IG: Welfare Recipients Traded Food Stamps for Cash to Buy Drugs and Guns

Edwin Mora | March 8, 2012 | 1:43pm EST
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USDA Inspector General Phyllis Fong. (USDA Photo)

(CNSNews.com) -- Some of the record total of 46.3 millions recipients of food stamps--a federal welfare program--have traded their benefits at a discount with corrupt retailers to get cash to buy drugs and weapons, the inspector general (IG) for the Department of Agriculture (USDA) told Congress today.

The IG testified before the House Oversight and Government Reform Committee about fraud affecting the USDA-administered food stamp program, officially known as the Supplemental Nutrition Assistance Program (SNAP). The USDA’s Food and Nutrition Service (FNS) component is charged with handling SNAP.

USDA IG Phyllis Fong highlighted food stamp trafficking, which refers to the sale or purchase of food stamp benefits for monetary gain, which is punishable by disqualification from receiving future benefits, fines, and criminal prosecution.

“In terms of fraud, we have seen many types of trafficking in SNAP benefits. By giving a recipient $50 in cash for $100 in benefits, an unscrupulous retailer can make a significant profit; recipients, of course, are then able to spend the cash however they like,” said Fong in her prepared remarks.

“In some cases, recipients have exchanged benefits for drugs, weapons, and other contraband,” she said. “When trafficking occurs unchecked, families do not receive the intended nutritional assistance, and unscrupulous retailers profit at the expense of the American public.”

The IG also alerted House members about the USDA not vetting some recipients’ Social Security numbers when checking for program eligibility, which in turn may allow them to defraud SNAP of millions in taxpayer funds each month.

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The Office of Inspector General "also has been looking at recipients who misrepresent themselves to receive benefits," said Fong. "Recently, OIG has conducted a series of audits of 10 States to assess how they used participant databases to identify potentially fraudulent recipients, and we have completed work in 5 States."

"Our analysis of the databases that States check as part of their role in ensuring recipient eligibility revealed that a total of 8,594 recipients in the 5 States were receiving potential improper payments,” stated the IG. “Some of these recipients were using the Social Security numbers of deceased individuals, or otherwise invalid Social Security numbers, while others were receiving benefits in more than one State. In total, we estimate that these recipients could be receiving about $1.1 million a month.”

(AP Image)

Kevin Concannon, the USDA undersecretary for FNS who testified alongside the IG, told lawmakers that fraud by program recipients who misrepresent their circumstances or misuse their benefits happens “relatively infrequently.”

“Over 98 percent of those receiving SNAP benefits are eligible, and the FY 2010 payment accuracy rate was over 96 percent--a historic high,” the USDA official said. “In fact, the payment error rate is less than half what it was 10 years ago, which has resulted in a reduction of $3.3 billion in improper payments in 2010.”

In terms of participants and budget, SNAP is the USDA’s largest program, which currently costs a total of $75 billion annually.

The latest estimate from the USDA places the number of food stamp recipients so far this fiscal year (Oct. 1, 2011-Sept. 30, 2012) at about 46.3 million. That is a substantial increase from the 30.8 million beneficiaries at the beginning of FY 2009.

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