NCPA - National Center for Policy Analysis


December 12, 2006

Efforts to reduce the illegal use of food stamps have kept millions of dollars in benefits from going to waste during the past five years, but small convenience and grocery stores in low-income areas continue to be hotbeds for fraud, according to the Government Accountability Office (GAO).

Food stamp recipients who want to use their benefits to buy something other than food have found many ways to get cash out of the system, according to the GAO:

  • Typically, a grocer or store owner willing to take part in such a scheme will pay a food stamp recipient about 50 cents in exchange for $1 in stamp payments the retailer then can claim that the $1 was used for groceries and seek reimbursement from the government.
  • Some small retailers intending to scam the government will stock only the minimum amount of food required to qualify for the program and may let their stock dwindle after they are accepted, figuring inspectors won't return.
  • The selling of food benefits for cash at small groceries and convenience stores is 38 times the rate of fraud at large supermarkets, where less than a penny per dollar is lost to fraud, the GAO found.

About $241 million in food stamp benefits were stolen in 2005, according to the Food and Nutrition Service (the agency within the Agriculture Department that runs the food stamp program) which reported that small stores redeemed less than 15 percent of the food stamp benefits last year but accounted for $190 million of the fraud.

The amount stolen from the food stamp program through fraud has declined dramatically since 1993, when the program lost about $812 million, according to the GAO.  Increased enforcement has helped, as has the Electronic Benefits Transfer system, which eliminated the easier-to-trade paper benefit coupons.

Source: Donna Leinwand, "Small grocery stores hotbeds for food stamp fraud; They redeem less than 15 percent of benefits but account for 79 percent of misuse, GAO says," USA Today, December 12, 2006.

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