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Average time to establish eligibility:

15 to 30 minutes-5 percent.
30 to 45 minutes-50 percent.
45 to 60 minutes-21 percent.
60 to 75 minutes-11 percent.
90 minutes and above-13 percent.

Average-51 minutes. Number of trips required by recipients to establish eligibility status:

1 trip-11 percent. 2 trips-84 percent. 3 trips—5 percent. The American Data Systems, Inc. viewed the Consolidated Standards System as a step in the proper direction for making the certification system simple.

He defined Consolidated Standards System thusly:

FOOD STAMP CONSOLIDATED STANDARDS DEFINITION

The Consolidated Standards concept for Food Stamps is a process whereby specific U.S.D.A. allowable expenses are redefined from individual items or groups of items to a single standard. This single standard is expressed as a dollar amount by household size and by income level. This redefinition is accomplished by averaging historical payments made for the individual items to be consolidated. Statistical sampling techniques are employed to survey individual case payment records to develop these averages.

Consolidated Standards do not mean that all recipient households of the same size have the same monthly purchase requirement. Because the income of each household is considered separately in the computation of the purchase requirement, each household remains a distinct and individual case.

The need for change was clearly articulated in the Report of the General Accounting Office dated February 28, 1975. FINDINGS OF THE GENERAL ACCOUNTING OFFICE

(Report of Feb. 28, 1975) A, OBSERVATIONS OF THE CURRENT PROGRAM (1) Some States were having more problems than others regarding such things as establishing sampling universes, selecting cases for review, completing reviews of selected cases, developing adequate corrective action plans, and recruiting and training staff.

(2) Only non-public-assistance households are subject to the Service's quality control system. Although the eligibility of public assistance households is subject to review under HEW's quality control system, no check is required for such households on the accuracy of amounts paid for food stamps or the value of stamps issued. Also, certain households receiving general assistance from State and local agencies are not subject to review under either HEW's or the Service's quality control system.

(3) In June 1974, about half—7.3 million-of all food stamp recipients were on public or general assistance.

A Service official said that the Service had been trying to arrange for HEW to have the States verify food stamp payments and issuances for public assistance households as part of HEW's reviews and that both agencies agreed to this approach. The Service also plans to bring the general assistance cases under quality control review.

Data reported by the States for the 6 months ended June 1974 showed a high incidence of improper determinations (program errors) in establishing program eligibility and the amounts to be paid for food stamps. Error rates relating to food stamp allotments have been relatively low. Although the data may not be statistically reliable, preliminary overall figures indicate significant problems in maintaining program integrity.

(4) Nationally, 18 percent, or almost 1 in 5, of the active cases examined were considered to be ineligible. GAO roughly estimated that, of the total monthly bonus of $120 million received by all nonpublic-assistance households, about $23 million was received in 1 month by the households considered ineligible.

(5) GÃO did not estimate the additional amounts that would be applicable to errors involving the eligibility of public assistance households, the amounts paid for stamps, or the stamp allotment received.

Without further clarifications, reported error rates may not give a proper perspective on program eligibility because some error categories can include minor technical or clerical errors as well as substantive considerations. Some of these may be easily remedied and may not be indicative of serious problems in program integrity.

(6) Analysis and comparison of participant and target population data would enable the Service to identify low-participation groups on which outreach efforts may need to be concentrated.

State plans and reports indicated that outreach efforts varied considerably but generally did not evidence a systematic approach toward achieving established goals. They also were not specifically directed toward particular population segments where the outreach need may be greatest.

Concern about the effectiveness of outreach efforts has increased. In October 1974, the U.S. District Court of Minnesota ruled that the Secretary of Agriculture had failed to take effective steps to properly implement the outreach requirements of the Food Stamp Act. By February 1975, 18 other outreach cases were pending against various States.

Finally, the General Accounting Office asked two basic but vital questions:

Are all people in the program's target group aware of their potential eligibility for food stamp benefits?

Is the program benefiting only those who are genuinely eligible? In a real effort to secure the correct answers, the subcommittee suggested legislation which would ensure affirmative replies. (See appendix A.)

THE ADMINISTRATION'S POSITION

Mr. Edward Hekman, Administrator for the Food and Nutrition Service of the U.S. Department of Agriculture submitted the basic testimony for the administration.

Generally, Mr. Tlekman considered the following factors extremely important:

(1) The inclusion of the working poor in the program: eligibility for the program is not confined to welfare families. Effective work incentive features should be retained.

(2) The self-help principle is a vital part of the program and that feature is found in the effort that families must pay for coupon allotment. The bonus coupons then depend on family size and income.

(3) That the Food Stamp Program is a nutrition program and not an income transfer program. The mandated objective is to improve the nutrition of participating families.

(4) In accountability area, (we) will be talking to the states, and these plans will have to relate to quality control, to coupons, cash accountability, security of coupons and the accuracy and

timeliness of reports.
Mr. Hekman further stated:

Now, the Department is happy with this legislation that mandated a level of state efficiency and effectiveness.

As the previous witness stated, the Department also has the "stick" to withhold administrative funds. Next year, Mr. Chairman, we estimate those funds in total might be over $400 million.

So there is now a progran that we work with the states and towards getting this job done. Frankly, I have met with several governors recently on this issue. There are state problems. I can assure the committee that we are going to work very hard on this.

On the other hand, we are not going to use this stick indiscriminately, or use it first. Our purpose would be first of all to work with the studies, to provide federal resources to them, not only money, but staff, and then working together to try to work this thing out.

This withholding of funds should be, I think, for the Department a last resort: because if you withhold the funds, you almost automatically make the program

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Worse.

Mr. Hekman responded to criticism about itemized deductions allowing people being on the program who are not among the “poorest of the poor" by saying: '

For example, I think we all agree that some type of medic:al deduction, or very high rent deductions, that make it possible for a few persons to qualify who should not, and this chart will show that it is not a really horrendous problem, but it does permit those type of exceptions to income to get onto the program. Do you try to build a program that is going to be responsive to these people? Then this is the sort of thing you run into. I have used the example before sort of what happens in IRS on municipal bonds. You end up with people with a million dollars of income that do not pay any taxes,

You try to meet certain social objectives, like making people have some money to get into the program. When you do that you end up with certain people on the program, in strictly legal fashion, who are not, as you use the phrase, the poorest

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of the poor.

Teasons:

In correspondence following the hearing (attached, Appendix B), Mr. Hekman enclosed a one page note maintaining that the program does in fact reach tive poorest of the poor. While we will deal with the issue of targeting the program in a later section, the Subcommittee considers these notes misleading for the following

1. The data presented refer to income net of deductions, thus avoiding the issue of whether the dedue-
tions allow middle-income persons to benefit.
2. A level of 51 percent of the population below $4,000 income does not seem an adequate participation
rate. Since the note says that 72 percent of the population below $2,000 participates, considerably less
than 50 percent of the population in the $2,000 to $4,000 range are participating.

3. The note ignores the large percentage of participants with relatively high levels of income, which
is relevant to the concept of program targeting.

CONTRIBUTIONS BY WITNESSES

Most witnesses heard by the subcommittee made recommendations for various ways to simplify the certification process. The major issues were:

1. Replacing the individual itemized deduction schedule with a simpler "standard deduction" or "consolidated deduction" method.

2. Simpler forms, eliminating dual certification interviews for public assistance clients who are automatically eligible.

3. Providing aid to the States for adequate manpower to eliminate long waits for approval.

4. Allowing States to experiment with more efficient and effective administrative mechanisms. Testimony was received from Ms. Jodie Allen of Mathematica, Inc., which has completed two recent studies for USDA concerning improvement of the administration and regulations of the food stamp program. A major highlight of her testimony concerned the impact of using a "standard deduction" method of income determination.

Ms. Allen suggested that in setting the appropriate level of the standard deduction and purchase requirement, the criteria of equity, target efficiency and cost control should be kept in mind.

One particular feature which should be given consideration is the provision of an extra monthly deduction for any household with an aged member. This particular feature is a practical necessity to avoid adverse effects on aged participants who tend to have high shelter and other currently deductible costs relative to their income and family size. But it is also consonant with the generally preferred treatment afforded the aged in both our tax and income transfer programs.

Ms. Allen further advocated using the standard deduction as an effective means to eliminate program errors.

According to Ms. Allen, verification of claimed expenses is not only difficult and time consuming for both administrators and recipients, but the source of about 40 percent of errors in benefit payments.

Ms. Allen also suggested that with implementation of a simplified standard deduction method, a monthly income redetermination could be effectively implemented. She reported on the results of such rapid redetermination by several states and in income maintenance experiments conducted by her firm. Her testimony maintains that the system is workable with minimum paperwork and would produce significant savings from those participants who return to work or go on and off working status several times a year without changing their food stamp eligibility.

Ms. Allen is also recommending changes in USDA regulations which favor small families in computing purchase requirements.

Mr. Eugene Sanchez, State Administrator of the Food Stamp Program in Florida, saw the standardizing of shelter, utility, medical and educational deductions as a means of speeding up the interview process and reducing verification requirements.

The position of the General Accounting Office on the issue was outlined in its report (Feb. 28, 1975) which read, in part:

TSE OF STANDARD DEDUCTIONS COULD SIMPLIFY PROGRAM ADMINIS

TRATION AND REDUCE PROGRAM ERRORS

Program requirements for determining monthly net income for food stamp purposes are administratively complex and many errors are made in their application particularly with regard to the determination of allowable deductions from income. These deductions include:

(1) Work allowances of 10 percent, not to exceed $30 a month, of compensation for services performed as an employee or received as a training allowance;

(2) Mandatory deductions, such as Federal and State income tax withholdings, social security taxes, mandatory retirement payments, and union dues;

(3) Medical expenses if in excess of $10 a month;
(4) Child care expenses;

(5) Tuition and mandatory fees assessed by educational institutions;

(6) Support and alimony payments;

(7) Unusual expenses arising from disasters or casualty losses, even if subsequently reimbursed; and

(8) Shelter costs, including utilities and any mortgage payments in excess of 30 percent of income after all other allowable

deductions have been made. To be deductible, expenses generally must be incurred by, and paid for by a household member and must be paid, or anticipated for payment, during the certification period in which the deduction is claimed. By considering amounts paid in the past, anticipated changes in the future, and other information available, the caseworker must estimate deductible expenses as accurately as possible and must determine what the monthly net income will be for the total certification period. A further complication is that the expenses reported by applicants will not necessarily be in terms of monthly amounts. In such event, caseworkers must make proper conversions on either an arerage or an actual basis. The potential for error in applying these and other related requirements is great.

Food stamp regulations also require participants to report any changes in income or deductible expenditures above specified amounts to the local food stamp office. Such changes could make the household ineligible for further participation or could result in a recomputation of the amount the household will have to pay for its stamps.

Several State officials commented to the General Accounting Office on the difficulties in making program determinations relating to income deductions and attributed much of their program's high error rates to these difficulties. Colorado, in commenting in its quality control report on eligibility errors relating to medical expenses, said that primating these expenditures was always arbitrary and that the different circumstances of health and frequencies of treatments made it almost impossible to accurately estimate medical deductions. The State concluded that frequent differences between the determinations of the regular caseworkers and the subsequent determinations of quality control reviewers are almost inevitable.

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