Good morning. I call this meeting of the Senate Committee on agricultural nutrition in order. Over the last several months, i along with a Ranking Member and our colleagues on this committee having working on a new farm bill, an important part of this process has been to hold hearings on each farm bill title and to listen to stake holders. Im proud to say that the committee has sufficiently conducted our work in this area, having held hearings so far on eight titles. Todays meeting cover Nutrition Program on farm bill. Two titles remain, the process as far as the opportunity to review the full range of usda programs to ensure that they are operating efficiently and effectively. Not every Program Needs a Major Overhaul but many federal programs can benefit from increased efficiency, improved integrity and the production of waste. As we conduct this review, it is important to remember the purpose of these critical Nutrition Programs. They are not about longterm dependency, they are being giving aid in times of trouble. They are about ensuring our nations security, helping folks become productive members of our economy and about assisting the vulnerable among us who cannot help themselves. Part of a thorough review includ includes verifying the programs have been administered and implemented properly at the federal and state levels. Now unfortunately we have learned of significant issues regarding the administration and oversight of the supplemental Nutritionist Program of what we call snap. The Departments Office of Inspector General, and the department of justice have revealed states have purposely used, quote, whatever means necessary, end quote. To miss lead the federal government to obtain bonuses or to avoid financial penalties. Witnesses here today will provide details but what we have discovered is that the integrity of the snap program cannot be verified. In all but a few states, the process used to measure errors has failed. Thus the level of erroneous at the same time have made when administering this program is completely unknown. Simply put, no one knows the error rate of snap and that is unacceptable. And the federal government does not know the basic element of problem such as how long this has been occurring. This program accounts for over 75 of farm bill spending. If we are unable to verify that this program is making every dollar count, and ensure the right amount of assistance is going to those who really need it, then something needs to change. And with the help of the distinguished Ranking Members something will change. We are not talking about rampid fraud here, or rampid program abuse, we are talking about states cheating and gaming the system, resulting in an inability to even measure how many tax payer dollars are being spent in error. This is not fair to tax payers, it is certainly not fair to those who depend on this program and it is not right. It is our duty to ensure that the integrity of this program, which is vital to those among us in need is able to be measured and to be verified. Once that is accomplished, we must also ensure this program is truly serving those in need, helps those to achieve selfsustainability and not hindering theyre ability to succeed. Much has been made of the, quote, work requirements. But it is our job to be delivertive and informed when considers how we chose the goal of enabling those worth receiving public assistance to maintain selfsufficiency. The last farm bill included a significant investment in work pilots to test effective method of ensuring the longterm assessment of folks. We will need to build on that investment and continue to test proven method of success. As we undertake this process with the goal of integrity and truly helping people to become selfsustaining well need the support and flexibility of all program stake holders. Lines in the sand and uncompromising positions will benefit. Working together, i am confident we can find a way to ensure the integrity of snap and their critical need that the program meets. With that, it is my pleasure to recognize senator for any remarks she may have. But before you i would like to take a moment to express appreciation to the departments food and Nutrition Services and other agencies for their work in providing assistance to those effected by the recent tragedies with regards to the hurricanes that we have experienced in this country. I understand that Department Staff have worked around the clock to provide services and ensure that Program Participants and others have access to assistance in this time of need. I receive the departments preparation in response and id like to thank senator secretary perdue and his staff and for everybody involved for their dedication and hard work. It will take the same spirit of working together for those of us to remedy these and other issues that need to be addressed to pass the farm bill. Senator staff gnaw i yield to you for any comments you may make. Thank you more mr. Chairman and it continues to be a great opportunity to work with you. First recognizing the devastation that hurricanes irma and harvey have caused if the south. These storms jurn score the need for disaster systems for both our farmers and families. I want to commend secretary perdue for his quick action to provide flexibility for those in the path of these storms so having enough to eat is the least of theyre worries. Our families deserve a reliable safety net in times of need. Whether its making disaster snap available during a hurricane or ensuring that can whether the storm of job loss during the recession. Nutritional programmes are vital to rebuilding after disaster strikes. The Great Recession hit our country like the force of nature causing too Many Americans to lose their home and jobs. For those who face unexpected unemployment or underemployment, the supplemental knew trissals program is a life line to keep food on the table while they look for a stable longterm job that allows them to fully support their families. This is a point worth repeating, snap support families, its about america saying we got your back when there is an emergency. Nearly half of snap recipients are children. The vast majority are children, seniors, people with disadvantages or care givers that live in those household. Approximately 1. 5 million veterans received snap at some point during the year. Many of those heroes are considered able bodied despite lasting challenges from their time of service. Even current military families face food hardship. Many utilize snap and visit food banks stretched thin to Reach Community needs. Its important we keep these people in mind, like mr. Parker whose here today to share his story about the impact of snap in his life. And thats an important story. Its important reflecting other stories as well as we consider chang changes to nutrition systems in the farm bill. As committee we can make improvements to snap. We need to make improvements and every single area, hold every Single Program in the farm bill accountable. As we shared for every area of the federal government. We will continue, i will continue to be very focused on making sure we are doing that, while still preserving critical food access. As we know we have a farm safety net and a Family Safety net, we need to make sure theres accountability in both and support for both, and that as prices go down in farm country, but jobs have gone up for families, its really important to note that we will see significant savings over the last ten years in snap because thing are working as they should, people are going back to work and needing less assistance with their food. In 2014, we made common sense reform to further strengthen the integrity of nutrition assistance. While Nutrition Programs have a low rate of error and fraud, weve investigated low cases and use while protecting benefits that needed access to the Family Safety net. We also included employment and training pilots to allow states to test innovative strategy to help snap with its participants find stable longterm employment. These pilots along with the broader snap Employment TrainingProgram CreateImportant Community partnerships to connect people to jobs and training that works. Rather than focusing on arbitrary cuts to push people off of needed Food Assistance, we shall focus as we have in the past, there are types of volunteer partnerships that help families succeed. As ive indicated before, the good news is this is happening as this economy has improved and people are getting back to work, we want the economy to move faster. So, everyone has the opportunity for a good paying job, but we are seeing savings that in the Nutrition Programs, they are working as intended. The Congressional Budge Office recently estimated the farm bill is projected to save 80 billion, more than initially expected. Largely driven by reduced spending on Food Assistance. Looking ahead to the next farm bill, well continue to look for ways to strengthen Health Outcomes through snap, like snap education and the very successful food nutrition and Center Program that has often been called double up bucks. Well also ensure the oversight of snap at the state and federal level is working as it should. I look forward to hearing from the s da and the Attorney Generals Office today of the steps already been taken. I want to learn more about the ways we can support the work the food and Nutrition Services are doing to strengthen the equal control program. Mr. Claurm i look forward to working with you as we move forward to put together a great farm bill and well continue to fine tune these programs while we are protecting food access for millions of families. Thank you. I thank you senator. Welcome my first panel of witnesses before the committee this morning. Mr. Brandon lips. Mr. Lips currently serves as the matter of food and Nutrition Services as well as the acting deputy under secretary of food and Nutrition Services as well as food and services at the department. He oversees 15 nutrition assistance program. Prior to his time at the usda, mr. Lip served as chief of staff and the officer of chancellor Robert Dunkin of texas tech university. Home of the ever passing and successful read raiders, and led nutrition policy for the House Agricultural Committee during the 2014 farm bill. Welcome to you sir, and i look forward to your testimony. Mr. Harden, gill harden, assistant Inspector General for audit with the office of Inspector General. Mr. Hardin is the assistant and Inspector General for the audit at the department of the office of Inspector General. He currently managers all auditings of the department and previously has served in a variety of roles at the oig headquarters. Mr. Hardin began his career at the Western Region office and also oversaw performs and National Audits for the northwest region. Welcome sir, i look forward to hearing your perspective. Lastly we have miss ann, m coffee. A company mr. Harden to respond the question as ann coffee also joins us from the office of the Inspector General. Shes served in she began her career at the office of Inspector General subsequently worked as a special agent with the oig and wen over to the department of homeland security. Following her return to the office of Inspector General in 2005, miss coffee led the special Operations Division and then the investigation, liaison and hawk line division. Welcome to you maam, i look forward to your testimony. Mr. Lips. Good morning mr. Chairman, Ranking Members staff and members of the committee. Let me start by thank youing you for the recognition of the secretary produced leadership and the hard work of our staff, certainly in n s df but also nationwide. The staff has worked overtime to make sure everybody gets fed and we appreciate that. Im honored to be here today to talk about the supplemental Nutrition Program. I am the acting deputy undersecretary in the Food Administration service. I looking forward to working to make sure those in need have access to food proficiently, evgtively and with the utmost integrity. Working with state agencies, s f programs our abundance to ensure no american goes hungry. Youve invited me here today to talk about staff Quality Control or qc. Staffs measures often refer to it as the payment error rate. This is refers to payments too high and those too low. Its a measure of issuing benefits. Quality control is a two tiered system between states revocations for errors and s f reviews a sample of those to make sure the facts have made the correct determination. Usda releases a National Error rate for snap on investigation. For fiscal years 2015 and 2016. F and s noted rate reductions appeared to happen too quickly like dropping off the cliff, making us question the integrity of the qc system. That led snap to create error to comb the area for bias. When s f shows all states we looked at showed problems in all cat guerra think wick le removed to different data. Some states had made process errors but states were hiding error from federal reviewers. In doing say they by passed our data controls, preventing snap from catching the bias until based on our findings s f began implementing corrective action with these 42 states to eliminate the bias at state level in 2014. S f also made our own policies guidance and review process more r robust. We issue guidance with our handbook, developing a new management evaluation guide to strengthen our oversight and made Data Services available to state findings. F s owns our role in these problems and taking strong action to solve them. The egregious problems we saw do not result in unclear guidance. We learned in some states error reduction committees which are intended to identify errors and present them from Going Forward were instead hiding the errors. Fully eliminating the bias will require a commit of faith on all sides. S f did not release the rates in 2015 because the data was unreliable. I fully expect to release an err rate in june of 2017 and 2018 when the forms are in the data. We will hold ourselves accountable and our state partners accountable. We look forward to working with you on Additional Solutions to prevent this problem in the future. Thank you and im happy to answer any questions. Mr. Harden. Good morning chairman roberts, Ranking Members and members of the committee. Thank you for opportunity to testify about oig efforts. With me today is ann coffee, the assistant ig for investigations. My statement will focus on the audits of staff, qc process as well as related investigations. Through our audits, f s helps oig with data. Our snap related investigations of the same period have led to over 2300 arrests, 1600 indictments, 1500 convictions as well as 296 million in monetary results. In 2013, oig initiated an audit of snaps qv process. We recognized the rate for snap has been declining, snap benefits have been doubled to increase participation. Even in a low error rate the profit for snaps averaged 2 billion annually. In all eight states we visited, private consult tans and or state review committees used method to indicate data found rather than report the cases as errors. A number of states hired Third Party Consultants who worked to eliminate errors. These states show dramatic if unwarranted improvement in their error rates from 21 to 25 depending on the state. We also found other issues with how error rates were calculated. For example, state qc reviewers did not call late errors during their cases. Also, f s did not adequately review state q results. Of the 60 cases we reviewed were unsupported, questionable or inkratd. As a result, s f determining the snap National Error rate. In total we admitted 19 recommendations to help s f improve the qc progress. As of august 17 the recommendations were closed. Our investigators received a whistle blower complaint related to the activities of a thirdparty consultant working in one state. So far this investigation has been resulted in go states, virginia and wisconsin agreeing to pay over 14 million to resolve allegations both administrations. Both states admitted they used consultants to review the errors cases identified by their workers. They provide it had use of several improperly and biased qc practices. Including finding a basis of dropping cases from the review, selecting policies to overturn and reducer ros and asking beneficiaries leading questions. These practices properly decrease the states error rate and as a result states were paid performance bonuses for which they are unentitled. This investigation and jong going. I want to thank the committee again for testifying and im open to welcome any questions you may have. Thank you very much. Let me note that we appreciate the statements of mr. Lips and l harden and miss coffee is here for questions only. And thank you to panel one for taking the time to join us today, i appreciate it. Whattive heard is extremely disturbing. The integrity of the largest food assistants program, spend over 70 million a year is simply unknown. The oig has found that the Quality Control process is broken and in need of reform. And not only that, but we have a number of states that have defrauded the federal government and are being investigated by the department of justice. Mr. Lips, you stated that the 2014 error rate data raised questions as f s, once the agency completed its indepth review, did you discover any indication when bias entered states Quality Control process . Do you have a sense at what point the state error rates became inaccurate . Senator, unfortunately i cant give you an exact answer to that question. We do have concern that bias has been in the system for quite sometime. The oig notes in its report that this consultant first started acting with states as early, i believe it was 2004. When states individual error rates started dropping dramatically, so i think there has been some level of bias in the system for over a decade. 2004 . Yes, sir. So we have a problem here that could have started 13 years ago . Thats correct. The f s review, mr. Lips for kiss call year twief2015, f 42 out of 53 states, effort for improperly administers the Quality Control process. A document referenced by the media indicated that the very preliminary estimates of the 2015 National Error rate could be between fo4 and 7 . If thats the case, 7 would be almost double the 2014 error rate. Sounds pretty fishy here. That was biased and would have indicated over 5 billion in error. Do you have any updated estimates for 2015 . Mr. Chairman, unfortunately we do not. Data was significantly biased we do not feel we could provide you an accurate measure of that rate. So, youre basically saying that the data was unreliable and so therefore you could not release the error rate for 2 15 or 2 16 . Yes, sir. Do you have better data now . We believe well have accurate data with the ability to report a rate to you in 2017. As i stated in my testimony weve entered correction action plans with those 42 states and we believe the bias will be removed significantly and our status advise we can get you an accurate rate for 2017. I appreciate that, but we have no idea how much tax payers money was waists, it could be billions. Yes, sir. During the review the with s f. Snart it was arranged on that. Many were not, there were certain some egregious prauks oig recognize in their report. We did have difficulty getting all the information from all of the stakes. Can you describe some of the difficulties for us . States, for us to be able to perform accurate reviews wed have to have the entire case file from the states. States didnt all want to give us access to their data. Sometimes there are issues with us being able to access that data, we do believe some of the states were intentionally keeping that data from us. We believe some states had destroyed portions of those of the data that was part of their review before we came in to review those. Is this an open investigation . Yes, sir, there is an Ongoing Investigation my colleagues at oig may be able to comment further. I understand the reviews were done in 16, what level of error did you find, approximately how much in improperly payments does that indicate . Senator, i would unfortunately give you the same answer, that we cant give you an accurate measure. I do think as the rate reported in 2014 was 3. 66 and weve noticed significant bias. Its definitely above 4 but could be significantly higher. I i recognize you just recently came on the board at the department, i think it was june. But it is absolutely imperative that we work together, the department and all competemitte members to address these issues. Miss coffee, let me ask, the oig noted that the investigation is jong going, but wisconsin and virginia have settled with the department of justice. How many of the 42 states that have had issues are currently being investigated . Unfortunately, since it is an Ongoing Investigation and the state considered the subject i cant comment on a specific number, but it is multiple states involved in the investigation. Multiple. Yes, sir. So it could be all 42, could be 20 . Bigger than a bread box, what are we talking . I would say it is not all 42, thats what i can offer you at this time. A significant number . Its a significant number, sir. Have you ever encountered a case like this where so many states have been defrauding the federal government . Sir, ive been doing this job for a number of years and i can tell you this is a unique situation. We have not encountered this type of investigation previously in my experience. We need a better casualty than unique but well work on that. During your investigation, did oig look into the information regarding pressure, pressure on state employees to use information from a consultant . Sir, during the course of the investigation, and i think thats also part of Public Knowledge for the state of virginia, there was allegations that pressure was placed upon the employees to adhere to the from the Consultant Companies and that is something we looked into. However we do not jurisdiction to impact the committees within the state of virginia unless it was a criminal matter. In this case it was an administrative matter handled by the state of virginia. The stiates under investigation not to con iffer what could occur if. I cant comment in this particular instance. If there is a criminal or civil matter that we are working with the department of justice on, if we are not able to reach a Settlement Agreement the next step would be that would go to trial, either on civil or criminal. So those number of states, 15 or 20, we dont foe or you cant comment on, i understand that, the department of justice would enter into that. Based on your indepth audit what role do you believe the almost 50 million a year in state bonuses played in creating conflicts of interest . Im sorry that goes to mr. Harden. Mr. Chairman we think the conflict of interest really stems from the two tier process for the qc process where states and the federal level are involved. What we found was that process is vulnerable to state abuse due to conflicting interests between accurately reporting the rates, mitigating bonuses for exceeding the standards. We consider this an inherent conflict of interest for the states and thats why it led to us making the recommendation that they are still working on, to look at that prose and see if theres a cost beneficial way to move away from the process to have s f do it alone or through a third party thats doing it independently. Id also recognize, we know this recommendation is not new necessarily, its something that have rear mirrored back in 1987 by an outside study that noted the conflict of interest that wen along with the process. So basically, the program was incentivising bad behavior . Yes, and stuff that we heard from state state staff as we did our work. They express concern with what the consultants were wanting them to do and training them today. Some states said its kind of keeping up with the joness type of thing. They knew they need to use the consult stants to get the error rates down or else they wouldnt be in line for the bonuses. They recognize competing for the bon bonuses was a consequence of that. Could you explain what you mean in your article by gaining the method are stated tried to reduce their error rate. Could you expand on that . We found the consultants were used to train the states qc staff that would exploit as a rule neshlts in the process. The consultants foked their work on mostly on qc workers and how they could mitigate the errors rather than use the errors to abuse the process. They also very much encouraged the use of error committees by state to eliminate the errors as oppose to working on solutions to make the program stronger. How did the s f respond to the recommendations from the oig . I would say this is a very difficult audit, probably the most difficult ones ive worked on in my career and i have been with the oig. Wed sit down with the agency and made sure we understood what we were hearing and find out if theres any other information we need to consider. At the time we issued the report we did not reach an agreement on all the recommendations and the actions to take. I would just say since that time we have reached agreement on all 19 recommendations. Theyve reported out theyve implemented 14 of the recommendation and working on their main five. So a number of steps mr. Leaderships referred to on how theyre improving the progress is in line on the progress weve made. Later down the road well look to see how effective the changes were. But there was push back prior to this latest better relationship that you had with with f s. Yeah there was push back throughout the process. I would say because of the the sensitivity of the nature, it included discussions all the way up through the former level. But from my perspective and opinion having discussions at that level is part of the process that we do for any of our major audit work. We need to hear the reviews and allow they think of things. We dont always agree. But hearing what they have to say, talk those things out and decide to proceed on a path forward. You notice during your testimony in fiscal year 2015, snap has the highest participation level on the history of the program, and yet had the lowest error rate. Still 2. 4 billion, thats not a small amount of money, do you find record high participation or the record low error rate to be rather unusual . I would say we were aware that the error rate was trending down and it was from what we learned as we did the qc audit it was caused by a number of factors. One of the factors s f raised the threshold in 2012 to 25 to 50. Which meant anything below 50 is an error, wouldnt be reported so that contributed to rates going down or having errors. I also want to note as part of the 15 Farm Bill Congress established that threshold in law the way it would be change. F s also had policies that symptom tied thing like reporting that didnt require staff participates to report changes of income as frequently as they had before or had the caseworkers followup on that. They would not know of different changes because they were not required to report them. Thank you very much for your testimony. I apologize to my colleagues for going over time. Senator, staff. Thank you mr. Chairman, this is a very important, very serious issue that we need to address. I do want to make it clear this is about state reporting and what they are doing, correct, this is not about individual people committing fraud, this is about what the states are doing in the system. And, many cases i know the errors are data entry errors, administrative mistakes or what you have found in terms of what they can be doing to man plait the system. Mr. Harden im wondering if you can give us examples of the kind of things counted as errors. I may have to get back to you as specifics because there are 48 Different Things that they check. Its income levels, work history if theyre working. One of the problems weve found with the work requirements is that when the states were checking, the work requirements wasnt a requirement for them to check on that, so, sometimes they did not do the extra digging to find out about that. Its determine their status, you know in terms of veterans and those types of things or the thing theyre checking to see. So, its how much theyre really digging into . Yeah, and that was part of the problem we saw. States were following the guidance that s f provided. The guidance provided from what we found to make recommendations about was contrary or different than what was in the regulations. So, they were following what was in the handbook but the handbook didnt agree with what the regulations say. The federal reviewers is f s werent dealing into and making independent assessment of what the states did. It wasnt that full review thats necessary to know the amount that was given was correct. Great. And by the way, miss coffee thank you for being here. I understand youre here for the tough questions so chime in any time if you want to add anything. Did you want to add anything as it relates to the type of errors. I can comment about what gill said. He is much more the expert specifically what theyre checking from. What we did see in the investigation side was that there was definitely encouragement on the third. Party consultants to misrepresent facts to the federal authorities when they were submitting information to f s in efforts to lower they payment error rate. Things like stretching their income as expenses and altering documents of that nature. Okay, and the state was doing this . Thats correct. State. Thank you. Do errors reflect both overpayments and underpayments . Yes. So it could be either. When theres an overpayment error, do this the states wen they recoop the payment, which i understand they go back over payment, they recoop the dollars, that counts as an error still, correct . Yes, it should. One of the things we saw that whether every the state qc reviewers maybe identified an error over or under they werent necessarily communicating that back to the caseworkers are the people that would carry out actually pursuing that repayment. So theres an overpayment. Theyre saying if it was an underpayment and they corrected that correct. That count as an error they should be reporting that yes, maam. As on error even though its been corrected. They should be counting that. Mr. Lips, the usda has issued several memos and taken a variety of things to correct the bias that youve talked about what Quality Control system. Anything else youd want to describe to us if terms of the steps that have been taken and do you believe that f s will be able to issue a reliable error rates for the fiscal year 2017 . Thank you. I do think the most significant change is the corrective action plans we have entered into with the 42 states. We have identified where they were entering bias into the system and weve required them to report to us how theyre going to change that and were following up on those with states. Following through on those plans is what gives our staffs confidence theyre going to be able to report a rate for 2017. Ive asked that question as many different ways as i can and im assured wed get you a rate. There are a number of other important factors. I talked in my testimony about how were not only changing our management model but or training for reviewers and making sure the states are doing the same for theirs. Were requiring any contracts with a thirdparty consultants wrults to the qc are reviewed before moving forward. We want to limit that to legitimate process oriented work. Also, i want to say thank you, the congress provided us 4 million in 2016 to hire 32 extra reviewers at the federal level. I do think one of the issues is that our federal reviewers were expected to review between 6 and 700 cases a year, which was not allowing them to dig as dooply as they needed to. And we should have looked at that as an internal resource issue. Appreciate the extra fund you provided for those ftes and well ensure theyre working hard on that. Along those lines, because oig is moving away from the twotier system to a singletier system. In looking at that, it does raise questions. Would usda need additional staff and resources to be able to move to a singletier system . O i dont have a specific answer on that. Id expect that we would. The twotier process should work if administered properly. We have led a contract with an outside entity to look at this issue and well report back to you as soon as we get that information from them. At this point given whats happening and the focus and the needed focus on all of this, and the actions that are being taken, do you feel that additional legislation is needed to fix this, or are we talking about Additional Resources to support what the department is currently doing . As weve talked about, weve made significant internal changes and we believe that will get us to a corrected error rate. I want to be careful in the future we dont end up back in this place and we want to work with you on any ideas you may have with regard to legislation to make sure this doesnt happen in the future. Regard to recourses or a change in how this process works. Thank you very much. Thank you. Senator. Thank you more chair and thanks to our witnesses here today. Mr. Lips id like to start with you please. The usda administers a handful of the over the 80 different federal programs designed to serve low income americans. According to the gao these programs are too fragmented and overly complex for clients to navigate. For Program Managers and makers to assess program performance. What steps is the usda taking to better accord fate with other agencies to make this safety net more koe hesive . Senator we havent taken significant steps since my arrival but we do intend to do so. It is regard to what these view verse to look like, application to this program id say is kin to following tax return. We have to look in income, reduction expenses. Its very difficult process. Were also looking at ways to make sure those eligible have access while were making sure that we have integrity in the program. Its also a difficult balance. I think allowing programs to work across help on that, there are other agencies around the government that have access to data that we dont have at s f can be helpful on that. We hoping to working with yall in the future. Yes, i hope so. Its a complicated area, i think by linking our agencies together, not only can we better assist the americans that need these support systems but also stop maybe some of the fraud that might exist out there. So, i would just encourage you to continue working with other agencies in those areas. And also improve that coordination. Despite over 80 programs and billions and billions of tax payer dollars that have spent, the federal government just often time fails to address the barriers to selfsufficiency faced by those currently living in poverty. And, just a plug for one of my bills, earlier this year i introduced the empowers act. That is a bill that will allow states to pursue pilot projects that integrate programs and further address the challenges faced by lowincome families and individuals. That does require a lot of these agencies working together to find a better way forward. Were always looking for efficiencies out there and ways to prevent fraud and abuse within the system. Mr. Harden, snap is one of the largest benefit program for those in need. The oig findings are very very concerning. I think youve heard that over and over again from this panel. What specifically can we do as congress, especially with the farm bill coming up . Are there ways we can address the types of system through legislation beyond rules that might be able to address it in the agencies . We will continue to have conversations with f s as we go through this. As a result of our work in the qc process we didnt see the need for any necessary legislative change. It was a matter of applying the rules and regulars that were already there. We do as an oig if we see the need for lj layoff change we do make the recommendation to agencies and have them work through their process for putting them forward. We also make sure we advise committees we make these recommendations too. We didnt see that this time. Thank you i appreciate that. Mr. Chair id thank you for raising this to our attention here at this level. Thank you for the proper oversight necessary for the program to be successful. With that, mr. Chair ill yield back my time. Senator gilma brand. Thank you mr. Chairman. Im. Senator kasie. I apologize. Thats okay. More mr. Chairman thank you very much and thank for this hearing. I wanted to thank or witnesses. I want to start with the value of the snap program in a state like pennsylvania, big diverse state with a lot of economic challenges. Weve gotten, for example in our state snap helping one and twelve workers and the state put food on the table. That means roughly more than 507,600 pennsylvania workers live in household that participated in snap in the last year. Thats what the census data tells us. I spent ten years in elected office in pennsylvania, eight of those is the stagt Auditor General which meant that i was on a daily basis, kicking the hell out of state programs that werent efficient, effective and in some cases wasting tax payer dollars. So, we have i think an enduring obligation to make sure every Program Measures up to the expectations of tax payers, thats why this hearing is so important. At the same time, i think there are some folks in washington, i dont think any this this committee, but some folks that use examples of waste, fraud and abuse, or error or overpayment or waver the description is to take a meat ax to programs and just hack away at them, while allowing other programs to be sack roe saint from that kind of ability. My question involves what can we do to make sure that what im told is a payment error rate for fiscal year, i guess is the most recent fiscal error rate for 2014, is that correct . Yes, sir. Thats 3. 66 , is that correct . Yes, sir. So, with that number in front of us, weve got to make sure were bringing that number down even more. And i realize states, because theyre dealing with the socalled qc program may not measure error rates fairly or consistently. So, weve got to make sure were holding them accountable. What and i direct this to you mr. Lips. What action can we take to ensure our systems drive meaningful improvement as oppose to just improving the measure . Senator, i think theres a lot of different sides to that. I do think improving the qc rate is about improving the program as its delivered to the recipients. We talk about the money wasted from the tax payers and its an important factor to this, but its else important to recipient. The lower we get that to zero, the better job were doing of ensuring each recipient is getting the money you intended them to have. And, how do you think we arrive at that point . Whats the best way to get there . I think we always work for a lower error rate, the thing ive talked about that s nf has taken action on with working with states to ensure we get there. Its a partnership between the feds and the states and we have to constantly work on this issue. Thats the state options and the significance of states being involved if this program. We want to make sure each state has the able to adapt to that. Last question i have is with regard to the bonus and penalty system. The report among anything reports indicates that both bonus and penalty cribb contributed to the prop. Do you think theres a need to reevaluate that . Theres been a lot of discussion on that issue and we look forward to engaging with you on that. States have certainly said both of those influenced their reaction in this. Great. Thank you very much. Thank you. Senator bozeman. Thank you mr. Chairman. Id like to follow up on the bonus situation. In the 2012 farm bill, i offered an amendment on the floor that would strike the state bonuses for lower error rates. Money is used to encourage the states to be doing something they ought to be doing anyway and reinvest those into the administration and food program. As the oig reports show these bonuses also created an incentive for states to create a false error record. Mr. Harden do you think congress should do away with the bonuses . I mean, in terms of us looking at the program i dont want to say what the policy should be because thats kind of not the auditors role. We noted that was a big conflict of interest at states when they were looking at themselves, trying to they used the consultants and they knew if they got lower error rates theyd be Getting Better bonuses so it did incentivise them to get those rates lower in a variety of ways. Okay. Very good. So theres a nice way of saying there is a significant problem there . Yes, sir. Mr. Harden, as you stated in your testimony, oig made 19 recommendations, intended to assist s nf to improve their Quality Control process. Could you bereariefly summarize recommendations. Do any of theme carry more weight than other . Of the five that has s nf has closed out whats been the delight . I know thats a lot. I think the most significant recommendation we had in the report is the first one that talks about looking into the cost benefit of whether we should move away from the twotier system. S nf is acting on that and looking at that. A twotier process can worked but it has to be managed the right way as mr. Liens has said. A loot of our other recommendations are moving out and have implemented in terms of making sure theres guidance out there if youre going to use consultants because there wasnt guidance before. As well as redoubling the effort on the federal review process and making sure they had the right type of oversight from the federal level to look at the cases the states were doing in asking the proper questions. Theres only five theyre continuing to be open and having reported back to the department that they have implemented and i think the one that will take the longest is the one on the twotier process which is expected currently to be put in place by next year. So wed then follow up as an agency usually after an agencisy has had a chance to implement the recommendation, say 18 to 24 months afterwards. Wed be look at this on a 2020 audit cycle. Very good. Mr. Lien. Which is the time to get the fine line closed out . O i dont have access on tha. On the onetier system we have left the contract and it will take the annals sis time to get back. Itll be at least a year on that issue. What do you see the challenges facing of the snap error rate . Sfaert, i think the biggest challenge is making sure states are a big partner in there this and theyre working with us on a valid qc work. We will continue to be good partners with them. What i want to commit to you from within the agency is that we are read a review our qc oversight regularly so we dont end up in the situation again. Good. Thank you mr. Chairman and thanks to the panel. Senator gilda ban. Thank you mr. Chairman. Im very grateful were holding this hearing. Everyones on this committee is determined to fight poverty in our country and we all know snap is our effective tool to do that. Snap can lift people out of poverty, driver down healthcare cost and improve peoples health. Help our children stay focused at school and improve the lives of our vulnerable citizens. Snap helps americans in every communities in our cities, small towns and our rural communities. Even as snap participation drops we must remind ours there are millions of americans who are working hard but still dont earn enough to buy the food they need and they rely on snap. Snap is an essential program and a program that works. I want to thank the witnesses for their testimony and to work to serve snap for efficiently and effectively. Concerning the snap medical reduk, many of the concerns raised about Quality Control this morning is a different about how conduct the paperwork. I recently introduced the snap medical intersectiroductiof 2017. With more uniform and simple deductions like this help make qc easier for the state agencies and s nf to verify . Any of you. Senator we look forward to working with you on that. Certainly standard diazing thing make the process easier. Were always balancing to make sure folks get what they need. And happy to visit with you further about that. I would tend to agree, if it could be standardsed its usually helpful and it can be implemented. Any thoughts miss coffee . I will defer to my colleagues at the table but yes. Obviously standard daigs is helpful when were doing our review and investigations. Mr. Loipz we are hearing in a year. However not every community recovers as quickly. The National Rate of snap participation in Rural Counties is 16 which is 3 higher than cities. What steps is s nf taken to coordinate with agencies and what has been done to be sure that cities who face the issues can present their paperwork . Senator, one of things that snaps being about the state it some of our states have been overwhelmingly rural in the combination of both. We look to the state agency to be sure their serving all the populations in our technical guidance and overview with them, we want to make sure everybodys getting served. And just to clarify, some of our earlier testimony, one of my colleagues referred to this is an instance of fraud. I dont understand theres any allegation of fraud with regard to these paperwork concerns. Is this an issue of fraud or is this mismanagement . The investigation is semi agreement was put in place to celebrate false claims act so yes, that is to provide information thats not wed consider it to be fraudulent. Did you file a case against various case for fraud . There are two Settlement Agreements we worked with the department of justice on. For our purposes whether every we have an allegation with the inspector Generals Office on my side were obligated to go to the attorney general, its part of the oig act. We did sir sue that avenue and as a result the Settlement Claims that you see were not criminal but civil matters taken up by the department of justice. Are you able to tell us what states . At this point i can tell you there are two that are block, wisconsin and virginia Settlement Agreements but i cannot excellent on the other ones because those are still in process at this time. Can you describe for the two that are public why you believe it was intentional fraud . I think based upon the information that was submitted to fn s, as well as we do a lot of work, interviewing individuals, state employees, the complaint originally came in from a tstate committee who was concerned about how the being provided to s nf, all that we made a determination as to whether fraud was in play. Uhhuh. Thank you. Thank you mr. Chairman and again thank you for this hearing. I think it is critically important instead of waiting for the reauthorization process for the farm bill that we Start Talking about these issues and developing strategies and techniques. I want to kind of get back to senator jill grands line of questioning which is fraud. Because i think if people if the headline is, the Inspector General finds fraud in the snap program, people are going to automatically assume that that was widespread thought of fraud by applicants. If we can just clarify what were talking about and who what the the lets be charitable and say the misunderstandings were with the state, i think it will be really important that we make sure that we understand what were talking about here. Miss coffee. From the perspective of the states, typically what we see in many of the overpayment or the payment error rate a pattern thats been established utilizing Third Party Consultants to basically look to change information that normally states would be reporting to fns. That information has either been withheld in some circumstances or altered in some fashion or guidance given out to state employees to not follow up on certain pieces of information. Thats very different, i think, in terms of what you see typically with payment error rates. This is a really overt act on the part of the consultants and the states that obviously we have identified thus far. There is a distinction there. But its fraud in establishing the review process or its fraud in putting more people on the program, on the s. N. A. P. Program who are unworthy or we dont know whether they were unworthy or not . Its basically we cant say because the information was not accurately followed up upon. I want to clarify what were talking about when we talk about fraud and mismanagement is at a state level where theyre administering this program, this is not to imply there is widespread applicant fraud, where the applicant maybe somebody said, i think this person probably has 1099 income that wasnt reported, no followup on the 1099 income that wasnt reported, you dont know whether thats true or not because the states havent taken the steps they should have taken to do the investigation and in fact allegedly covered up the missteps that they had in terms of administrating the program. Is that fair characterization what were talking about . Yes, it is. Okay. I want to make sure that we take very seriously this program. Access to this program is essential. Its essential for people who live below the poverty line, its essential for seniors and essential for our recovering and veterans who are coming back who are struggling with the transition back into civilian life. So we dont want a headline coming out of this saying, theres widespread fraud. Its really unfortunate that the states have not followed the proper procedure. Ill bet if we had them in here they might argue that they did and they want to put this behind us and that there wasnt a problem. The fact that the department of justice has chosen to not take this criminal, i think, is an indication we need to ratchet down the rhetoric on how we look at this. Do you think thats a fair characterization . I believe it is. Thats part of the reason we dont talk about the states currently under review in the investigation because we dont want to unfairly accuse anyone or anything at this point. I would argue the federal administration of these programs, not the Inspector General, but the federal administration of the program not setting broad guidelines, not auditing and appropriately overseeing the state administration of these programs has led i see mr. Harden is nodding his head has led to the confusion and led to this problem. I think there is opportunity for criticism all around. Is that a fair characterization . Mr. Harden . Yes, it is. Mr. Lipps, i know youre knew to this business, i new to this business i hope youre taking it all in. It will not be okay with me for somebody who worked with federal programs and might have gotten dinged on an audit, cant remember if i did or not. Its really important we not throw out the baby with the bath water and not have a wide statement there was fraud, waste and abuse in the snap program and we be more directive and look at Solutions Like senator gillibrands bill. I look forward to working with the committee. Thank you for the extra 25 seconds senator boozman didnt use up. Thank you, senator boozman for those 30 seconds. Any time, senator. Any time. I would say there are disturbing things about fraud with the people involved and states involved and integrity of the largest Food Assistance program that expands over 70 billion a year is unknown. Not acceptable. The Inspector General found the policy is broken and we are in the process of doing that. We have a number of states that have defrauded the government and are being investigated. Theyre gaming the system. Senator boozman had an amendment that would have taken care of that to some degree. But in determining how many it is an open investigation, miss coffey is correct in stating that and only that, but we dont know we know, too, there are 42. Thats no small number in terms of people who are gaming the system. That people who are gaming the system, states gaming the system, there are people in charge of that. And now were hearing primarily, well, it was the consultants. Maybe the states got together and figured out how to do that. Maybe somebody in the department knew that and maybe they didnt. I think thats to be determined. This is a very serious problem. And i dont think it should be understated. Mr. Chairman, if i might just jump in here with you as well to just agree that this is a very serious problem but to underscore what senator heitkamp and senator gillibrand were addressing on this. In my question you indicated there was an overpayment, corrected, still an error, underpayment, corrected, still an error. What we have are states who want to get bonuses who have not been reporting as they should be reporting. We know corrections are made on underpayments, overpayments, other kinds of things. We need to do a better dive, deep dive. The sba needs the staff to do that and do what oig is recommending. I agree with you, we have to look at the bonuses and incentives. If the incentives are creating a situation were not getting accurate reporting on errors and whats being corrected, that a big problem. I would make an appointment before we get to the second panel, an improper payment rate, thats improper payment rate, money that should not have been spent. 2009 of that rate of a percent was 4. 36, thats about 2. 2 billion. 2010, 3. 81, about 2. 5 billion. 2011, 3. 8, about 2. 7 billion, 12, 3. 42, 2. 5 billion. 213, 2. 4 billion and 2014, 2. 5 billion and for some reason we dont have any numbers from 2015 and 2016 because the method of determining the error rate was very questionable. But if its 2 about 1. 4 billion for 70 billion. 5 , 3. 5 billion, if some of the states would have a 10 error that may or may not be true, probably not. Thats 7 billion. 15 , im not going to go there ill say it anyway, 10. 5 billion. This is a major problem over the life of a farm bill, six years, five years, were talking an awful lot of money. Thats not acceptable. Thats the gentlest way i can put that. Lets go to panel two, please. Thank you, panel one. I appreciate your testimony. Welcome the second panel. To our second panel of witnesses, first, we have mr. Sam schaefer, center for employment opportunities. Mr. Schaeffer is executive