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the subcommittee is looking for ways in which efficiencies can really serve the program and the recipients that depends on the program for food assistance."

Finally, the subcommittee was not out to consider only the critical aspects of the program. The purpose of the hearings was to help pinpoint problems in the existing program and seek constructive proposals to remedy these deficiencies. The subcommittee was in a unique position of not having to consider any specific legislation so it could listen objectively to a wide range of testimony containing both constructive criticism and productive proposals.

OVERVIEW

The subcommittee feels the congressional mandate for the Food Stamp Program is well enunciated and apparent-to provide a nutritious diet to those in need and to prevent hunger. The Senate Select Committee on Nutrition estimates that 38 million potential recipients are eligible to receive food stamp assistance, yet only 19 million are presently participating in the program.

It was felt that before the program continued to roll on like a juggernaut that inefficiently expends funds, aggravates present recipients, and doesn't reach many needy who should be participating in the program, an effort should be made to rectify the increasing administrative complexities of the program. In light of the present plight of the needy and the newly unemployed, the subcommittee decided a good hard look was needed into (1) the present law, (2) the Federal Government's role and responsibility, and (3) local

administration.

Although the subcommittee is deeply concerned about the plight of recipients, we are equally serious about asking the crucial questions and coming up with responses towards correcting the inconsistencies and complexity in the present laws and regulations. If not we would be doing a disservice not only to the recipients who desperately need the food stamp assistance but the American people who expect proper and efficient administration of Federal programs. The subcommittee recognizes that it cannot provide all the answers towards alleviating waste and inefficiency in program administration, but hopefully, this report will provide an information base to be used in correcting the abuses inherent in some aspects of meeting program objectives.

THE NEED FOR CHANGE

Virtually every witness who testified before the subcommittee suggested some positive changes that should be made in the program. A. CERTIFICATION PROCESS AND ELIGIBILITY DETERMINATION PERIOD Senator Lawton Chiles keynoted this aspect of concern as he explained in his opening statement.

The subcommittee's limited investigation of the certification process has turned up some interesting facts:

There is little uniformity in certification periods from state to state and from county to county within the state.

57-400-75-2

The certification system is complex, far too complex for many clients to understand. The complexity leads to inconvenience for applicants, a high rate of certification errors and many inequities in the distribution of program benefits. Ineligible persons receive benefits while a high percentage of eligible persons are improperly turned away.

Mr. Henry Eschwege, testifying for the General Accounting Office, raised valid concerns about data on the certification forms.

Question. Of what value is the data collected from the forms?

Mr. ESCHWEGE. We are not asking that there be a lot of additional data obtained, but rather that some of the data that is already being obtained, and possibly for other programs, should be classified, summarized, analysed and reported to the Food and Nutrition Service to provide a more meaningful data base on program participants.

Much of the information that is being obtained concerns the applicant's identity, household compensation, income, assets and expenses, information which is necessary to determine his eligibility now and to figure out the amount of stamps the applicant is authorized to buy and how much it will cost.

So what we are really saying is that this data is available and, in some of the counties, actually being reported. But we need to assemble it, not collect it, and analyze it, probably on a sampling basis.

Mr. Norman Davis, President, American Data Systems, Inc., noted that his firm had conducted several studies aimed at cutting down the application form and aiding in eliminating errors caused by multiple computation.

I might mention some of the benefits of this new proposed system to the recipient. It would have a benefit to the recipient by eliminating the current time consuming application procedure. The self esteem of the recipient will be enhanced. He will no longer have to bring in all of his receipts for every individual expense he has had. All recipients in similar financial situations will be treated equitably. The number of eligible food stamp participants will increase. Variations in the application and interpretation of policy by case technicians will be eliminated. Long waiting lines could be significantly reduced or eliminated.

Benefits to the State administration: Eligibility determination and redetermination will be vastly simplified. All expense computation errors will be eliminated. Food stamp personnel will have greater time to spend on recertification and improvement of eligibility statistics. The number of transactions processed by food stamp personnel will decrease. Consolidated standards may be easily updated. Ineligible, overpayment and underpayment statistics will improve. Quality control can concentrate on eligibility errors in gross income verifications. Administrative costs will decrease significantly.

At the Federal administrative level, administrative costs will decrease considerably. Publicized abuses will decrease because the error rate will significantly improve.

From a business administration of financial control, more accurate financial projections can be made, Consolidated Standards Systems are more amenable to computer adaptation. Consolidated Standards can be easily updated to reflect changes in cost of living from year to year.

Elaborating, Mr. Davis revealed results from a study that his company accomplished which showed the value of a simple system of certification.

Eighty-two percent of State Administrators indicated that waiting lines were excessively long while only 18 percent felt lines were acceptable. The current USDA Food Stamp eligibility certification was considered grossly inefficient by 29 percent, somewhat inefficient by 50 percent and adequate by 21 percent.

Other significant findings relating to eligibility or certification were:

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) GAO 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. Hekman 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 program that we work with the states on 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 states, 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

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:1

For example, I think we all agree that some type of medical 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 of the poor.

1 In correspondence following the hearing (attached, Appendix B), Mr. Hekman enclosed a one page note maintaining that the program does in fact reach the 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

reasons:

1. The data presented refer to income net of deductions, thus avoiding the issue of whether the deductions 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.

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