The Supplemental Nutrition Assistance Program (“SNAP”) is being closely watched with high-tech audit tools. The SNAP program is commonly referred to as the food stamp program. The program began in 1939 in order to assist low income Americans during the Great Depression. The program was overhauled in 1964, 1977 and more currently in 1990s. In the more recent overhaul, benefits are given to recipients on a electronic benefits transfer (“EBT”) cards, instead of on paper coupons or “stamps”. The EBT card is essentially a debit card for the benefit recipient to purchase food and a predetermined amount of food benefits is added to the recipients’ card each month. SNAP benefit recipients may purchase food or food product for human consumption and/or seeds and plants for use in home gardens to grow their own food. SNAP benefit recipients may not purchase alcohol, tobacco, ready-made hot foods, vitamins, pet food, and non-food items.
A common fraud scheme associated with food stamps is referred to “food stamp trafficking”. The USDA Food and Nutrition Service (“FNS”) oversees the SNAP program. The move from paper stamps to the EBT card was one effort by the FSN to reduce fraudulent misuse of benefits. At its core, food stamp trafficking is where a recipient sells the benefits for cash, at less than face value. An example of this is where a salesperson at a store rings up a small purchase for a SNAP recipient, let’s say a $2.00 food item, and then charges the EBT card for $62.00. The salesperson then hands the EBT card holder $30.00 and keeps $30.00 for themselves.
The transition to the EBT cards provides the FNS with an electronic audit trail to assist in identifying suspicions and illegal activities. The FNS uses a system, the Anti-Fraud Locator using EBT Retailer Transactions (ALERT), to monitor EBT activity and constantly analyze and investigate suspicions activity. This process is commonly called data mining. The FNS has a dedicated team of over 100 analysts to monitor SNAP benefit compliance. The program has had the following results:
- 14,000 of the 234,000 retailers that provide SNAP benefits in FY 2010 were put on a watch list for further review by the FNS
- In 2010, FNS investigated 5,000 retailers suspected of program violations
- 931 retailers were permanently disqualified from the SNAP program and another 907 were sanctioned in 2010
Although abuse of SNAP benefits still exists, the FNS’ use of high-tech audit tools has reduced the amount of fraudulent misuse of SNAP benefits.
The applicability of data mining is a powerful audit tool. With the shift to electronic records and data being relatively cheap to store, a wealth of information is available for auditors to use. High-tech audit tools allow an auditor to review the entire population electronically instead of random sampling. Also, electronic records allow for the comparison of disparate sets of data (i.e. different or not commonly linked together) in order to assist in identifying fraudulent activities. The move to electronic records and the use of high-tech audit tools have, and will continue to, make auditors much more effective in their work.