when this committee was looking at medicare or medicaid fraud, i distinctly remember the hearing because there was outrage, appropriate outrage, that the entities that engaged in the fraud were still doing business with the government. i think the gentleman to my right expressed appropriate outrage. my question, mrs. fong, is the same as mr. cummings was then. when you have recidivists, repeat offenders, what do we heed to change about the debarment process that is the default instead of disqualification. disqualification is an insufficient penalty to me for recidivist offenders. >> i believe that the government suspension and debarment process is an effective process. and usda has implemented regulations. as a whole the department could do a better job of implementing that.

i think there are concerns as the under-secretary expressed about timeliness and length of time. i think we need to engage in those discussions because my understanding is if you've got somebody convicted of a criminal felony that disqualification while it may be effective vis-a-vis the food stamp program, it's not effective for other government programs. if you've got a criminal conviction, it should be a pretty quick process because the conviction in and of itself is sufficient evidence to proceed. it should not take a long time to do this. maybe a month, two months. >> let me say this. i distinctly remember spending four days in a courtroom prosecuting a lady for disturbing a school. and i spent three days in a courtroom prosecuting someone for throwing an iced tea cup at a dea agent. so resources and time should not be the only barometer by which we decide whether a case should

be prosecuted or not or else we would never prosecute petty crimes. whatever needs to be changed in the process, i hope you'll give all of us that have expressed an interest in it a list so we can put a little more teeth into the punishments when people systemically defraud the government. i want to move to mr. meehan's point about ncic. ncic has arrests that don't result in convictions, pardons, expungements, other information law enforcement may have an interest in seeing but they are not convictions. but the remedy is very easy because schools do it and churches do it and after-school programs do it. just have one ncic trained operator on site and then redact the nonconvictions. the notion that we can't do

background checks on people who want to do business with the government, people do them all the time for schools, churches, everyone does it. redact the information. go to a law enforcement agency that does track convictions. go to the court clerk's office. there's a way to get that information other than ncic. and if there needs to be an exception to ncic for government agencies that are looking at fraud, i can't speak for the gentleman from maryland but i'll be happy to do that and i don't think law enforcement would resist is one bit. miss fong you mentioned a 50% conviction rate. i would have been run out of office if i had a 50% conviction rate and i don't think mr. cummings would have been hired as often as he was hired if he had one. that strikes me as a low conviction rate. is it because you're negotiating a civil instead of a criminal punishment?

does the statute need to be changed? what needs to be done so we don't swing and miss half the time? >> let me take a look at that data. i want to make sure i get you the right percentage and i'll provide that for the record. when we do that we'll provide with you our insights on that. >> all right. my final question for you is this. if i wrote the numbers down right, you said there's 900 cases, 600 of which are against retailers. i think your energy and efforts should be directed at retailers but not to the total exclusion to the individuals who are providing a market, if you will, for this kind of fraud. what do your numbers look like on prosecuting individuals who either sell their cards for cash or otherwise engage in fraudulent activity? >> let me just generally address

the approach that we take on law enforcement. we focus our efforts on the retailers, because when we go to the u.s. attorney's offices for federal prosecutions, they have certain thresholds for prosecution which involve dollar amounts, et cetera. so the dollar amounts tend to be on the retailers side, which are much higher. when it appears there are recipients involved, which there usually are, they partner with the state prosecutors because those tend to be violations of the state and local laws. so most effective are when we do joint work where we take resources to federal prosecutors state prosecutors work on the individual recipients and we can approach all of those as a global kind of approach. >> that sounds like a perfect marriage. you need witnesses against retailers and sometimes recipients make very good witnesses. with that the gentleman from massachusetts.

mr. tierney. >> thank you very much. this is exactly the type of oversight we need to be doing on programs. if we're going to have programs where we agree we need to reduce hunger and fraud can't be allowed if we're going to have public support behind it, this is a good thing for the community to be doing. in my district in massachusetts we had groups working very, very hard to try to reduce hunger. they have seen a 40% increase in people accessing soup kitchens and pantries. with the economy the way it is, it's been very, very difficult for them. massachusetts is the only state i'm aware of that actually that has line item on this type of issue, mass emergency food assice they have a level budget. all my folks working hard on this, when they see a proposal 20% cut for s.n.a.p. program, it's panic. they want to make sure fraud isn't an issue as well but they want to make sure they have the resources. when i hear the numbers of 4%

down to 1% on fraud, 20% cut in the budget, i understand why they are looking that way. we have over 15,000 people in our district that benefit from these programs. i guess the 35% of them have a household member over 60, 41% have a household members under 15, talking seniors and children. it's important we get this right. julie fontaine, who does open door program up there to beverly, they serve 2,200 families on that basically. then we have hunger, boot straps, a lot of people working very hard on that. we need to know we're focusing, this is a situation of fraud we have to do. i do make the note, this committee has a broader portfolio. on the subcommittee which i sit, we've been looking at contracts in afghanistan. i just noted on food service i've asked the subcommittee chairman to have a hearing on that. we've asked defense logistics agency thought they were overpaying the food distributor in afghanistan $780 billion and

asked for that money back. that's serious, serious money. we need to do it on this program. i'm impressed mr. concannon you're continually working on this and your numbers are we need to do it across the board. we can't allow it to happen. the focus here, you think you have it down below 4%, maybe as low as 1%. is that correct? you're trying to get the new permutations of how people might defraud. you have a new website. >> we have a new website set up a month ago. later in the spring will be promulgating regulations that will increase financial penalties when a store is taken out of the program and sold to a new owner i've been interested in increasing financial penalties, it's a cost of doing business, flip the store. we continue to add layers. >> you had an issue with facebook and craigslist, how did you attack that? >> we did. we notified and that's what the inspector general was talking about new types of fraud,

several examples that way recently. we've written to craigslist, some of the other social media sites but we've also amended our regulation that even the simple intent, expressed intent to sell benefits constitutes a violation. we consider that trafficking. you'll be out of the program. >> you've tried to increase fines for falsifying information, things of that nature? >> we have indeed. we have strengthened again requirements, look for a variety of, for example, tax. these are particularly from stores to the other earlier comments made for additional corroborating information beyond what we have traditionally sought and especially so in locations where we've had prior issues. these kinds of issues of trafficking and fraud tend to congregate in the same location. we want those spots moved up on our high-risk profiles.

we also want to make sure we're exhausting every available source of information to us. >> i think on the debarment issue, that contractor in afghanistan that was overcharging $787 million, they are still operating on a single source contract. they don't even have to compete for the contract and are still in business. i know your efforts of debarring is important to this committee, both sides of the aisle. moving forward on that i hope you do proceed. i'm hearing from pat baker who does mass law reform who tells me you're doing a very good job in fda and they are adamant to work with you on that. people are clever, and they keep coming up with different ways. one of the ones recently crosses the border between abuse of people and the system. they find some women supporting their children are threatened, sometimes physically attacked to get them to turn over their electronic card. are you addressing that issue at all? anyone come across that? apparently it's more prevalent?

>> that would be the kind of incident where we have a number of partnerships where we call state law enforcement bureaus as well. we would definitely want to know about that, that absolutely is the worst kind of extortion. so we would want to work closely as inspector general faulkner mentioned we work closely with state agencies on a variety of things. that would be horrific. we would be happy to pursue that. >> thank you all. i think it's important work you do there. thank you, mr. chairman. >> i thank the gentleman from massachusetts and i apologize to the gentleman from virginia and texas because i got the order out of whack, so i would now recognize the gentleman from virginia as i should have and then the gentleman from texas. >> mr. chairman, thank you. no need for an apology. i know the pressures sitting in that chair. but you are always gracious and i thank you. mr. concannon, i'm old enough to

remember some ground breaking books like nick cass' promises michael harrington's, the other america, and the ground breaking work done by united states congress especially by then senator george mcgovern on a bipartisan basis with then senator bob dole to establish the food stamp program to address a pervasive problem of hunger and malnutrition in the united states. has the food stamp program, in fact, successfully addressed the issue of hunger and malnutrition in the united states. >> i believe the food stamps program has been one of the most effective first line efforts to reduce hunger in the country. it also has reduced poverty. we know in the census bureau last year pointed out last year alone 4 million additional americans would have sunk below the poverty line absent the food stamp program. as has been mentioned here

today, almost half, 47% of the beneficiaries of food stamps are children, another 8% are senior citizens over 60. about 20% of the households have a person with disabilities. increasingly these days the food stamp program are serving households in which 41% of the household members live in a household where one of the adults is earning, that is is in the workforce. i refer to that group of beneficiaries often as the new faces of s.n.a.p. these are folks who have been displaced in this difficult economy. they might not be getting as many hours in their work. it's really important that the s.n.a.p. program be responsive. across the country s.n.a.p. is serving 72% of the eligibles in the country. that reflects -- that has been moving upwards from in the

mid-50s and mid-60s now 72%. we're serving more than 90% of the eligible children in the country. there are a few states far below the rest of the country we continue to dialogue with and work closely with. the program really is responding as it should to the needs of folks in this country. it's the most inclusive of both state and federal feeding programs. so, if i understand your testimony in the 40-plus years since we started this program, it has, in fact, achieved its desired result in reducing hunger and malnutrition in rural and parts of urban america as well as reducing the poverty rate in the united states. >> indeed. there's a measure called food insecurity. we have data that points to the impacts of the food stamp program as it's still known in 20 some states. >> what percentage of food stamp recipients are children?

>> 47%. >> 47%. that translates to how many people? >> there are 46 million people, round figure around 21 million or 22 million. >> children. it's too bad the title is food stamp fraud as a business model, usda struggle to please store owners, seems to suggest or one could infer we have prejudged the case and apparently fraud is rampant. it kind of begs the question of the purpose and original mission of this program and whether, it, in fact, has achieved that mission some fraud that has to be stamped out notwithstanding. but let me ask you a question given that title what percentage of s.n.a.p. funds were improperly issued last year. the committee has looked at improper payments what percentage of the total program classified as improper payments? >> last year we achieved record

low -- we and states, all benefits are extended through states. we achieved an improper payment rate of 3.81%. about 3% of that was overpayments. just under 1% was underpayments meaning the beneficiary based on his or her income, household income, 3% received more than they should have. less than 1% received less. this is part of our quality control effort. >> of that total -- i'm sorry. mr. chairman, your pitch hitter as chairman offered to give me one extra minute. >> he's so much kinder than i would be. >> i lucked out, mr. chairman, that's right. i would ask the chair to honor that request. but 3.8% roughly improper payments, so all of that was not fraud? >> correct. >> what percentage of fraud? >> the fraud figure we have is

1%. >> and have we reduced improper payments over the last decade or has it gone up? >> we have considerably -- that's one of the charts we handed out. we have reduced it significantly over the past decade and continue to focus on it as well as reducing fraud in the program also. >> it's good this committee is having this hearing to absolutely highlight there are still problems we have to get -- our goal should always be to get it to zero. let's not overstate the problems and lose sight of the mission especially at budget time when people might be thinking of a $100 million cut in the program. miss fong you mentioned to us you still think mr. concannon's operation could do a better job of debarment and suspension, correct? >> that's correct. >> mr. concannon, could you address that, in my final question. >> in your second overrun minute. >> i'm sorry, mr. chairman. >> go ahead, please. >> thank you. >> i mentioned earlier that we believe that the approach we

take of moving people out of the program immediately is a more effective way. to most of the beneficiaries, the stores we're concerned with don't do other business with the federal government. even to cover that, we have been working with the general service administration to have these stores or companies put on the excluded parties list system, which will prevent them from being able to participate with other government programs. now, we're also -- we're continuing to have dialogue with the office of the attorney general to see if there are ways we can do both. aversion to the debarment process, it's that it slows it down. we like the authority we have right now. when we find that a store has misled us about their business relationships, or debarred before, we can take them out of the program. we send them a letter, give them

ten days, they are out. i don't have to give them more hearings. i don't have to give them more due process. they're gone.onderation and my colleague. >> because i know you want full disclosure miss faulkner, i think you had something to say on those questions, too. >> i wanted to talk about what my s.n.a.p. trafficking program has found in the fiscal year 2010-2011. we conducted 584 just s.n.a.p. trafficking investigations, we scheduled 158 administrative hearings with the total restitution we received back of over $250,000. we disqualified 77 recipients of s.n.a.p. benefits who committed trafficking violations, which really gave us a cost savings of close to $500,000. that's with the limited staff that we have. in pennsylvania, as i stated earlier, we're seeing more fraud. we are. in that we have little staff, we

hope to get a little bit more, that was 2010-2011 alone. we don't expect itgo previously said you don't necessarily concur with those figures independently at this point. i would only ask that since the hem to be mutuallyy are going to agreed to by metrics that then you could essentially concur with? >> yes.someork planned for this year to take a look at the methodology in those numbers. we now go to the gentleman frer. >> thank you, mr. chairman. i'd like to deal with something i hear about some from my constituents. that is the stretchingr e progr. for instance, i received a photograph from a constituent of

a sign outside of a place that prepares pizzas to order. they just don't cook them. apparently it qualifies under the letter of the law. certainly i wouldn't think under the spirit of the law the sign out there says accepts the lone star card, which in texas is our method of doing that. you also see an instance of grocery stores and convenience stores also offering quite a few hot food items i would think would not qualify under the program. i guess i'll address this to miss fong, what are y'all seeing with respect to that? what can we do to combat that. >> we as far as i know have not received any allegations along those lines that would indicate fraud or criminal activity. i would defer to the under-secretary, i think it's really a policy question. >> mr. secretary. >> i'd be happy to try to answer it. the second part of your question, when you look at first

of all consumers in the program cannot buy hot foods, period. they can buy frozen foods. there are pizza chains that have been admitted into the program over time. i mentioned earlier my testimony. one of the -- one of the definitions of who is eligible for the program in terms of the 231,000 providers is set in the statute through the farm bill. and it requires a minimum number of certain food groups, what we refer to as the depth of stock requirement. i would like to see that strengthened. >> let me follow up on that maybe with miss hatcher. we've got the technology now in place through upc codes that we can actually determine what items are qualified and don't qualify. i guess if you wanted to get into a big brother scenario could probably link up who is buying what. with the cost of upc readers,

$20, $30, hook up to a pc. i can't imagine any store being too small to implement it. do you see technological solutions to these problems, and could technical problems or solutions -- i'll let you answer it and then come back to the under-secretary. >> sure. i guess in the question about hot foods, that one is already taken care of now. our members, and we educate them very clearly, hot foods are not eligible. we code in anything that's a hot store. so then especially on the pizza thing, it would depend actually. go it's a troezen pizza in the frozen section it would be eligible. if it's a heated pizza in the deli area it would not be eligible.

>> strikes me a pizza made to order or not is stretching it. mr. secretary, that's fine. i guess my question do you see a technological solutions? another complaint i hear consistently from constituents people will go in and buy highly processed food with low nutritional value. i don't want to get in the business of dictating what people do and don't eat but to some degree our money our rules. what do you see as an optimum situation there? >> unfortunately on the processed food question, i'm not talking about those mini carrots that come from larger foods that have too much sodium. too many france fats and so on. all of us, americans, eat more processed food than any other country in the world. we are tryinro part i have responsibility for, center for nutrition policy to healthier, more fruits and vegetables. my plate is very simple but very effective icon. we are also encouraging access

to farmers markets for our -- in your case lone star beneficiaries to try to nudge them, direct them to buying healthier, often locally grown foods. i'm also still, i remain very interested in increasing the requirement for small stores to have better choices of fresh fruits, healthier foods for people rather than just the overabundance of processed food. >> i see my time has expired. thank you very much. >> i think the gentleman's time has expired. i thank the panel of witnesses. i think this was informative. contrary to what might have been perceived, this was a limited hearing, limited to businesses who, in fact, defraud the government and deny our children that $22 million or more children the receipt of the actual food rather than trading 50 for 100. our intention is to allow for at least five days for members who were not able to get here for

questions to supplement by asking all of you questions. would you agree to respond to them if you get them in writing? i want to thank you. i would like unanimous consent that if anyone thinks of something they didn't say and would like to supplement their tht objection, so ordered. we stand adjourned.

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