Feds slap another state with $7 million fine for food stamp fraud

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The Wisconsin Department of Health Services (WDHS) to pay nearly $7 million for allegedly violating the False Claims Act in its administration of the Supplemental Nutrition Assistance Program (SNAP), according to a Thursday news release from the U.S. Department of Justice.

Since 2010, SNAP allows the U.S. Department of Agriculture (USDA) to provide $71 billion per year to over 45 million eligible, low-income individuals and families for the purchase of nutritious food. Prior to 2008, it was known as the Food Stamp Program.

With a federally-funded program like SNAP, it relies on each state to accurately determine qualified applicants and appropriate benefits accordingly.

According to the court document, the USDA requires that states conduct quality control measures and “report error rates” when making eligibility decisions. States also receive reimbursement for administrative expenses and quality control efforts as it relates to SNAP.

Additionally, performance-based bonuses are awarded by the USDA to states based on “lowest and the most improved error rates each year,” says the court record, and the USDA also reserves the right to impose penalties on states with increasing error rates or those that fail to improve rates.

In the settlement, WDHS admitted that starting in 2008, it used services from Julie Osnes Consulting, a quality control consultant, to review error cases.  WDHS further admitted that it “implemented several improper and biased quality control practices” based on instructions from the consulting firm, which included:

  • Finding a basis for dropping error cases from the review by discouraging beneficiaries from cooperating with information requests and pursuing unnecessary information.
  • Selectively applying requirements and policies to overturn and reduce errors.
  • Asking beneficiaries leading questions to obtain desired answers to eliminate error potential.
  • Arbitrating any and all differences with USDA.
  • Subjecting error cases to additional scrutiny and quality control casework with the goal of overturning an error or dropping a case.
  • Omitting verifying information in documents made available to USDA.

In doing so, WDHS falsely reported error rates, making them appear lower in order to secure bonuses for 2009, 2010, and 2011 to which it was not entitled.

Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division said the settlement of $6,991,905 “reflects the Justice Department’s commitment to ensuring that taxpayer funds are spent appropriately” and he hopes it will instill confidence in the integrity of programs like SNAP.

WDHS’ settlement marks the second of its kind involving a state agency that manipulated its SNAP quality control findings. The first agency, Virginia Department of Social Services, agreed last week to pay over $7 million to resolve its liability associated with the use of Julie Osnes Consulting to improperly reduce its reported error rate.

“While I am deeply troubled that these actions happened within a state agency entrusted with assisting vulnerable and needy Wisconsin residents, I am heartened that WDHS has cleaned up its act and that it cooperated with our investigation,” said Acting U.S. Attorney Jeffrey M. Anderson for the Western District of Wisconsin. “Together with our partners in the Civil Division and the USDA, we will continue to investigate and hold accountable entities, including government entities, which misuse and wrongfully obtain SNAP funding.”

H/T: U.S. Justice Department

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