QC
processes, (2) that SNAP regulations and policies have been properly applied, and (3) that SNAP
case information is complete and accurate. FNS procedures direct Federal reviewers to verify
the actual circumstances of each sub-sampled recipient and determine the accuracy of the State
QC review using official documents, such as recipients’ complete certification case files from
State offices, State QC files, and any other Federal, State, or local records relevant to the
review.54
Each month, States statistically select a specified number of active cases (cases that were issued
benefits in a given month) and perform a QC review of them. The States use FNS
Handbook 310 as a guide when verifying the accuracy of the States’ SNAP eligibility
determinations and the amount of benefits provided to recipients. From this information, the
States determine payment errors and report those figures to FNS. FNS regional office QC staff
conduct a second review to validate the States’ QC results. To accomplish this action, FNS’ QC
reviewers (hereafter referred to as Federal reviewers) select a subsample of cases from each
State’s QC sample and re-review them to determine if the State properly completed its review of
the sampled cases in accordance with FNS Handbook 310.55 The Federal reviewers either agree
or disagree with the State’s QC determinations and discuss the results of their validation work
with each State. FNS then adjusts the State’s reported error rates upward or downward to reflect
any problems it found with the State’s reported results and ultimately to produce the official
State error rate.
Federal Reviewers Did Not Conduct Independent Reviews of States’ QC Cases
We found that none of the 60 cases we reviewed at FNS’ 7 regional offices were
subjected to a full, independent Federal review. Federal reviewers allowed States to
submit partial case documentation rather than complete case files, and relied on States’
conclusions regarding recipients’ household circumstances (such as household
composition, income and expenses, and program disqualifications) without obtaining the

53

7 C.F.R. § 275.3(c).
FNS Handbook 315, Food Stamp Program: Federal Quality Control Validation Review Handbook.
55
FNS annually subsamples about a third of States’ QC cases and subjects them to a Federal review. For example,
in FY 2011, FNS reviewed 20,022 of the 51,959 cases States subjected to a QC review.
54

AUDIT REPORT 27601-0002-41

27

documentation necessary to independently validate the accuracy of the State
determinations.
FNS’ independent validation of SNAP error rates is a critical oversight component of
SNAP. FNS Handbook 315 states,
Only an independent Federal reviewer’s examination of official documents and
statements issued by government agencies, businesses and persons apart from the
State agency and the State reviewer (collateral contacts) can meet the objective of
the Federal review to verify the actual circumstances of the household and
determine the accuracy of the work performed by the State QC reviewer.
Therefore, to the extent that the certification records contain official documents
that verify a household’s circumstances, these documents must be provided to the
Federal reviewer, in addition to any notations that the State eligibility worker or
State QC have made regarding such documents.
FNS Handbook 315 requires Federal reviewers to do additional work, such as requesting
complete case file information from the State agency, under a number of circumstances,
including: (1) a case review element cannot be fully evaluated on the basis of the
information provided by the State; (2) the Federal reviewer cannot account for
inconsistencies in information provided by the State; or (3) the State-provided QC
information does not contain sufficient documentation to allow the Federal reviewer to
independently validate the accuracy of the States’ findings. FNS’ Federal review process
is its primary control to ensure program integrity and the proper stewardship of SNAP
funds.
The information contained in complete case files allows reviewers to thoroughly assess
and validate the recipient’s circumstances to a degree not possible when only partial
records are reviewed. For example, case records contain the names of all household
members, dates of birth, social security numbers, individual household members’ earned
and unearned incomes by source, deductions, changes in household circumstances
reported by the household and/or other agencies, immigration status, work registration,
disqualification actions, employment and training, etc. Complete case files also
document a SNAP recipient’s benefit history and reported circumstances, so reviewers
can readily identify questionable or contradictory information about the recipient’s
household composition, employment, income, expenses, etc., and follow up on them.
Complete case file documentation also allows reviewers to identify recipient patterns of
non-compliance that might make them ineligible for SNAP benefits.
In order for Federal QC reviews to be independent, they must be based on the review of
complete case file information. Any Federal review based on incomplete information
cannot be deemed an “independent” validation because Federal reviewers would, to some
degree, have to rely on State assertions and conclusions. State QC reviews, in contrast to
Federal reviews, are done using complete case file information for sampled recipients. It
is generally understood that State QC can only be “independent” if State reviewers have
access to, and review, complete case file information. Basing State QC conclusions on

28

AUDIT REPORT 27601-0002-41

limited information, such as what State eligibility workers choose to provide, would limit
the scope and independence of the State QC process and raise questions about the
accuracy of State QC determinations. Basing Federal reviews on what States provide
places State agencies in the position of controlling what Federal reviewers see and do not
see. It also places reliance on States to submit to the Federal reviewer documentation
that, by its very nature, could be contrary to the States’ interests. Without complete case
file information, Federal reviewers cannot properly validate State QC results and ensure
State payment errors have been accurately reported.
Federal Reviewers Did Not Identify States’ QC Discrepancies
We determined that Federal reviewers did not adequately identify and address States’ QC
discrepancies evident in the limited documentation the States provided FNS. We
analyzed the adequacy of FNS’ Federal review procedures by statistically selecting
60 QC cases completed in FY 2011 by the 8 States in our audit that were submitted to
FNS’ 7 regional offices. We used the criteria specified in FNS Handbooks 310 and 315
and individual case file information States provided to FNS to make case determinations
independent from those made by FNS reviewers. We compared our determinations with
those that FNS made and concluded that FNS’ regional QC staff did not properly conduct
27 of the 60 cases we reviewed. Federal reviewers approved cases that did not contain
sufficient information from States to support their conclusions, did not resolve
questionable or inconsistent QC information, and contained incorrect State calculations
and determinations.56
Federal reviewers approved State cases that lacked documentation needed for
independent determinations: FNS Handbook 315, Section 177, requires Federal
reviewers to do additional work if State QC records do not contain sufficient
documentation to allow the Federal reviewer to determine the accuracy of the State’s
QC findings. From our review of the 60 Federally-sub-sampled cases, we
determined Federal reviewers agreed with 17 State cases (28 percent) that lacked
sufficient documentation to support independent Federal validations of household
circumstances relating to income, expenses, program disqualifications, and other
information. For example, one State’s QC reviewer reported that a recipient had rent
and utility expenses. However, the State’s QC reviewer relied on statements made
by the client and her roommate to support these expenses, instead of obtaining the
independent verification (i.e., rent receipts and utility bills) specified by FNS
procedures. The Federal reviewer in turn relied on the same information as the State
reviewer.
Federal reviewers approved State cases with conflicting or questionable
information: FNS Handbook 315, Sections 173, 174, and 177, requires Federal
reviewers to resolve conflicting information and perform additional work if they
cannot account for inconsistencies in the case information provided by the State QC
staff. Our review of the 60 Federally-sub-sampled cases disclosed that Federal
56

The errors we identified were based on the limited information State QC sent to FNS. Had we conducted reviews
with complete case file information, additional Federal review inadequacies might have been identified.
AUDIT REPORT 27601-0002-41

29

reviewers agreed with 8 State case determinations (13 percent) that had conflicting
or questionable information about recipients’ rent expenses, income amounts, etc.,
that the Federal reviewers did not resolve by obtaining additional documentation.
For example, one State QC reviewer reported there were no students in the
household, even though the recipient’s application indicated that his daughter was
attending a local college (college students are ineligible for SNAP benefits unless
certain conditions apply). In another example, State QC reported that the client had
no resources (i.e., income, savings, etc.) while also reporting that the client was
paying rent and utility expenses. The State did not address or resolve in the
documentation provided to FNS the questionable and conflicting information present
in these two cases. The Federal reviewers agreed with both cases without requesting
additional information from the State.
Federal reviewers agreed with State case determinations that were incorrect:
FNS Handbook 315, Sections 130 and173, requires Federal reviewers to ensure the
completeness and accuracy of all information gathered to support QC conclusions
and to validate the correct determination of the household’s eligibility and benefit
levels. We found that in 10 of the 60 cases in our sample (17 percent), Federal
reviewers agreed with incorrect State determinations regarding participant eligibility,
program violations, and allotment calculations. For example, one State reported a
participant’s income as $1,751 per month. However, the case documentation the
State provided to FNS indicated that the correct income amount was $2,101 to
$2,251 per month because the recipient’s uncle gave her monthly cash assistance of
$350 to $500, which was required to be included in the participant’s reported
income. The State’s exclusion of the cash assistance potentially understated the
reportable payment error amount by $222. The Federal reviewer agreed with the
State’s review of this case without correcting the income information. In another
case, the State reported that the recipient was eligible for transitional SNAP benefits
when they were, in fact, not eligible for such benefits because the participant failed
to meet program reporting requirements. The Federal reviewer agreed with the
State’s conclusion on the case, despite the State’s incorrect determination.
See Table 2 below for a summary of the discrepancies we found during our review of
selected Federal reviewer QC cases.
Table 2 – Federal Reviewer Discrepancies
Reason Federal Review Was
Inadequate
Did Not Obtain Sufficient
Information to Support
Independent Federal Decisions
(17 of the 60 cases)
Household Composition

FNS Regional Office
57
(‘X’ Denotes an OIG Determined Review Deficiency)
SWRO
X

Work Requirements

57

MPRO

SERO

MWRO

X
X

Some of the 60 cases had more than one deficiency in a listed category.

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AUDIT REPORT 27601-0002-41

NERO

MARO

X

X

WRO

Reason Federal Review Was
Inadequate

FNS Regional Office
57
(‘X’ Denotes an OIG Determined Review Deficiency)
SWRO

MPRO

SERO

MWRO

NERO

MARO

WRO

Income

X

X

X

X

X

Shelter Expense

X

X

X

X

X

Other Household Expenses
Did Not Resolve Conflicting or
Questionable Information
(8 of the 60 cases)
Household Rent Expense

X

X

X

X

X

X

X

X

X

Household Income

X

X

Student Status
Household Composition
Did Not Address State QC
Inaccuracies
(10 of the 60 cases)
Ineligible Household Not
Disqualified
58
Incorrect CE Treatment
Submitted Documentation for
Incorrect Household
Used Incorrect Household Size
Used Incorrect Household Income
and/or Expense Amounts
Uncorrected Mathematical Error

X
X

X

X

X
X

X
X
X
X

X

X

X

X

QC Environment and Lack of FNS Oversight Affected Adequacy of Federal Reviews
We determined the weaknesses in the Federal QC review process were due, in part, to the
approach taken by the Federal QC review staff and by the absence of sufficient FNS
national office oversight. QC supervisors in three regions told us Federal reviewers had
to complete their reviews within certain timeframes, which could restrict them from
conducting in-depth reviews. One of the QC supervisors also stated that regional
management in her region expected QC staff to accept the State’s determination, as long
as there was nothing already in the State’s QC file that proved it was wrong. In light of
this direction, one of the QC supervisor’s QC reviewers told us that he only followed up
with the State for additional information if he found a discrepancy in the State’s QC file
that he considered blatant. Another QC supervisor stated that some Federal reviewers
may be reluctant to question State QC conclusions because Federal reviewers in her
region had less experience than their State QC counterparts. Based on these statements,
we concluded that Federal reviewers generally agreed with State determinations as the
first course of action, and they disagreed with State determinations only in rare instances.
We found that Federal reviewers disagreed with only 104 of the 20,040 State cases they
58

State QC incorrectly considered the household categorically eligible (CE) for SNAP benefits even though the
household did not qualify for CE status.
AUDIT REPORT 27601-0002-41

31

reviewed in FY 2010. In FY 2011, Federal reviewers disagreed with only 129 of the
20,022 State cases they reviewed. The number of cases Federal reviewers disagreed with
amounted to approximately one half of 1 percent of the total cases each year.
We also concluded that FNS oversight of the Federal review process, although a national
priority, was ineffective because national officials identified Federal review weaknesses,
but did not take sufficient action to correct them. In 2009, the FNS national office
developed procedures for evaluating the effectiveness of Federal QC reviews, known as
“QC to QC” reviews. In the QC to QC process, FNS national office QC specialists select
a sample of Federally-reviewed SNAP cases to determine if the Federal reviews are
conducted in accordance with FNS policy. FNS national officials have conducted QC to
QC reviews in each of the FNS regional offices annually since 2009, and concluded that
the Federal reviews were ineffective, in varying degrees. For example, in FYs 2012 and
2013, FNS management determined that between 21 and 60 percent of the State cases
they examined had been incorrectly validated by FNS staff (see Table 3 below).
Table 3 – Percentage of Federal Reviews FNS’ National Office Determined Were Inadequate
QC to QC Reviews of FNS Regional Offices
FYs 2012-2013
SWRO

MPRO

SERO

MWRO

NERO

MARO

WRO

25%

34%

21%

24%

42%

60%

46%

Although FNS identified Federal review deficiencies similar to those we found, FNS
officials did not take the necessary steps to ensure that regional office QC staff improved
the effectiveness of their Federal reviews. FNS national officials sent letters to the
regional offices containing their findings from the QC to QC reviews and discussed their
findings with the regional offices by telephone to determine their actions to address them.
However, FNS national officials did not require regional offices to institute formal
corrective actions to address the findings in their reviews. FNS national officials viewed
the QC to QC reviews as a training tool, which they expected the regions to use to
provide additional training to their staff to address the reported deficiencies. In the letters
sent to the regions, they were asked to provide the FNS national office written
information outlining their plan to address training; however, we saw no evidence that the
regions provided it. We concluded that a more formal process was needed to ensure that
regions took the necessary actions to improve the effectiveness of Federal reviews.
Without a corrective action plan that is assessed and monitored by the FNS national
office, the agency lacks the assurance it needs that regions are taking the appropriate
actions to improve the effectiveness of Federal reviews of States’ QC cases.
The increase in SNAP participation and spending in recent years has focused attention on the
importance of ensuring FNS has strong controls in place for detecting and addressing incorrect
payments. The lack of strong oversight controls, in the form of inadequate Federal QC reviews,
has serious implications for the accuracy and reliability of SNAP’s reported payment errors and
error rate. By not ensuring that each State agency is performing its SNAP reviews objectively

32

AUDIT REPORT 27601-0002-41

and in conformance with FNS requirements, FNS national officials lack assurance that SNAP is
operating with the integrity needed to properly account for significant disbursements of Federal
funds.
FNS’ Federal review procedures in FNS Handbook 315 do not specifically require Federal
reviewers to obtain complete case records when conducting QC reviews. To ensure Federal QC
reviews are done in a comprehensive, independent manner, FNS needs to modify FNS Handbook
315 to require that Federal reviewers obtain the necessary information from the SNAP
recipients’ case files to determine the accuracy of the States’ results and then to adequately
follow up on all discrepancies. FNS’ review of complete case information is the only way
Federal reviewers can reach independent conclusions about SNAP payment accuracy and
resulting error rates. FNS should also modify the QC to QC review process to require the
development of regional office corrective action plans that are assessed and monitored by FNS
management.

Recommendation 14
Modify FNS Handbook 315 to require Federal reviewers to (1) obtain the necessary information
from the SNAP recipients’ case files to conduct a thorough and independent review to determine
the accuracy of the States’ results and (2) adequately follow up on all discrepancies.

Agency Response
In its August 31, 2015, response FNS stated:
FNS does not concur with this recommendation. Current FNS policy requires that
Federal reviewers review information and documents relevant to the case. As written,
OIG’s recommendation goes beyond current policy to require a specific way in which
information must be accessed. FNS submitted to OIG suggested revisions to the wording
of this recommendation that focus on the thoroughness of the review. Our suggested
language states “Modify FNS Handbook 315 and related procedures to (1) make the
Federal re-review an independent review of the facts of the case and (2) require adequate
follow up on discrepancies.”
With the increasing modernization of the Program, there are no longer paper case files in
most States. We have struggled with the issue of how to adequately review in light of the
complexities brought about by the States’ computerization of their records. We will
continue to examine this issue to determine a more appropriate approach to having access
to the information that the auditors think would be in the case files, and ensure that
Federal reviewers have all of the information and documents necessary to conduct a
thorough and independent review of the facts of each case.

OIG Position
We do not accept management decision on this recommendation. OIG did not accept FNS’
suggested change to the recommendation because FNS Handbook 315 already requires that the
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33

Federal reviewers conduct an independent review of the States’ results. As noted in the report,
FNS Handbook 315 states that “Only an independent examination by the Federal reviewer of
official documents and statements issued by government agencies, businesses and persons apart
from the State agency and the State reviewer (collateral contacts) can meet the objective of the
Federal review to verify the actual circumstances of the household and determine the accuracy of
the work performed by the State QC reviewer.” Despite the current requirement for an
independent review, OIG found that the Federal review process did not adequately validate the
accuracy and completeness of the State QC reviews because it relied on information States chose
to provide to FNS, and because Federal reviewers relied on State assertions and determinations
without independently validating the accuracy of those assertions and determinations. OIG
concluded that reliance on State provided documents and on State provided conclusions
eliminated the possibility for independent Federal reviews, and that the Federal re-review
process can only be independent if Federal reviewers obtain complete case information and reach
independent conclusions about the accuracy of SNAP cases based on the complete case
information. FNS Handbook 315 currently requires that States make all case information
available to the Federal reviewers. To reach management decision on this recommendation, FNS
needs to specify the revisions that it plans to make to the FNS Handbook 315 and related
procedures to ensure that the Federal re-reviews are conducted independently as required, the
necessary information is obtained from the SNAP recipients’ case files in order to conduct a
thorough and independent review of the States’ results, and that all discrepancies determined
during the re-reviews are adequately followed up on. FNS needs to also provide an estimated
completion date for this action.

Recommendation 15
Modify the QC to QC review process to require the development of regional office corrective
action plans that are assessed and monitored by FNS management.

Agency Response
In its August 31, 2015, response FNS stated:
FNS concurs with this recommendation. We will design and establish a corrective action
system for the QC of QC process.
FNS provided an estimated completion date of September 30, 2016, for this action.

OIG Position
We accept FNS’ management decision on this recommendation.

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Section 2:  Payment Accuracy 
Finding 4: SNAP Households’ Eligibility Questionable Under BBCE
States did not assess the eligibility of more than 15 million SNAP households in FY 2012 under
the traditional SNAP eligibility requirements because of their Broad Based Categorical
Eligibility (BBCE) status. States allowed these BBCE households to qualify for SNAP benefits
based on these households’ receipt of information about other State benefit programs. Their
eligibility also was not assessed during the QC process used to determine the SNAP error rate.
This lack of assessment occurred because FNS established its BBCE policy without ensuring that
the other State programs used to confer eligibility met all regulatory requirements regarding
State-funding percentages, program purposes, and participant gross monthly income levels. FNS
also incorrectly decided to treat BBCE cases the same as other categorically eligible (CE) cases
during the QC process. In FY 2012, we found more than 6.4 percent of BBCE QC households
received SNAP benefits, even though they exceeded the statutory gross and net income
limitations. Further, SNAP’s FY 2012 national error rate was understated by more than
6.5 percent (or nearly 0.24 percentage points) because BBCE SNAP recipients’ eligibility was
not assessed during the QC process. This rate equates to more than $178 million in improper
payments. Considering that more than 15 million households (roughly two thirds of the
22.3 million SNAP households in FY 2012) are eligible due to their BBCE status, and with total
SNAP benefits averaging over $71 billion annually since FY 2010, the amount overpaid to
SNAP recipients nationwide due to FNS’ BBCE policy is likely substantial.59
Federal regulations state that Categorical Eligibility (CE) can be conferred (with FNS approval)
to “any household . . . in which all members receive or are authorized to receive non-cash or inkind services from a program that is less than 50 percent funded . . . under Title IV-A and that is
designed to further purposes three and four60 of the TANF [Temporary Aid for Needy Families]
block grant . . . and requires participants to have a gross monthly income at or below 200 percent
of the Federal poverty level.”61 FNS Handbook 310 states that the QC reviewer need not review
those elements of eligibility superseded by categorical eligibility (e.g., resources, gross and net
income limits, etc.). According to a 2011 FNS policy memorandum, “the verifications for
resources, gross and net income . . . for BBCE households are the responsibility of the
[Temporary Aid for Needy Families] TANF program. They are TANF verifications, even if they
are listed in State SNAP manuals and should not be verified by SNAP QC.”62
Historically, CE enabled recipients who had previously met the eligibility requirements for other
comparable programs to be automatically eligible for SNAP. This eliminated the need for States
to determine the recipients’ eligibility twice. Under CE, the expectation was that another
59

A Congressional Budget Office report in 2012 estimated the total cost of BBCE to be roughly between
$11.5 billion and $11.8 billion over the next 10 years.
60
Purpose three is to “prevent and reduce the incidence of out-of-wedlock pregnancies and establish annual
numerical goals for preventing and reducing the incidence of these pregnancies.” 42 U.S.C. § 601(a). Purpose four
is to “encourage the formation and maintenance of two-parent families.” Id.
61
7 C.F.R. § 273.2(j)(2)(ii)(B).
62
USDA FNS Policy Memorandum, Questions and Answers on Broad-Based Categorical Eligibility
(January 31, 2011).
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35

Federally-funded program already assessed and verified certain information about the SNAP
applicant’s eligibility for financial assistance (e.g., gross and net income, value of resources,
citizenship, residency, etc.). In 2009, FNS expanded CE to BBCE, which allowed States to
confer eligibility to SNAP applicants based solely on applicants receipt of information (e.g., a
brochure, a website address, or a phone number) that described other State programs’ services, as
long as the applicants’ gross incomes were less than 200 percent of the Federal poverty level
(FPL). In 2012, FNS estimated that over 15 million SNAP households (approximately
68 percent of all SNAP households) were considered categorically eligible for benefits, based on
their receipt of information that referred to other State programs.63 We determined, however,
that FNS’ BBCE policy did not meet SNAP regulatory requirements regarding State-funding
percentages, program purposes, and participant gross monthly income levels. Also, the policy
inappropriately excluded ineligible BBCE cases from the SNAP error rate analysis during the
QC process. The following sections provide details regarding our findings:
Impact on SNAP Eligibility
We found that the TANF programs referenced in the brochures did not separately assess
or determine the applicants’ eligibility, and we found no evidence at the eight visited
States that those States determined whether the SNAP applicants or their household
members were eligible or actually participated in any of these programs. Furthermore,
these programs did not meet the regulatory requirements needed to confer SNAP
eligibility (e.g., they did not have gross income limitations or meet the required TANF
purposes).64 Under BBCE, State SNAP eligibility workers assessed the SNAP applicants
based on more lenient State-established BBCE requirements, which varied by State, but
included gross income limitations that were up to 70 percentage points higher than those
for SNAP, and had no net income or asset limitations.65
Specific examples of what OIG found are described below.
·

One State conferred BBCE on all SNAP applicants that met its State-established
BBCE limitations (200 percent of the FPL for gross income, and no net income or
asset limits) by having a family planning brochure available. The programs
referenced in the brochure did not have any financial eligibility requirements.
Additionally, State officials provided the brochure only at the request of SNAP
applicants. Consequently, SNAP applicants in that State may not have received the

63

FNS did not track its BBCE households. Consequently, it estimated the number of BBCE households based on
the type of assistance received. Those households that received non-cash services or benefits were generally
considered BBCE.
64
7 C.F.R. § 273.2(j)(2)(ii)(B).
65
SNAP eligibility requirements include a net income limitation of 100 percent of the FPL, a gross income
limitation of 130 percent of the FPL, and an asset limitation of $2,000 (with certain exceptions). As of FY 2013,
43 States, including the District of Columbia and two territories, implemented BBCE with varying gross income
and asset requirements. Of these, 29 (more than 67 percent) implemented gross income limitations that ranged from
160 to 200 percent of the FPL. Conversely, only 7 of these States (16 percent) had limits on net income and only
5 of these States (11 percent) had limits on assets. The limit on assets for the five States ranged from $5,000 to
$25,000.

36

AUDIT REPORT 27601-0002-41

information that was used to confer eligibility for SNAP unless they specifically
requested the information.66
·

Another State conferred BBCE on all SNAP applicants that met its State-established
BBCE limitations (185 percent of the FPL for gross income, and no net income or
asset limits) by providing them with a brochure for social services. The brochure
referenced many programs that did not have financial eligibility requirements or meet
the required TANF purposes. Additionally, the State only mailed the brochure to
applicants after it conferred their eligibility for SNAP. Consequently, the State
determined the SNAP applicants to be “categorically eligible” for benefits based on a
brochure that the applicants had not yet received.

·

A third State conferred BBCE on all SNAP applicants that met its State-established
BBCE limitations (130 percent and 100 percent of the FPL for gross and net income
respectively, and no asset limit)67 by providing them with a brochure for the State’s
family planning services. The services referenced in the brochure did not have any
financial eligibility requirements, but they were restricted to individuals that were of
child-bearing age, not sterile, and not pregnant. Consequently, many of the State’s
SNAP applicants did not benefit from the information or were not even eligible for
the services described in the brochure that was used to confer their eligibility for
SNAP. For example, in 2 of the 4 BBCE cases (50 percent) we reviewed at the State,
none of the SNAP household members were eligible for the family planning services
cited in the brochure because they were young children, ages 5 and below.

We concluded that providing the contact information for another State program can be a
service for BBCE purposes, as long as each member of a SNAP applicant’s household
actually receives or is authorized to receive such services. Further, we concluded that
BBCE cannot be extended to a SNAP household unless all household members are
receiving or are authorized to receive services from a program that meets the specific
purpose, income level, and other requirements of SNAP regulations.68 Consequently,
FNS’ BBCE policy did not comply with SNAP regulations because it did not ensure that
SNAP applicants received or were authorized to receive services and the services came
from a program that met the regulatory requirements (i.e., State-funding percentages,
program purposes, and participant gross monthly income levels).
In FY 2012, FNS estimated that more than 91 percent of all SNAP households were CE,
and that nearly 75 percent of these households (or more than 15 million) were BBCE.
Officials from all of the eight States we visited acknowledged that almost all SNAP
recipients were either CE or BBCE and, therefore, few recipients had to meet SNAP’s
statutory income and asset limitations.69 We analyzed FNS’ QC data from FY 2012, and
66

We could not determine from the cases we reviewed whether the applicant actually requested or received a
brochure. The State only documented in the applicant’s’ case file that their status was BBCE.
67
These limitations were in effect at the time of our audit; however, the State has since raised its BBCE gross
income limitation to 200 percent of the FPL.
68
7 C.F.R. § 273.2(j)(2)(ii)(B).
69
7 U.S.C. § 2014(c), (g).
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37

found that 2,286 (or 6 percent) of the 35,582 BBCE QC cases exceeded SNAP’s statutory
gross and net income limitations. These recipients received $241,655, or nearly 3 percent
of the SNAP benefits issued in the QC sample month for these cases.70 In addition, this
number could be much larger if the effect of the elimination of the statutory SNAP asset
limitation was known. FNS does not currently obtain asset information for those
households that are BBCE, so we were unable to determine whether these households
exceeded the statutory limitation. Under FNS’ BBCE policy, SNAP applicants’ assets
are not considered in most States when determining their eligibility for benefits.
Impact on SNAP Error Rate
FNS and States conduct QC reviews of a sample of SNAP households to determine the
national error rate for SNAP. The QC reviews are intended to assess whether SNAP
recipients were eligible for benefits and received the correct amount. FNS’ procedures,
however, directed QC reviewers to not assess the eligibility of BBCE SNAP recipients
because FNS treated these cases as it treated other CE cases that had eligibility assessed
and verified by another program.
FNS’ QC procedures for BBCE were inappropriate because, unlike other CE cases,
SNAP was the only program that would have assessed the applicants’ eligibility under
BBCE; no other program would have verified the households’ financial information in
accordance with regulatory requirements. As previously discussed, State SNAP
eligibility workers conferred BBCE on SNAP applicants and determined whether
applicants met the State-established BBCE limitations. The State SNAP eligibility
workers processed BBCE applications as they processed any other SNAP applications
(except applicants were subjected to more lenient requirements), and no other program
was involved in the process.
FNS’ QC procedures also allowed BBCE SNAP recipients to continue receiving benefits
after it became known that they were no longer eligible to participate in the program. For
example, during our review of sampled QC cases, we found a SNAP recipient’s gross
income was 460 percent of the Federal Poverty Level (FPL) during the QC review
month. The recipient was allowed to continue in the program, even though the
recipient’s gross income exceeded the State’s BBCE gross income limitation by nearly
150 percent (the State’s limitation was 185 percent of the FPL). In another case, we
70

The amount cited here is based on our analysis of the QC cases nationwide from FY 2012 recorded in ROQCTS.
As was previously noted, FNS does not track its BBCE cases; however, we concluded that households in ROQCTS
were likely BBCE if they received no cash assistance from authorized programs in States that implemented FNS’
BBCE policy. Our analysis is similar to an analysis performed by GAO in its 2012 report (GAO-12-670, Improved
Oversight of State Eligibility Expansions Needed, July 2012). Our estimate of BBCE households is also consistent
with FNS’ 2012 estimate. For these BBCE households, we determined from ROQCTS that 2,157 had gross incomes
above 130 percent of the FPL (the SNAP statutory gross income limitation) and an additional 129 households had
net incomes above 100 percent of the FPL (the SNAP statutory net income limitation). BBCE households that
exceeded the statutory limitations would not have been eligible for benefits without their BBCE status. The
2,286 households received nearly 3 percent of the SNAP benefits issued for the FY 2012 BBCE QC cases (the
households received $241,655 in benefits which, when divided by the $8,768,239 in benefits provided to FY 2012
BBCE QC cases, equals nearly 3 percent).

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AUDIT REPORT 27601-0002-41

found that a SNAP recipient’s gross income was 238 percent of the FPL during the QC
review month. The SNAP recipient was allowed to continue in the program, even though
the recipient’s gross income exceeded the State’s BBCE gross income limitation by
nearly 20 percent (the State’s limitation was 200 percent of the FLP). In both cases, QC
determined there was no error and no claim was established to recover the amounts.
FNS’ QC procedures for BBCE significantly understated the SNAP error rate since
BBCE recipients’ eligibility was not assessed during the QC reviews. In FY 2012, we
found 405 BBCE SNAP households exceeded the States’ BBCE gross or net income
limitations. Had these households’ eligibility been assessed, it would likely have resulted
in the identification of additional errors and increased the national SNAP error rate by
more than 6.5 percent, or nearly 0.24 percentage points, which equates to more than
$178 million of improper payments.71 This number could be significantly higher if
information regarding the households’ assets was maintained and known by FNS.72
In 2010, a Presidential Memorandum73 emphasized the importance of preventing
payment errors and protecting public funds against fraud, waste, and abuse. It stated that
“In those cases where data available to agencies clearly shows that a potential recipient of
a Federal payment is ineligible for it, subsequent payment to that recipient is
unacceptable.” Contrary to guidance in the memorandum, FNS’ QC procedures advised
that BBCE households would “never [be] ineligible regardless of income,” and that QC
reviews did “not identify any eligibility errors” for these households.74 FNS did not
require QC reviewers to identify eligibility errors for BBCE households, even if the
SNAP recipients were required to report changes that made them no longer eligible

71

The amount cited here is based on our analysis of the nationwide QC data from FY 2012 recorded in ROQCTS.
As was previously noted, FNS does not track its BBCE cases; however, we concluded that households in ROQCTS
were likely BBCE if they received no cash assistance from authorized programs in States that implemented FNS’
BBCE policy. Our analysis is similar to that performed by GAO in its 2012 report (GAO-12-670, Improved
Oversight of State Eligibility Expansions Needed, July 2012). Our estimate of BBCE households is also consistent
with FNS’ 2012 estimate. For these BBCE households, we determined that 405 exceeded their State’s BBCE gross
or net income limitations and were no longer eligible for SNAP benefits. To determine the additional error amount
for these 405 ineligible households, we calculated the difference between their State-reported monthly allotments
and the State-reported error amounts already identified and reported by the States during the QC process. Using the
State reported amounts, we utilized FNS’ methodology to determine the impact on the error rate. We calculated the
weighted average of each State’s additional error amount, which equaled nearly 0.24 percent. We concluded that
the SNAP error rate was understated by more than 6.5 percent (0.24 percent rounded and then divided by the
FY 2012 SNAP error rate of 3.42 percent plus 0.24 for the additional errors identified. This equates to
$178,237,675 in improper payments (0.24 percent multiplied by $74,619,344,626 in FY 2012 SNAP benefits). In
our calculation, we used the State-reported information in ROQCTS that does not reflect the results of the Federal
re-reviews discussed in Finding 3; however, the effect of the re-reviews has historically been small and increased the
State-reported error rates. As was previously discussed, the results of both reviews (State and FNS) are combined to
calculate the States’ error rates.
72
Five States have BBCE asset limitations; however, QC does not obtain information regarding assets for CE
households so the State-established BBCE asset limitations are not verified.
73
Presidential Memorandum, Enhancing Payment Accuracy Through A “Do Not Pay List” (June 18, 2010),
published at 75 Fed. Reg. 35,953 (June 23, 2010).
74
FNS emails addressing “National office response – BBCE Q&As” and “National Office Response BBCE question”
sent to FNS personnel on April 15, 2011, and July 6, 2011, respectively.
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39

(though FNS does not currently require all BBCE SNAP recipients to report when they
exceed the State’s BBCE gross income limitation).75
In order to ensure that CE is appropriately conferred on SNAP applicants, FNS needs to obtain
from the Office of the General Counsel (OGC) a legal opinion on whether its current BBCE
policy complies with the Federal regulation requiring that all SNAP household members must
receive, or be authorized to receive services from another program that meets SNAP regulatory
requirements regarding State-funding percentages, program purposes, and participant gross
monthly income levels. FNS also needs to amend its QC procedures to ensure BBCE recipients’
eligibility for SNAP benefits is fully assessed during the QC review process and any QC errors
are included in the error rate.

Recommendation 16
Obtain from the Office of the General Counsel (OGC) a legal opinion on whether FNS’ BBCE
policy complies with the Federal regulation requiring that all SNAP household members must
receive, or be authorized to receive, services from another program that meets SNAP regulatory
requirements (i.e., State-funding percentages, program purposes, and participant gross monthly
income levels).

Agency Response
In its August 31, 2015, response FNS stated:
FNS will consult with its Office of the General Counsel and senior policy officials and
consider the appropriateness of obtaining a legal opinion on whether FNS’s BBCE policy
complies with Federal regulations requiring that all SNAP household members must
receive, or be authorized to receive, services from another program that meets SNAP
regulatory requirements.
FNS provided an estimated completion date of September 30, 2016, for this action.

OIG Position
We do not accept management decision on this recommendation. To reach management FNS
needs to obtain an independent legal opinion from OGC.
75

Under simplified reporting rules, SNAP recipients must report when their gross income exceeds 130 percent of
the FPL (the gross income limitation). Since BBCE allows SNAP applicants to have higher gross incomes than
what is traditionally allowed, applicants’ gross income may be above 130 percent of the FPL at the time of
certification. FNS does not require these SNAP recipients to report when their income increases above the Stateestablished BBCE income limitation. In a 2009 policy memorandum, FNS stated,
[C]ategorically eligible households with gross income over the gross income limit have no reporting
requirements until they recertify or file a periodic report, whichever comes first . . . . We would expect,
however, that the TANF program used to confer categorical eligibility would require households to report
when their income exceeds the income threshold for the TANF program.
USDA FNS Policy Memorandum, Categorical Eligibility Questions and Answers (December 15, 2009).

40

AUDIT REPORT 27601-0002-41

Recommendation 17
Amend FNS’ QC procedures to state that BBCE recipients’ eligibility for SNAP benefits must be
fully assessed during the QC review process and that any errors identified during the QC review
be included in the error rate.

Agency Response
In its August 31, 2015, response FNS stated:
FNS does not concur with this recommendation. We believe that the finding is based on
a misunderstanding of SNAP policy.
Current review procedures align with the BBCE policy. The program that confers BBCE
is a separate program. It is not in the scope of SNAP Quality Control to review this
program.

OIG Position
We do not accept management decision on this recommendation. As noted in the report, we
found that there was no other program that actually assessed the BBCE recipient’s eligibility for
SNAP benefits. To reach management decision on this recommendation, FNS needs to amend
its QC procedures to require that BBCE recipients’ eligibility for SNAP benefits be fully
assessed during the QC review process and that any errors identified during the QC review be
included in the error rate. FNS needs to also provide an estimated completion date for this
action.

AUDIT REPORT 27601-0002-41

41

Finding 5: Inaccurate Conversion Factors Used to Determine SNAP
Recipients’ Monthly Income
SNAP recipients whose weekly and biweekly income amounts were converted to monthly
income amounts received more benefits than they were entitled to in five of the eight States in
our audit. This oversight occurred because FNS’ regulations, used by the States, included
inaccurate conversion factors. The regulations listed the conversion factors as 4.3 for weekly
income and 2.15 for biweekly income. The conversion factors should have been 4.33 for weekly
and 2.17 for biweekly income. If conversion factors are increased, then monthly income
increases would tend to decrease the level of SNAP benefits. Considering that since FY 2010,
on average, over 45 million people received monthly SNAP benefits totaling over $71 billion
annually, the amount overpaid to SNAP recipients nationwide due to the inaccurate conversion
factors is likely substantial.
FNS regulations direct State agencies to convert household incomes to a monthly amount by
using conversion factors: a multiplier of 4.3 for weekly income and a multiplier of 2.15 for
biweekly income.76 The five States all used these conversion factors to determine monthly
income for SNAP recipients.77 However, we determined the conversion factors listed in FNS’
regulations were inaccurate. The factors should have been 4.33 for weekly income and 2.17 for
biweekly income.
FNS’ conversion factors enabled SNAP recipients paid on a weekly and bi-weekly basis to
receive more SNAP benefits than those recipients paid on a monthly basis. For example, if a
household earned $12,000 annually and it was paid monthly, the eligibility worker would
determine the household’s benefit allotment based on its monthly income of $1,000. However, if
the same household was paid on a biweekly or weekly basis, the eligibility worker would convert
the income using FNS’ conversion factors, which would result in a monthly income of $922.30,
a difference of $77.70.78 Generally, when calculating a SNAP recipient’s benefit amount, the
lower his or her monthly income, the greater the benefit. However, if the eligibility worker
converted the SNAP recipient’s income using the more accurate conversion factors (4.33 for
weekly income and 2.17 for biweekly income), the resulting monthly income would more
accurately reflect the SNAP recipient’s actual monthly income of $1,000 ($99979 for the weekly
conversion and $1,00180 for the biweekly conversion). Consequently, we concluded the weekly
76

7 C.F.R. § 273.10(c)(2).
The remaining three States in our audit elected to use their own conversion factors that they established for their
other public assistance programs, which Federal regulations allowed. One of the States used the same conversion
factors that we determined were more accurate, another State used conversion factors similar to the ones that we
determined were more accurate, and the remaining State used conversion factors that were less accurate than those
listed in FNS’ regulations.
78
To calculate the monthly income of $922.30 for households paid biweekly, we took the annual income of
$12,000, divided it by 26 biweekly pay periods, and multiplied it by 2.15. Similarly, to calculate the monthly income
of $922.30 for households paid weekly, we took the annual income of $12,000, divided it by 52 weekly pay periods,
and multiplied it by 4.3.
79
To calculate the monthly income of $999 for households paid weekly, we took the annual income of $12,000,
divided it by 52 weekly pay periods, and multiplied it by 4.33.
80
To calculate the monthly income of $1001 for households paid biweekly, we took the annual income of $12,000,
divided it by 26 biweekly pay periods, and multiplied it by 2.17.
77

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conversion factors of 4.33 and 2.17 (carried out 2 decimal places) would eliminate the inequity
between those SNAP recipients paid monthly versus those paid on a weekly or bi-weekly basis.
We determined the conversion factors cited in the regulations were inaccurate when checking
QC reviewers’ calculations of SNAP recipients’ monthly income for the QC cases we reviewed
at the five States. When checking the accuracy of the conversion factors, we calculated the
weekly conversion factor to be 4.33 (52 weeks divided by 12 months), as opposed to 4.3, and the
bi-weekly conversion factor to be 2.17 (26 biweekly periods divided by 12 months), as opposed
to 2.15. Although the difference between the conversion factors appears insignificant, its
cumulative effect on overall program dollars is substantial. For example, in one of the QC cases
we reviewed, the SNAP recipient’s monthly benefit should have been $6 less than was calculated
by the eligibility worker had the more accurate conversion factors been used. SNAP recipients
in other QC cases we reviewed received monthly overpayments ranging from $1 to $3.
On January 26, 2015, we questioned FNS national officials about the conversion factors cited in
the regulations. They informed us that the agency had not reviewed the conversion factors since
they were included in the regulations in 1978. Thus, they were unaware that the conversion
numbers cited in the regulations were inaccurate, and would not comment on the factors until
they had time to review them.
To ensure all SNAP recipients receive the appropriate benefit amount and the Federal
Government does not incur unnecessary overpayments, FNS needs to amend the SNAP
regulations to specify the accurate weekly and biweekly income conversion factors. FNS also
needs to notify all States of the accurate conversion factors to use in calculating SNAP
recipients’ monthly income.

Recommendation 18
Amend the SNAP regulations to specify the accurate weekly and biweekly income conversion
factors (4.33 for individuals paid weekly and 2.17 for individuals paid biweekly).

Agency Response
In its August 31, 2015, response FNS stated:
FNS does not concur with this recommendation. We believe that the finding is based on
a misunderstanding of SNAP policy.
OIG states in the narrative regarding this finding that “inaccurate conversion factors were
used to determine SNAP recipient’s monthly income.” The draft report states, “SNAP
recipients … received more benefits than they were entitled” when the conversion factors
were applied.
The use of these conversion factors is an option to States. As provided by 7 CFR
273.10(c)(2):

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43

Whenever a full month's income is anticipated but is received on a weekly or
biweekly basis, the State agency shall convert the income to a monthly amount by
multiplying weekly amounts by 4.3 and biweekly amounts by 2.15, use the State
Agency's PA conversion standard, or use the exact monthly figure if it can be
anticipated for each month of the certification period.
Note that the policy allows States to apply the State Agency’s public assistance (PA)
conversion standard. This means the State may use TANF conversion standards of 4.333
for weekly or 2.167 for monthly income.
Thus, a State that utilizes one of these three methods is ensuring that the SNAP recipient
receives the correct benefit to which they are entitled.
It may be helpful to read more about the history behind this policy.
These conversion factors are long-standing policy. They appear in the US House
Committee on Agriculture’s Report which recommended passage of the Food Stamp Act
of 1977. The 862-page report is the result of two and one-half years of work by the
Committee to analyze the growth and cost of the program, determine the nature and
extent of administrative problems, and recommend actions for the future of the program.
The report provides, “The eligibility worker should convert income received … to a
monthly figure by use of a multiplier in the following manner: (1) Weekly income—
multiply by 4.3 or 4 1/3. (2) Biweekly income—multiply by 2.15 or 2 1/5.”
FNS codified these conversion factors through rulemaking, including a Notice of
Proposed Rulemaking published on May 2, 1978 and a Final Rule published on October
17, 1978. Between the Proposed Rulemaking and the Final Rulemaking, the Department
made an important addition.
The Preamble of the Final Rule describes comments received regarding determining
income: “Nearly 500 comments were received on this portion of the regulations. … State
and local agencies were frequently concerned with the use of the proposed multipliers for
converting income received on a weekly (4.3) or biweekly (2.15) basis. Some
recommended using 4.333 and 2.167 to conform to the AFDC factors for weekly and
biweekly income conversions.”
To address this, “The final rules permit State agencies to use the public assistance
conversion factors for multiplying weekly or biweekly income to obtain monthly income.
State agencies may also use the exact monthly figure if it can be obtained for the entire
certification period.”
Thus, States may use the more precise conversion factors from their TANF programs, or
they may use the 4.3 and 2.15 multipliers, or they may use the actual income if it can be
anticipated. All three methods are “accurate” and would result in the household receiving
the benefits to which they are entitled.

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AUDIT REPORT 27601-0002-41

OIG Position
We do not accept FNS’ management decision on this recommendation. It is OIG’s position that
for those States that choose to use FNS’ conversion factors, which was the majority of the States
we reviewed, that the conversion factors be as accurate as possible in order to eliminate the
inequality in the SNAP benefits received by those with monthly incomes. As was noted in the
report, FNS’ conversion factors enabled SNAP recipients paid on a weekly and bi-weekly basis
to receive more SNAP benefits than those recipients paid on a monthly basis. To reach
management decision on this recommendation, FNS needs to amend the SNAP regulations to
specify the accurate weekly and biweekly income conversion factors (4.33 for individuals paid
weekly and 2.17 for individuals paid biweekly) and provide an estimated completion date for this
action.

Recommendation 19
Notify the States of the accurate conversion factors to use to calculate SNAP recipients’ monthly
income (4.33 for individuals paid on a weekly basis, and 2.17 for individuals paid on a biweekly
basis).

Agency Response
In its August 31, 2015, response FNS stated:
FNS does not concur with this recommendation. Please refer to FNS’s response to
Recommendation 18.

OIG Position
We do not accept management decision on this recommendation. To reach management
decision, FNS needs to notify the States of the accurate conversion factors to use to calculate
SNAP recipients’ monthly income (4.33 for individuals paid on a weekly basis, and 2.17 for
individuals paid on a biweekly basis) and provide an estimated completion date for this action.

AUDIT REPORT 27601-0002-41

45

Scope and Methodology 
We conducted an audit of the QC process that FNS and States used to determine the SNAP error
rates. To accomplish our objectives, we performed fieldwork at FNS’ national office and all
seven of its regional offices (see Exhibit B). We also performed fieldwork at the State agencies
responsible for administering SNAP in the following eight States: California,81 Connecticut,
Florida, Maryland, Nebraska, Texas, Vermont, and Wisconsin. We non-statistically selected at
least one State from each FNS region, based primarily on the amount of SNAP benefits and
reported error rate.82 We performed our audit work from March 2013 through January 2015.
For the 8 States, we statistically selected 80 of the State-completed 8,936 QC cases in FY 2011.
We evaluated whether the States’ QC reviewers adequately reviewed those cases and drew the
appropriate conclusions. We also statistically selected 60 of the 3,167 QC cases that were
reviewed by both the States and FNS in FY 2011. We evaluated whether FNS’ QC reviewers
adequately reviewed the cases to validate both the conclusions reached by the States’ QC
reviewers and the States’ reported error rates. In total, we reviewed 140 statistically selected QC
cases from FY 2011 for the eight States. See Exhibit D for further details on our sampling
methodology.
In developing the findings for this report, we also performed the following steps and procedures:
At the FNS National Office (see Exhibit B), we:
·

reviewed the pertinent laws and regulations governing the QC review processes for
SNAP and the current policies and procedures FNS established as guidance for SNAP
and the QC reviews; and

·

interviewed key personnel to gain an understanding about SNAP, the QC processes,
SNAP information systems, and National Office oversight.

At the FNS regional offices (see Exhibit B), we:
·

reviewed supplemental guidance issued for the QC review processes;

·

interviewed key personnel to gain an understanding about SNAP, the FNS regional office
QC review processes, regional office oversight of State activities, and SNAP information
systems capabilities and internal controls;

81

The State of California does not perform QC reviews for all of its counties, but instead allows certain counties to
perform their own reviews. To adequately cover the QC process in California, we non-statistically selected two of its
counties that conducted their own QC reviews. The two counties selected were Fresno County and Los Angeles
County. The two counties were selected based on the amount of program benefits and reported error rate.
82
We selected a mix of large, medium, and small States based on the level of SNAP funding. For example, we
classified a State as small if it issued less than $700 million in SNAP benefits, medium if it issued between
$700 million and $2 billion in SNAP benefits, and large if it issued more than $2 billion in SNAP benefits. We
ultimately selected two small States (Connecticut and Vermont), three medium States (Maryland, Nebraska, and
Wisconsin), and three large States (California, Florida, and Texas).

46

AUDIT REPORT 27601-0002-41

·

obtained QC data for FYs 2011 and 2012 from ROQCTS and analyzed the data’s
reliability and integrity;83 and

·

reviewed a statistical sample of FY 2011 QC case files subjected to FNS QC reviews to
evaluate the accuracy and consistency of the QC review assessments and determinations.

At selected State offices (see Exhibit B), we:
·

reviewed State manuals and guidance issued for administration of SNAP and the QC
review processes;

·

interviewed personnel to gain an understanding about SNAP, the State office QC review
processes, State office oversight, and SNAP information systems capabilities and internal
controls;

·

obtained QC data for FYs 2011 and 2012 from ROQCTS, which included information
fed directly from the State SNAP QCS, and analyzed the data’s reliability and integrity;84
and

·

reviewed a statistical sample of FY 2011 QC case files subjected to State-only QC
reviews for seven of the eight selected States to evaluate the accuracy and consistency of
the QC review assessments and determinations.

At selected county offices (see Exhibit B), we:
·

reviewed county manuals and guidance issued for administration of SNAP and the QC
review processes;

·

interviewed key personnel to gain an understanding about SNAP, the county office QC
review processes, county office oversight, and SNAP information systems capabilities
and internal controls; and

·

reviewed the statistical sample of FY 2011 QC case files subjected to county QC reviews
for one of the selected counties in California to evaluate the accuracy and consistency of
the QC review assessments and determinations.

We conducted this performance audit in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions
based on our audit objectives. We believe the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.

83

To determine the data’s reliability and integrity, we compared the information in the QC case files for our
sampled QC cases to the information in ROQCTS.
84
Id.
AUDIT REPORT 27601-0002-41

47

Abbreviations 
BBCE ..........................
CE ...............................
C.F.R. ..........................
E&T.............................
FNS .............................
FPL..............................
FY ...............................
GAO ............................
MARO.........................
MPRO .........................
MWRO........................
NERO..........................
OGC ............................
OIG .............................
OMB ...........................
QC ..............................
ROQCTS .....................
SERO ..........................
SNAP ..........................
SNAP QCS..................
SWRO .........................
TANF ..........................
U.S.C. ..........................
WRO ...........................

48

Broad Based Categorical Eligibility
Categorical Eligibility
Code of Federal Regulations
Employment and Training
Food and Nutrition Service
Federal Poverty Level
Fiscal Year
Government Accountability Office
Mid-Atlantic Regional Office
Mountain Plains Regional Office
Midwest Regional Office
Northeast Regional Office
Office of the General Counsel
Office of Inspector General
Office of Management and Budget
Quality Control
Regional Office Quality Control Tracking System
Southeast Regional Office
Supplemental Nutrition Assistance Program
SNAP Quality Control System
Southwest Regional Office
Temporary Aid for Needy Families
United States Code
Western Regional Office

AUDIT REPORT 27601-0002-41

Exhibit A: Summary of Monetary Results 
This exhibit lists findings and recommendations that had a monetary result, and includes the type
and amount of the monetary result.

Finding

Recommendation

Description

2

11

QC Reviews Not
Conducted In
Accordance with
SNAP Regulations

4

16

FNS’ BBCE Policy
Does Not Comply With
SNAP Regulations

17

FNS’ BBCE Policy
Understates SNAP
Error Rate

4

TOTAL MONETARY RESULTS

Amount

Category

$5,568,534

Questioned Costs,
No Recovery

$241,655

Questioned Costs,
No Recovery

$178,237,675

Questioned Costs,
No Recovery

$184,047,864

AUDIT REPORT 27601-0002-41

49

Exhibit B:  Audit Sites Visited 
This exhibit shows the name and location of all sites visited, including FNS offices and State and
county offices responsible for the QC reviews.

AUDIT SITE

LOCATION

FNS National Office

Alexandria, VA

FNS Southwest Regional Office

Dallas, TX

State Office
Texas Health and Human Services Commission

Austin, TX

FNS Southeast Regional Office

Atlanta, GA

State Office
Florida Department of Children and Families

Tallahassee, FL

FNS Western Regional Office

San Francisco, CA

State Office
California Department of Social Services

Sacramento, CA

County Offices
County of Los Angeles Department of Public Social Services
County of Fresno Department of Social Services

City of Industry, CA
Fresno, CA

FNS Midwest Regional Office

Chicago, IL

State Office
Wisconsin Department of Health Services

Madison, WI

FNS Northeast Regional Office

Boston, MA

State Offices
Connecticut Department of Social Services
Vermont Agency of Human Services at Department for Children and
Families

Hartford, CT
Essex Junction, VT

FNS Mid-Atlantic Regional Office

Robbinsville, NJ

State Office
Maryland Family Investment Administration at Department of Human
Resources

Baltimore, MD

50

AUDIT REPORT 27601-0002-41

FNS Mountain Plains Regional Office

Denver, CO

State Office
Nebraska Department of Health and Human Services

Lincoln, NE

AUDIT REPORT 27601-0002-41

51

Exhibit C:  FNS Allotment Test Flowchart 
This exhibit compares the allotment test QC reviewers currently use to determine errors versus
the process the Federal regulations require for determining errors.
FNS Allotment Test85
Comparison I:

Federal Regulations86
Calculate Benefit Based on Current Information

Calculate Benefit Based on Current Information

Compare Calculated Benefit to Benefit Recipient is
Currently Receiving

Difference Less Than
the Threshold

Stop Review
No Reportable Error

Difference Greater
Than the Threshold
(Comparison I Error)

Identify Any Changes in Household Information

Determine If Changes Were Reported by the Recipient &
Handled by the State Agency Correctly

Stop Review If Reported & Handled Correctly. No
Reportable Error
Go to Comparison II

Changes Not Reported or Handled Correctly
Comparison II:

85
86

Calculate Benefit Based on Current Information,
Excluding Any Differences Allowed by Policy (e.g.
differences in income that were not required to be
reported).

Error Less Than or
Equal to Threshold

Error Greater Than
Threshold

Compare Calculated Benefit to Benefit Recipient is
Currently Receiving

No Reportable
Error

Reportable Error
Amount

Difference Less Than
or Equal to the
Threshold

Difference Greater
Than the Threshold
(Comparison II Error)

Stop Review
No Reportable Error

Reportable Error
Equals the Lesser of
the Comparison I or
Comparison II Errors

FNS Handbook 310.
7 CFR 275.12.

52

AUDIT REPORT 27601-0002-41

Exhibit D:  Sampling Methodology 
This exhibit shows our sampling methodology for those SNAP QC cases statistically selected for
review. It also shows our sampling methodology for those States non-statistically selected for
review.
Objective
The objective was to determine whether FNS and the State agencies responsible for
administering SNAP have adequate controls in place to ensure that SNAP payment error rates
were accurately determined and reported, the appropriate actions were taken to reduce the error
rates, and errors were timely corrected when detected. We used non-statistical and statistical
sampling87 to ensure objectivity of our audit results, but no projections were made.
Audit Universe88
In FY 2011, FNS and the States performed a QC review on a total of 57,892 SNAP cases.
Due to resource and time constraints, we did not include all States in our audit universe. We
focused on eight States for review - California, Connecticut, Florida, Maryland, Nebraska,
Texas, Vermont, and Wisconsin. With this selection of States, we had a sample of 3 large States,
2 medium States, and 3 small States; 3 States with poor error rates, 3 States with average error
rates, and 2 States with good error rates; States that received bonuses totaling $49,152,378 or
were assessed sanctions totaling $6,877,547; and 2 States that were able to improve error rates
through various corrective actions. Overall, the 8 States issued benefits of $22,058,243,249
(30 percent) of the $74,620,790,688 in nationwide benefits issued in FY 2012.
Additional considerations in our State selections were selecting a State from each FNS region
and two from the FNS Northeast Region because of the consistently high error rates of the States
within that region. In selecting the eight States, the audit team not only wanted to obtain a
sample of States throughout the country, but also States with a variety of SNAP error rate
characteristics. We selected States of various sizes in terms of benefits paid out to recipients
(States that paid out more than $2 billion in 2012 are considered large, States that paid out
between $700 million and $2 billion in 2012 are considered medium, and States that paid out less
than $700 million in 2012 are considered small), as well as States that had displayed an ability to
have low error rates, States that had struggled to achieve low error rates, and States that had
received bonuses or had been assessed sanctions.
In summary, our total audit universe consists of the 8 States mentioned above, and a total of
8,936 QC reviews in FY 2011. The State only or the State and FNS reviewed these cases.

87

Also referred to as random or probability sampling.
All data used for this sample was from the most recent available information. Benefit information was available
through FY 2012, while error rate, bonuses and sanctions, and QC case information was available through FY 2011.
88

AUDIT REPORT 27601-0002-41

53

Sample Design
Of the 8,936 cases total, we selected 140 for review. The State and FNS reviewed 60, and the
State only reviewed 80.
We chose to use a stratified sample design because we wanted to be able to make separate
projections if projections were made. We used two strata – stratum 1 consisted of cases
reviewed by the State and FNS, and stratum 2 of cases reviewed by the State only. Within each
stratum, we selected a simple random sample of cases. The sampling probability of selection is
equal for each case within each stratum. A summary of the strata counts is presented in
table 1 below.
Table 1. Stratified sample design counts
Strata

Universe counts number of cases

Sample counts number of cases

Stratum I: Cases reviewed
by both the State and FNS

3,167

60

Stratum II: Cases reviewed
by the State only

5,769

80

Total

8,936

140

Results
We are not using this statistical sample to make projections to the universe of cases. We decided
to omit projections in this report because of our internal requirements for precision on statistical
estimates, combined with our sample size, as it relates to our findings. Additionally, some of our
findings are relevant to cases outside of our sample, as opposed to the original universe we
worked with. We did not have a way to predict this before the sample development stage.
Hence, the audit report presents actual findings only.

54

AUDIT REPORT 27601-0002-41

Agency's Response 

USDA’S
FNS
RESPONSE TO AUDIT REPORT

AUDIT REPORT 27601-0002-41

55

United States
Department of
Agriculture
Food and
Nutrition
Service

DATE:

August 31, 2015

AUDIT
NUMBER:

27601-0002-41

TO:

Gil H. Harden
Assistant Inspector General for Audit
Office of Inspector General

FROM:

/s/ (for): Audrey Rowe
Administrator
Food and Nutrition Service

SUBJECT:

FNS: Quality Control Process for SNAP Error Rate

3101 Park
Center Drive
Room 712
Alexandria, VA
22302-1500

This letter responds to the Office of Inspector General (OIG) official draft report for audit
report number 27601-0002-41, FNS: Quality Control Process for SNAP Error Rates.
Specifically, the Food and Nutrition Service (FNS) is responding to the content,
recommendations and Exhibits in the audit report.
FNS Response to the Introduction section of the audit report, “What OIG Found”:
The Quality Control system is an integral component of FNS’s responsibility to
effectively administer the Program to ensure that families and communities receive critical
nutrition assistance while practicing strong public stewardship. FNS takes its role very
seriously to preserve the integrity of the system. Thus, while we would like to express our
appreciation for the audit of the Quality Control system, as a number of the
recommendations are helpful and identify areas for needed improvement, we also have
some concerns with the report.
First and foremost, FNS is concerned about the expansion of the audit to encompass FNS
policies that are outside of the operations of the Quality Control system. It is under FNS
purview to establish policy. The recommendations of the audit reveal that there was not
full understanding or acknowledgement of the complexities of SNAP certification and
Quality Control policy which have their basis in statute and regulation. Some assertions
are made without information that would allow us to adequately understand the issues or
follow up on the concerns raised. For example, the report states, “We were provided
documentation by State officials from two of the States in our audit that described the
mitigation work performed by error review committees on active error cases and the
results of these mitigation activities on reported errors”.1 However, throughout the report,
references are made to unidentified State officials or undocumented conversations,
seemingly alleging that this activity is consistent among all eight States reviewed, even
though documentation was obtained from two of the eight States. As a result, portions of
1

Reference is found in Section 1, page 10, of the report.

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the OIG audit may be misleading by making it appear that errors are being underreported
when, in fact, actions being taken are mostly in accordance with current policy and
regulations.
Additionally, several references are made throughout the report that are attributed to a
single State official in one State, implying that this individual has knowledge of or is
speaking on behalf of other States. Furthermore, FNS is concerned that the report fails to
prominently indicate in the summary that these conclusions are based on a review of 80
cases out of the 8,936 cases completed in these eight States in FY 2011. Instead, this
information is contained at the end of the report in the scope and methodology section.
This represents less than one percent of all cases reviewed in the eight States selected;
however, the report draws conclusions indicating the allegations are widespread.
Similarly, the second finding also concludes that federal reviews are inadequate, but does
not note until later in the report that this conclusion is based on a review of 60 out of
3,167 cases, or less than two percent. We believe some articulation of the scope of these
observed problems would be helpful to readers of the audit report.
Your report referred to a limited number of cases where you found the review process did
not identify shortcomings in the verification, but then failed to provide any specific
information to aid the Agency in understanding your viewpoint on the inadequacies of
the review of these cases. As this is an important part of the business which we conduct
on an ongoing basis, it would have been helpful if you in some way followed the process
we use to document cases where we have disagreed. For example, add an appendix to the
report that individually identifies each case reviewed, the determination of the federal rereviewer, your observation, and then explain what is incorrect with the review,
disposition or findings of the case. This would allow FNS to further review your
conclusions from individual cases in order to identify trends or training opportunities to
strengthen the federal re-review process.
We are also very concerned about the summary of monetary results presented in Exhibit
A of this report. The information is presented in a manner that implies these costs
represent underreported improper payments, which is not the case. In addition, additional
monetary estimates are provided within the context of the report implying that States
underreported improper payments by attributing the entire reduction in a State’s payment
error rate to alleged activities cited in the report.2 However, at no point did the audit
document other factors in a State that may have contributed to a reduction in the State’s
error rate. State agencies have made significant investments over the years in policy
training for staff, improved eligibility systems, and expanded data matching, examples of
activities implemented to prevent errors before they occur. In fact, the largest estimate
provided in Exhibit A is based on incorrect assertion that FNS’s Broad Based Categorical
Eligibility Policy understates the SNAP error rate. It is not clear to FNS the basis for this
allegation as eligibility determinations are made in accordance with FNS’s statutory
authority. Furthermore, FNS could not replicate the monetary estimates provided and
find any transparent reference to the methodology used to develop them. FNS is
2

For example, the reference on page 9 to an alleged estimated value of $413.5 million in improper payments from
Table 1.

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requesting that the methodology used to develop these estimates, including a list of
assumptions that were made, be shared with the Agency for review and be prominently
noted in the report so as not to inadvertently mislead the audience.

AN EQUAL OPPORTUNITY EMPLOYER

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FNS responses to the report’s recommendations:
Recommendation 1:
Perform an analysis of the cost/benefit of changing the quality control (QC) process from a two-tier
process that relies on the States to make error determinations to a one-tier process where only FNS or
an unaffiliated contracted third party reviews cases for errors. If determined cost beneficial, establish
a timeline for implementing the change.

FNS Response:
FNS concurs with this recommendation. However, the audit refers to the 1987 National
Academy Panel study that recommended FNS adopt a one-tier QC system. The audit did not
recognize that FNS commissioned an evaluation study done by the Urban Institute following
the 1987 recommendation. That report found: 1) there was no strong evidence that the error
rates would be any different under a one-tier QC system, 2) there was little evidence that there
is a difference in the quality of the reviews between the one-tier and two-tier system, and 3)
under comparison of equal sample size, a Federal one-tier system would cost the Federal
government 16% more than the two-tiered system. After receiving the results of that study, no
change was made by the Agency to institute a one-tier system. Nevertheless, we will pursue a
reexamination of a one-tier QC alternative to the current two-tier system.
Estimated completion date – September 30, 2016
Recommendation 2:
Enforce FNS’ policy prohibiting States from using error review committees to review selected active
error cases to assess the potential for reducing or eliminating errors.

FNS Response:
FNS concurs with this recommendation. As stated in the report, current FNS guidance addresses
the use of error review committees and provides guidelines for the use of error review
committees to prevent bias. FNS had already implemented a review process to evaluate the
processes used by States to avoid bias and maintain the integrity of the Quality Control system.
FNS advised OIG of this process in our discussion on January 26, 2015; however, it was not
noted in the report. FNS conducted its first review in Virginia in April 2015 and its second
review in Vermont in July 2015. Additional reviews are planned for the next year. Upon
completion of the reviews, FNS will take appropriate action to enforce FNS policy if it is
determined that a State is using an error review committee to reduce or eliminate potential errors.
Estimated completion date – September 30, 2015

AN EQUAL OPPORTUNITY EMPLOYER

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Recommendation 3:
Issue guidance to States on the appropriate use of private consultants during the QC process. The
guidance should prohibit States from using private consultants to advise States’ QC staff to review
selected QC error cases that are still active in order to assess the potential for reducing or eliminating
errors.

FNS Response:
FNS concurs with this recommendation on the condition that the guidance is specific to State’s
compliance with federal regulations and policies. FNS has previously issued guidance to States
with the expectation that they prevent unacceptable bias from affecting the results of Quality
Control case reviews. We will reissue this guidance and provide technical assistance as
necessary. The fact that private consultants may be involved in providing improper advice does
not absolve the State of its responsibility in this area. Therefore, our focus will remain on States
implementing appropriate processes. In addition, FNS is requesting clarification from OIG as its
determination of the legal authority the federal government possesses to restrict State agencies
from using private consultants.
Estimated completion date – September 30, 2015
Recommendation 4:
Issue guidance to States that prohibits QC reviewers from inconsistently and incorrectly applying
policies in order to mitigate QC errors. The guidance should prohibit (1) using different income
averaging periods to manipulate income, (2) creating off-setting deductions, and (3) applying other
techniques specifically designed to inappropriately reduce and/or eliminate QC errors.

FNS Response:
FNS concurs with this recommendation. FNS guidance and policies already provide guidelines
on income averaging and deductions discovered during the QC review, and there is existing
guidance on eliminating bias in the QC review process. We will revise and reissue this guidance
to include discussion of the practices that the auditors encountered, and stipulate that mitigating
errors is an inappropriate approach to doing the QC work. The revisions will make clear that
States must follow their standard averaging rules and those rules are to be consistently applied to
all cases. It will also stress the rules for allowances of deductions and when a reviewer is
allowed to apply deductions relative to the actual circumstances of the case.
Estimated completion date – September 30, 2015
Recommendation 5:
Review the QC process administered at those States whose error rates significantly dropped after
using error review committees and/or private consultants to ensure that the QC reviews were
performed in compliance with FNS’ QC review requirements. At a minimum, the reviews should

AN EQUAL OPPORTUNITY EMPLOYER

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determine whether States are treating sampled cases consistently during the QC process and not
mitigating errors on active QC cases.

FNS Response:
FNS concurs with this recommendation. FNS already has an existing process to monitor and
review integrity of State QC systems. FNS uses a data driven approach to identify states for
review. FNS will continue to review QC processes in those States where the data indicates
warranted attention.
Estimated completion date – September 30, 2015
Recommendation 6:
Review the QC process administered at all States on a periodic basis to ensure compliance with FNS’
QC review requirements and that reviewer bias is absent from the QC process.

FNS Response:
FNS concurs with this recommendation. FNS already has QC management evaluation review
modules. We will enhance these modules to put a greater focus on QC integrity using what we
have learned through our reviews.
Estimated completion date – December 31, 2016
Recommendation 7:
If inappropriate QC review practices are found at the selected States reviewed pursuant to
Recommendations 5 and 6, correct the identified review deficiencies and adjust the States’ error rates
as appropriate.

FNS Response:
FNS concurs with this recommendation. If determined that any State Agency is using
unacceptable QC review practices, FNS will take action based on regulatory and statutory
authority.
Recommendation 8:
Amend FNS QC policies and procedures (including FNS Handbook 310) to ensure QC reviewers
base their conclusions on information verified through documentation or contacts with third parties
who confirmed the accuracy of the information.

FNS Response:
FNS does not concur with this recommendation. “Likely conclusion” policy was implemented
specifically to assist States in using reliable information to complete more cases, provide more

AN EQUAL OPPORTUNITY EMPLOYER

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accurate reporting to FNS, and prevent the bias that has been identified earlier in this report.
Removing the use of likely conclusion would increase the number of dropped cases, jeopardize
integrity, and may allow State Agencies to use dropped cases to under report errors.
Recommendation 9:
Amend FNS QC policies and procedures (including FNS Handbook 310) to limit the use of “likely
conclusion.”

FNS Response:
FNS does not concur with this recommendation. As indicated in our response to
Recommendation 8, removing the use of likely conclusion would increase the number of
dropped cases, jeopardize integrity, and allow State Agencies to use dropped cases to under
report errors. We will strengthen language about the appropriate use of likely conclusion in FNS
Handbook 310 to provide more structure on the use of this policy to States.
Estimated completion date – September 30, 2016
Recommendation 10:
Amend FNS QC policies and procedures (including FNS Handbook 310) to mandate that
employment and training program participation be verified during the QC process.

FNS Response:
FNS does not concur with this recommendation. Under current review procedures, QC
reviewers already check for non-compliance with Employment and Training (E&T) program
requirements. We will review procedures to identify opportunities to strengthen the rules on
how reviewers must verify compliance with E&T requirements.
Estimated completion date – September 30, 2016
Recommendation 11:
Amend FNS QC policies and procedures (including FNS Handbook 310) to require the error
tolerance threshold not be applied when calculating the SNAP recipient’s reportable error amount
until all variances (including those permitted by SNAP policy) have been properly identified and
accounted for during the QC process.

FNS Response:
FNS does not concur with this recommendation. We believe this finding may be a result of a
misunderstanding of SNAP Quality Control policy. The current two-step process was developed
to adequately account for statutory eligibility rules as well as regulatory policy flexibilities. The
procedure proposed in this recommendation would eliminate a step in the current process and

AN EQUAL OPPORTUNITY EMPLOYER

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result in undue penalties on States as errors would be called in some instances where the State
issued the correct amount of benefits following statutory rules.
Recommendation 12:
Amend FNS QC policies and procedures (including FNS Handbook 310) to require that (1) SNAP
recipient reporting errors identified during the QC process are considered separately from the State
agency’s failure to act on the errors and (2) SNAP recipient reporting errors and State agency failure
to act on the errors are individually assessed against their respective regulatory timeframes.

FNS Response:
FNS does not concur with this recommendation. We believe that the finding is based on a
misunderstanding of SNAP policy.
Quality Control reviews each sampled case to ensure payment accuracy in the sample month. As
long as the sample month benefits are reviewed, we find that considering the client’s time to
report separately from the State Agency’s time to act irrelevant. Furthermore, it would be
difficult for reviewers to determine a clear timeline of who took what action in all cases.
Reviewing the final benefit determination in the sample month is the issue. To determine a
payment error based on reporting does not make sense. FNS believes we are appropriately
measuring the certification requirement as established by regulations and changing the review
procedures as suggested would unfairly bias the review process. Just as importantly, it has no
impact on the benefit amount and, therefore, is irrelevant to improper payment assessment.
Recommendation 13:
Implement QC policies and procedures to ensure the States report and act upon information obtained
during the QC process affecting SNAP recipients’ benefits within required timeframes.

FNS Response:
FNS does not concur with this recommendation as we believe we already have an established
policy to address this concern. It is current policy for States to follow up on the results of the
review and, where appropriate, to establish claims when they should be established. We will
reissue guidance and expand upon it to make clear that it is the responsibility of State staff to
report to the eligibility worker that information has been uncovered by a Quality Control case
review.
Estimated completion date – September 30, 2016
Recommendation 14:
Modify FNS Handbook 315 to require Federal reviewers to (1) obtain the necessary information from
the SNAP recipients’ case files to conduct a thorough and independent review to determine the
accuracy of the States’ results and (2) adequately follow up on all discrepancies.

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P age |9

FNS Response:
FNS does not concur with this recommendation. Current FNS policy requires that
Federal reviewers review information and documents relevant to the case. As written,
OIG’s recommendation goes beyond current policy to require a specific way in which
information must be accessed. FNS submitted to OIG suggested revisions to the wording
of this recommendation that focus on the thoroughness of the review. Our suggested
language states “Modify FNS Handbook 315 and related procedures to (1) make the
Federal re-review an independent review of the facts of the case and (2) require adequate
follow up on discrepancies.”
With the increasing modernization of the Program, there are no longer paper case files in most
States. We have struggled with the issue of how to adequately review in light of the
complexities brought about by the States’ computerization of their records. We will continue to
examine this issue to determine a more appropriate approach to having access to the information
that the auditors think would be in the case files, and ensure that Federal reviewers have all of
the information and documents necessary to conduct a thorough and independent review of the
facts of each case.
Recommendation 15:
Modify the QC to QC review process to require the development of regional office corrective action
plans that are assessed and monitored by FNS management.

FNS Response:
FNS concurs with this recommendation. We will design and establish a corrective action system
for the QC of QC process.
Estimated completion date – September 30, 2016
Recommendation 16:
Obtain from the Office of the General Counsel (OGC) a legal opinion on whether FNS’ BBCE policy
complies with the Federal regulation requiring that all SNAP household members must receive, or be
authorized to receive, services from another program that meets SNAP regulatory requirements (i.e.,
State-funding percentages, program purposes, and participant gross monthly income levels).

FNS Response:
FNS will consult with its Office of General Counsel and senior policy officials and consider the
appropriateness of obtaining a legal opinion on whether FNS’s BBCE policy complies with
Federal regulations requiring that all SNAP household members must receive, or be authorized
to receive, services from another program that meets SNAP regulatory requirements.
Estimated completion date – September 30, 2016

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P a g e | 10

Recommendation 17
Amend FNS’ QC procedures to state that BBCE recipients’ eligibility for SNAP benefits must be
fully assessed during the QC review process and that any errors identified during the QC review be
included in the error rate.

FNS Response:
FNS does not concur with this recommendation. We believe that the finding is based on a
misunderstanding of SNAP policy.
Current review procedures align with the BBCE policy. The program that confers BBCE is a
separate program. It is not in the scope of SNAP Quality Control to review this program.
Recommendation 18:
Amend the SNAP regulations to specify the correct weekly and biweekly income conversion factors
(4.33 for individuals paid weekly and 2.17 for individuals paid biweekly).

FNS Response:
FNS does not concur with this recommendation. We believe that the finding is based on a
misunderstanding of SNAP policy.
OIG states in the narrative regarding this finding that “inaccurate conversion factors were used to
determine SNAP recipient’s monthly income.” The draft report states, “SNAP recipients …
received more benefits than they were entitled” when the conversion factors were applied.
The use of these conversion factors is an option to States. As provided by 7 CFR 273.10(c)(2):
Whenever a full month's income is anticipated but is received on a weekly or biweekly
basis, the State agency shall convert the income to a monthly amount by multiplying
weekly amounts by 4.3 and biweekly amounts by 2.15, use the State Agency's PA
conversion standard, or use the exact monthly figure if it can be anticipated for each
month of the certification period.
Note that the policy allows States to apply the State Agency’s public assistance (PA) conversion
standard. This means the State may use TANF conversion standards of 4.333 for weekly or
2.167 for monthly income.
Thus, a State that utilizes one of these three methods is ensuring that the SNAP recipient receives
the correct benefit to which they are entitled.
It may be helpful to read more about the history behind this policy.

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P a g e | 11

These conversion factors are long-standing policy. They appear in the US House Committee on
Agriculture’s Report which recommended passage of the Food Stamp Act of 1977. The 862page report is the result of two and one-half years of work by the Committee to analyze the
growth and cost of the program, determine the nature and extent of administrative problems, and
recommend actions for the future of the program.
The report provides, “The eligibility worker should convert income received … to a monthly
figure by use of a multiplier in the following manner: (1) Weekly income—multiply by 4.3 or 4
1/3. (2) Biweekly income—multiply by 2.15 or 2 1/5.”
FNS codified these conversion factors through rulemaking, including a Notice of Proposed
Rulemaking published on May 2, 1978 and a Final Rule published on October 17,
1978. Between the Proposed Rulemaking and the Final Rulemaking, the Department made an
important addition.
The Preamble of the Final Rule describes comments received regarding determining income:
“Nearly 500 comments were received on this portion of the regulations. … State and local
agencies were frequently concerned with the use of the proposed multipliers for converting
income received on a weekly (4.3) or biweekly (2.15) basis. Some recommended using 4.333
and 2.167 to conform to the AFDC factors for weekly and biweekly income conversions.”
To address this, “The final rules permit State agencies to use the public assistance conversion
factors for multiplying weekly or biweekly income to obtain monthly income. State agencies
may also use the exact monthly figure if it can be obtained for the entire certification period.”
Thus, States may use the more precise conversion factors from their TANF programs, or they
may use the 4.3 and 2.15 multipliers, or they may use the actual income if it can be
anticipated. All three methods are “accurate” and would result in the household receiving the
benefits to which they are entitled.
Recommendation 19:
Notify the States of the correct conversion factors to use to calculate SNAP recipients’ monthly
income (4.33 for individuals paid on a weekly basis, and 2.17 for individuals paid on a biweekly
basis).

FNS Response:
FNS does not concur with this recommendation. Please refer to FNS’s response to
Recommendation 18.

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FNS Response to Attachments:
FNS has provided responses to the chart from the audit report, Exhibit A.

Exhibit A – Summary of Monetary Results
Finding
No.
Recommendation Description

2

11

QC reviews
Not
Conducted In
Accordance
with SNAP
Regulations

Amount

$5,568,534

FNS’ BBCE
Policy Does
Not Comply
With SNAP
Regulations

4

4

16

17

FNS’ BBCE
Understates
SNAP Error
Rate

Category

Questioned
Costs, No
Recovery

$241,655

Questioned
Costs, No
Recovery

$178,237,675

Questioned
Costs, No
Recovery

AN EQUAL OPPORTUNITY EMPLOYER

FNS Response

FNS does not concur with
the calculation. We
believe the current process
appropriately measures
based upon existing
policy. FNS is also not
clear on the methodology
used as we could not
replicate this estimate.
FNS does not concur with
this calculation as we
believe these identified
cases are done following
SNAP BBCE policy. FNS
is also not clear on the
methodology used as we
could not replicate this
estimate.
FNS does not concur with
this calculation as we
believe these identified
cases are done based upon
the SNAP BBCE policy.
FNS is also not clear on
the methodology used as
we could not replicate this
estimate.

P a g e | 13

FNS has provided responses to the chart from the audit report, Exhibit C.

Exhibit C – FNS Allotment Test Flowchart
This exhibit compares the allotment test QC reviewers currently use to determine errors versus the
process the Federal regulations require for determining errors.
FNS Response
FNS does not agree with this
chart and the comparison created
by the auditors. Both the
references in the Food and
Nutrition Act of 2008 and the
regulation were done in
consideration of the current
procedures for the allotment test
which includes the full
procedures as outlined in the
FNS Handbook 310. Those
procedures existed before the
recent changes to the Act. The
regulations have always been less
detailed than the handbook
instructions as the handbook
responds to the regulations with
guidance and interpretation. The
misinterpretation by the auditors
to reinterpret the regulations in
the absence of the guidance in the
Handbook fails to recognize the
structure that has existed in the
SNAP Quality Control system.

AN EQUAL OPPORTUNITY EMPLOYER

To learn more about OIG, visit our website at
www.usda.gov/oig/index.htm
How To Report Suspected Wrongdoing in USDA Programs
Fraud, Waste, and Abuse
File complaint online: http://www.usda.gov/oig/hotline.htm
Click on Submit a Complaint
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