Published 7:00 am Thursday, June 22, 2023
On June 13, a Minnesota man pleaded guilty to his involvement in a $250 million fraud scheme in which the nonprofit Feeding Our Future and meal site operators exploited a USDA child nutrition program.
The man was the latest of several people to plead guilty in a case in which 60 people face charges for using money intended to feed hungry children to buy luxury cars, houses and jewelry, according to the U.S. Department of Justice.
When Agriculture Secretary Tom Vilsack was called to testify before Congress in March about his agency’s conduct, several members of the House Agriculture Committee expressed concern that USDA is not doing enough to prevent fraud, waste and abuse in its programs.
Rep. Brad Finstad, R-Minn., referring to the Feeding Our Future scandal, asked Vilsack “how USDA failed to prevent this fraud.”
Finstad urged Vilsack to review a report his office had submitted to USDA on the topic.
“We’ll look into it,” said Vilsack.
The Feeding Our Future scheme was not a standalone case. Since fiscal year 2018, the USDA Office of Inspector General — an entity tasked with auditing USDA — has received 78,383 hotline complaints, opened 1,119 investigations and found that billions of dollars across several agency programs have been subject to fraud, waste or abuse.
Some lawmakers on the House and Senate agriculture committees say holding USDA accountable for its spending is important, in part because any dollars that go to waste are ultimately taxpayers’ dollars.
Protecting the American dollar should come “first and foremost,” Rep. Lori Chavez-DeRemer, a Republican who represents Oregon’s 5th Congressional District and sits on the House Agriculture Committee, told Capital Press earlier this spring. “I don’t think that’s too much to ask (of officials) to have that oversight,” she said.
Others, however, say USDA must walk a narrow fence line between making its funding programs easy to apply for while also making the process thorough enough to prevent fraud.
USDA’s spending has grown in recent years as the agency has swelled with funds from the Inflation Reduction Act, Infrastructure Investment and Jobs Act and other spending packages passed by Congress.
Critics are concerned USDA has not been careful enough in allocating these funds, saying the agency should do more rigorous vetting of applicants for grants, loans and aid programs.
“Congress was injecting money. It was almost like: Pay now, verify later. It was a philosophy,” said Steve Morris, director of natural resources and environment at the U.S. Government Accountability Office, or GAO.
After dollars went out the door, Morris said, they were hard to track.
“Once the money’s gone, it’s very difficult to claw it back,” he said.
Part of the underlying problem, critics say, is that USDA devotes a tiny fraction of its resources to ensuring its programs are fraud-free.
For example, according to a June 7 report from the United Council on Welfare Fraud, an association that defends the integrity of public assistance programs, USDA’s Food and Nutrition Service spends less than 0.005% of its appropriations on anti-fraud efforts.
The council, the GAO and other organizations have issued reports saying some of USDA’s anti-fraud efforts are understaffed, underfunded and are using outdated hardware and software technologies.
A Republican aide familiar with USDA’s programs called the agency’s technology “antiquated” — insufficient for preventing or tracking fraud. “Why is USDA still acting like it’s 1972?” she said.
USDA staff, in response, said the agency is committed to preventing fraud, waste and abuse.
“USDA takes fraud seriously,” an agency spokesman told the Capital Press. “Those who commit fraudulent acts related to USDA programs are committing a serious crime that takes advantage of hardworking producers and low-income families.”
USDA, he said, is devoted to fulfilling its oversight activities and making sure its processes are consistent with federal guidelines and recommendations from the Office of the Inspector General and the GAO.
The Inspector General and GAO have issued many reports with recommendations on how USDA can improve its programs to better prevent fraud. Let’s zoom in on a few of these recent reports for a glimpse at how the oversight process works.
Twice annually, the Inspector General’s Office sends a report to Congress outlining instances of fraud, waste and abuse within USDA programs.
In a five-year period from 2018 to 2023, in a series of reports to Congress, the Inspector General’s Office identified more than $3.6 billion in questioned cost and funds that could be put to better use. The office’s investigations during that period also resulted in 1,802 indictments, 2,500 arrests and 1,922 convictions, leading to more than $1.2 billion in restitutions and recoveries.
Deltrick Johnson, deputy counsel for USDA’s Office of Inspector General, said “questioned costs” means costs his office has questioned as potentially unnecessary, unreasonable, unsupported with sufficient documentation or in violation of laws, regulations, contracts or agreements. “Funds for better use,” Johnson said, means funds USDA could have used more efficiently if managed differently.
In the most recent report to Congress for the six-month period ending March 31, the Inspector General’s oversight work resulted in a $492.4 million monetary impact.
The report included many examples of fraud, waste and abuse, one of which was strikingly similar to Minnesota’s Feeding Our Future scandal. A school in Brooklyn, New York, was responsible for an $8 million fraud scheme that involved misusing money intended to feed needy schoolchildren.
In the report, the Inspector General’s Office made 34 recommendations for ways USDA can improve its programs and operations.
Those concerned about USDA’s spending say that while the numbers in the Inspector General’s reports are large, they are likely a fraction of overall fraud that goes uncaught.
The GAO has also issued reports analyzing USDA programs and suggesting how they could be better managed.
One program the GAO has reported on is the Market Facilitation Program, administered by USDA’s Farm Service Agency. This program paid farmers for losses caused by international trade disruptions during the Trump administration. The GAO found that the Farm Service Agency could have done a better job of ensuring payments were accurate.
The Inspector General’s Office corroborated the GAO’s report, estimating that the Farm Service Agency’s Market Facilitation Program overpaid producers by more than $57 million.
The GAO issued another report on the Coronavirus Food Assistance Program, which provided more than 950,000 producers with $31 billion in aid to offset COVID-19 losses. The GAO found that more than half of the producers it randomly spot-checked did not provide proper evidence of their losses. For example, many submitted self-generated spreadsheets rather than verifiable third-party receipts. Some producers also did not provide evidence that they owned the commodities they claimed they owned.
The Inspector General’s Office followed up on the GAO’s report and found instances of fraud. For example, a rancher who had never owned more than 10 cattle falsely claimed to have owned 1,046 head of cattle and received a Coronavirus Food Assistance Program payment for the nonexistent cattle.
Finally, the GAO critiqued USDA’s changes to the Thrifty Food Plan, which estimates how much it would cost a family of four to eat a healthy diet on a budget. Supplemental Nutrition Assistance Program (SNAP) benefits are now based on the Thrifty Food Plan. During the pandemic, USDA updated the Thrifty Food Plan, resulting in a 21% increase in SNAP benefits. The GAO concluded USDA officials “made this update without key project management and quality assurance practices in place,” thereby increasing the program’s costs and risks.
Some lawmakers were displeased with USDA’s decision to change the Thrifty Food Plan without following the standard congressional review process.
“It (the GAO report on the Thrifty Food Plan) shows what little regard USDA had for Congress, and then what little regard they had for the process,” said a Republican aide.
Separately, Dawn Royal, who co-chairs an intergovernmental committee on the United Council of Welfare Fraud, testified in June to Congress that USDA’s nutrition programs face high risks of eligibility fraud, identity fraud and trafficking.
“SNAP integrity is underfunded, understaffed and widely ignored,” Royal testified.
Though many organizations and individuals have criticized USDA for letting taxpayers’ money slip into the hands of fraudsters, others have pointed out that if USDA cracks down harder on fraud, it could mean program applicants — including farmers applying for aid in times of need — will have to wade through more paperwork and bureaucratic red tape.
Bigger paperwork burdens, they say, will hurt small, beginning and minority farmers the most.
In a conversation with Capital Press, Rep. Andrea Salinas, a Democrat who represents Oregon’s 6th Congressional District and a member of the House Agriculture Committee, said she has heard from farmers that some of USDA’s grant and aid programs are “so cumbersome that they just aren’t even able to apply for them.” Salinas said that while she sees the value of strengthening some vetting requirements, she doesn’t want USDA’s vetting process to be so onerous that it deters farmers from applying.
Morris, of the GAO, also acknowledged this challenge.
“That’s a delicate balance,” said Morris. “How do you make the system not burdensome to producers but at the same time ensure the integrity of payments? That’s a tricky thing to balance.”
Those who sympathize with USDA’s predicament say it’s also worthwhile to note that during the pandemic, USDA fast-tracked payments to help producers in crisis, and the speed at which the money went out may have increased the risk threshold.
Lawmakers on the agriculture committees, along with their legislative aides, say they expect the debates over USDA’s handling of fraud, waste and abuse to continue throughout this year, especially in the wake of the massive Feeding Our Future fraud scheme.
Agricultural policy experts say it is also possible that lawmakers will try to build stronger anti-fraud language and frameworks into the 2023 Farm Bill.
