Talk about food stamp fraud.
The Alaska Department of Health and Human Services is being told to pay back $2.5 million to the federal government, after an investigation uncovered that the state, with the help of an out-of-state consultant, was playing fast and loose with the food stamp reporting requirements in order to get bonus payments.
Alaska was found to be using deceptive practices to lower its error rates for how it administers SNAP benefits.
The U.S. Senate Agriculture Committee held a hearing on the scandal last week.
“We have no idea how much taxpayer money was wasted,” said Sen. Pat Roberts, R-Kansas.
Sen. Roberts, who chairs the Agriculture Committee, said the investigation showed states had been “gaming the system.”
If so, they had help. Enter Julie Osnes.
Julie Osnes LLC, the South Dakota-based consultant hired by DHSS, helped Alaska make false claims in reports about the Supplemental Nutrition Assistance Program (SNAP), according to the Justice Department.
In 2016, Alaska administered $187.8 million in federal benefits to 129,649 residents. The $2.5 million fine represents over 1 percent of that total payout.
Other states that used the consultant also face fines. For example, Virginia and Wisconsin face $7 million apiece in fines for wrongly bringing in millions in federal bonuses. Virginia has 922,150 SNAP recipients, and Wisconsin has 818,000 recipients.
“Investigations by the Food and Nutrition Service, the department’s Office of Inspector General, and the Department of Justice, have revealed that states have purposely used ‘whatever means necessary’ to mislead the federal government to obtain bonuses or avoid financial penalties,” said Sen. Roberts at the beginning of the hearing. “The level of erroneous payments states have made when administering the program is completely unknown.”
This is the third settlement with a state agency that used Osnes and submitted inaccurate quality control findings, and then took bonuses they didn’t earn, the Justice Department wrote.
“Through these settlements, the United States will recover over $16.5 million. On April 7, the Virginia Department of Social Services agreed to pay over $7 million to resolve its liability associated with the use of Julie Osnes Consulting to improperly reduce its reported error rate. On April 12, the Wisconsin Department of Health Services agreed to pay nearly $7 million to resolve its liability associated with its use of Julie Osnes Consulting for quality control,” the Justice Department wrote.
The federal government pays for the SNAP program’s benefits, which are administered and passed through by the states. The states that report low error rates get bonuses from the federal government.
Osnes’ contract was to help lower the error rate, but it appears she did so by changing the meaning of “error.”
Investigators told the committee that the incentive itself is leading to fraudulent practices and that the Justice Department is now investigating a “significant number” of states for doing the same thing, according to Anne Coffey, the USDA’s assistant inspector general for investigations.
The USDA has in the past published its error rate at 3.66 percent, but it has not published the rate since 2014, when it lost confidence in reporting.