Archive for Saturday, July 22, 2000

Technology takes bite out of food stamp fraud

July 22, 2000


— Criminals are still swindling $660 million a year in food stamp benefits from the government, despite the widespread use of electronic debit cards in place of the traditional, easy-to-traffic paper coupons, federal officials say.

Still, the amount of federal money stolen each year by criminals has decreased 19 percent, from $815 million in 1993 to $660 million annually from 1996-98, Agriculture Department officials say.

And the trafficking rate -- which compares dollars trafficked to benefits issued -- dropped 8 percent from 3.8 cents per dollar in 1993 to 3.5 cents in 1998, according to a new department report released last week.

"Food stamps are intended for food and we do not and we will not tolerate fraud and abuse in the Food Stamp Program," said Shirley Watkins, the Agriculture undersecretary of food, nutrition and consumer services.

Using electronic benefit transfer (EBT) cards instead of paper coupons was supposed to help fight food stamp fraud and cut down on government paperwork. Currently, 37 states and the District of Columbia are using EBT cards for their statewide systems. All states have to be using the system by 2002, officials said.

But even though three-fourths of all American families using food stamps now use a card instead of coupons, criminals are still getting access to federal dollars, said Roger Viadero, the Agriculture Department's inspector general.

Just as they did with the paper coupons, recipients are selling their debit cards and personal identification numbers for drugs and money to traffickers, he told the House Budget Committee's welfare task force on Wednesday.

The street level traffickers may be having more difficulty using the cards, but "large-scale trafficking by retailers continues to be widespread," Viadero said. "Again, those involved often traffic in immense quantities of benefits, have large organizations and often use sophisticated schemes to carry out the crimes and conceal their illegal activities."

Part of the problem is that storeowners who willingly participate in fraud schemes are not being forced to pay the financial penalties they were assessed for trafficking, said Larry Dyckman, director of food and agricultural issues for the U.S. General Accounting Office, Congress's watchdog arm.

From 1993-98, stores were assessed $78 million in penalties but only $11.5 million was collected -- about 13 percent, he said. Fifty-five percent -- $49 million -- was written off as "uncollectable" and the rest was pending collection, he said.

"According to agency officials, this small percentage of fines collected reflects the difficulties involved in collecting this kind of debt, such as problems in locating debtors as well as their refusal to pay," he said. "However, weaknesses in the agency's debt collection procedures and practices also contributed to low collections."

In addition, most states with EBT systems aren't analyzing the data to find criminals, Dyckman said. As of last April, only Florida, Missouri, South Carolina and Texas were independently analyzing their electronic databases to identify suspect recipients, and Agriculture's inspector general provided 34,000 suspects to Maryland as well, he said.

"During 1998 and 1999, these five states were responsible for disqualifying about 99 percent of the 6,873 individuals nationwide who were removed from the Food Stamp Program for trafficking," Dyckman said.

The Agriculture Department has its own anti-fraud computer system called "ALERT" which records EBT transactions and looks for trafficking patterns, Watkins said.


On the Net: House Budget Committee welfare task force:

USDA Food and Nutrition Service:

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