The District of Columbia ignored U.S. rules and procedures and improperly raised the fees paid to private firms to sell federal food stamps here, according to a Department of Agriculture audit report.
Because the D.C. Human Resources Department failed to follow federally approved procedures in selling the stamps, the city has been ordered to absorb the additional costs incurred and to renegotiate all contracts with the firms selling the food stamps.
The city's violation of federal procedures is the latest problem for the star-crossed food stamps program, designed to help poor people who qualify to buy food. In January, federal investigators said that the District owed the U.S. government more than $800,000 missing from or owed by 10 city-licensed sellers of food stamps.
The problem first occured last spring when nine credit unions, which handled 70 per cent of the food stamps sold in the District, requested an increase in the payment they received, from 75 cents to $2. One Agriculture Department official said he knew of no food stamp seller in the United States who received $2 per transaction for selling food stamps.
Rather than pay the $2, the report said, DHR made arrangements with a check-cashing firm to sell the food stamps. DHR supplied buses to carry food stamp recipients from credit union locations to the check-cashing firm's locations so that they could buy the stamps. According to the report, the cost of the buses, plus the 75 cents per transaction the District paid, brought the total cost for each tranaction to something more than $1.
At the same time, DHR was making arrangements with the check-cashing firm, it offered the credit unions $1 a transaction. Three credit unions accepted immediately and the six others followed suit later.
According to the report, the check-cashing firm that received most of the business while DHR was dickering with the credit unions was terminated as a seller effective Sept. 1, 1976.
Credit unions were being paid $1 per transaction. The check-cashing stamps were paid 75 cents per transaction. "The DHR reason for increasing the rate by 25 cents," the report states, "was that the continuity of service not be further disrupted causing hardships to food stamp recipients."
The report concedes that the "public urgency of maintaining continuity of service" may have justified the increased payment during a "transition period." But, the report says, enough time was available for DHR to follow prescribed federal rules and procedures.
One of the check-cashing firms, according to the report, offered to sell food stamps at $1 per transaction, a proposal later modified to 75 cents a transaction. DHR rejected the proposals.
The Agriculture Department's office of audit rejected the justification offered by DHR that short-circuit federal procedures was necessary to avoid disrupting the program. "Adequate lead time was available to DHR" to have followed the procedures for the fiscal year beginning Oct. 1, 1976, the report said.
Additionally, the report points out, when DHR solicited savings and loan associations in the District to provide additional locations to sell food stamps, the department's letter said the price was 75 cents a transaction - credit unions already were receiving $1 - and the letter "did not solicit bids or indicate that contracts would be awarded competitively."
The report recommends that DHR be required to execute new contracts and that the improper costs incurred since Oct. 1 should be refunded by the District.
A Feb. 11 letter from Ralph Picone, regional director of the federal food stamp program, to Jacqueline Johnson, assistant director for state agency affairs in DHR, directs the District to reduce its costs to 75 cents, to repay the overcharge - estimated to be about $13,000 for the first three months of the fiscal year - and prepare and execute procedures that will follow U.S. rules for signing contracts with food stamp sellers.