WASHINGTON — The state of Alaska agreed this week to pay the federal government a settlement of nearly $2.5 million for allegedly submitting false food stamp claims, according to the Justice Department.
The agreement by the Alaska Department of Health and Social Services will resolve allegations that it violated the False Claims Act by submitting misleading data to the federal government about its administration of SNAP, the Supplemental Nutrition Assistance Program, formerly known as the Food Stamp Program.
The federal government spends $71 billion per year on SNAP, feeding 41 million Americans a month on average since 2010, according to the Justice Department. The program provides financial assistance for low-income families to buy healthy food.
In fiscal year 2015, Alaska administered $168 million in benefits to more than 81,000 people a month, according to the Department of Agriculture.
The federal government funds SNAP, but states are in charge of passing out the benefits and making sure they are awarded appropriately. States that have low and improved error rates get bonuses for quality control each year, and those with high and stagnant error rates can face sanctions.
That's where Alaska allegedly went wrong. In 2009, the state hired Julie Osnes Consulting LLC, a South Dakota company tasked with offering recommendations to lower the state's quality control error rate.
The Justice Department said that by following the recommendations from the consultant, DHHS "injected bias into (its) quality control process." That meant submitting incorrect quality control data to the Agriculture Department and getting performance bonuses it shouldn't have, annually from 2010 to 2013.
The state stopped employing Osnes in 2015. Alaska is the third state to pay a major penalty for bonuses obtained after hiring her companny. Virginia and Wisconsin each paid roughly $7 million earlier this year. At least a dozen states have used her services.
According to an archived version of the company's website, Osnes began the consulting company in 2007 and had 20 years of experience administering the food stamp program for South Dakota.
Osnes was not available for comment.
The archived website also showed that in fiscal year 2013, 96 percent of the SNAP program's $30 million bonus pool went to 11 states that had contracts with Osnes, including Alaska. That year the state got $482,032 for having the lowest payment error rate and the lowest case and procedural error rate, according to the site.
At a hearing last week, Senate agriculture committee Chair Pat Roberts, R-Kan., said the scandals showed that in "all but a few states, the process used to measure errors has failed."
"Simply put, no one knows the error rate of SNAP, and that is completely unacceptable," Roberts said.
Roberts spoke at a hearing on nutritional assistance as the committee works towards reauthorizing the Farm Bill, 75 percent of which goes to SNAP, he said.
"We are not talking about rampant fraud here. … We are talking about states cheating and gaming the system," Roberts said.
"Alaska, like many other states, relied on a contractor, Osnes Consulting, who advocated practices that may have led to the inaccurate reporting of food stamp error rates to USDA," said Cori Mills, assistant attorney general for Alaska.
"Alaska terminated its contract with Osnes Consulting in early 2015 and has reviewed and changed its quality control practices," Mills said.