GAO: States missing food-stamp fraud

Most states aren't catching food-stamp fraud although they've got the electronic

capability to according to a General Accounting Office report.

The report found that of 29 states with the ability to electronically identify

and document food-stamp fraud, only five states did. Florida, Missouri,

South Carolina and Texas used their electronic benefit transfer and "independently

and proactively analyzed their electronic databases to identify suspect

victims," the report stated. The fifth state, Maryland, used a list of suspected

traffickers provided to them by the Agriculture Department to investigate


Electronic Benefit Transfer systems allow recipients to receive their food

stamps electronically by paying for food using a card, similar to a debit

card. The money is then deducted from their monthly allowance.

In 1998 and 1999, Maryland and Texas were responsible for about 87 percent

of the 6,873 recipients disqualified from the food-stamp program for fraud.

Nine other states investigated suspect recipients that were identified for

them by the government, and disqualified those trafficking. The remaining

15 states of those reviewed did not disqualify any recipient for trafficking

during the 2-year period, the report said.

Food-stamp trafficking occurs when a recipient exchanges benefits to a store-owner

for a reduced cash value, and the store-owner in turn redeems the benefits

from the government for their full value. GAO originally estimated the cost

of trafficking at $815 million annually, but concluded the number was unreliable

because the data did not consider the effects of EBT systems.

The report recommends that the Food and Nutrition Service, which runs the

food-stamp program, take the following steps:

* Work with the five states to determine the best techniques to identify

traffickers and then work with the remaining states with EBT systems to

implement those techniques.

* Periodically develop estimates of the extent of trafficking and then use

that data to develop goals and strategies to reduce trafficking.

Six additional states had EBT systems as of November, 1999, but were not

included in the review because they did not have sufficient time to use

the data to analyze recipients purchasing patterns, the report said. By

October 2002, all states are required to have contracts for EBT systems.

The USDA spent $16 billion on food-stamp benefits last year — distributed

to about 18 million people. Seventy percent of those benefits are distributed



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