How Widespread is Welfare Fraud?

Rights, News

As the economy worsens, the welfare system in the United States has become an increasingly controversial topic, both in Washington D.C. and in homes across the country. Nearly 40 million Americans were receiving money under the Supplemental Nutritional Assistance program as of February 2010, the highest since the program began in 1939.

Taxpayers are more conscious than ever of where their tax dollars go, and welfare fraud investigators are on the job to prevent  abuse of the system. Unfortunately it’s impossible to track down everyone who takes advantage of public assistance, and the truly needy end up paying the price for the actions of some greedy scammers.

Most public assistance goes to benefit truly impoverished and needy families. Criteria for assistance vary by state; in California, for example, a single parent with two children generally must earn less than $1200 a month to qualify – about equal to the average rental rate for a two-bedroom apartment in many areas of the state. The average food stamp benefit across the country hovers at around $125 a month per person.

Gambling with Welfare

However, the Los Angeles Times made a splash earlier this year when it reported over $69 million of California welfare money was spent outside the state, in places like Hawaii, Las Vegas, and Miami, between January 2007 and May 2010.  The Times found Electronic Benefit Transfer (EBT) cards, which can be used to withdraw cash at ATMs, were used to withdraw $1.8 million in cash in Las Vegas. Most casinos ban the use of the EBT cards, but investigators found $34,700 of the money was withdrawn from an ATM at a 7-Eleven store close to the Circus Circus.

Nearly $400,000 of California’s welfare money was withdrawn in Hawaii and $1.5 million in Florida — $7,000 from ATMs within Disney World. EBTs were also used to withdraw over $16,000 on 14 different cruise ships out of ports including Long Beach, Rio de Janeiro, and Miami.

Where Does the Money Go?

Critics point to the rise of electronic debit cards as  making it easier to commit welfare fraud. In Mendocino County, California, a woman who owned two homes and 12 vehicles collected $79,000 in welfare benefits using a state-issued benefits card. The Boston Herald criticized Massachusetts’ handling of their assistance program, claiming cash withdrawn using EBT cards was often used to buy alcohol, cigarettes, and lottery tickets.

Cases such as this fuel criticism of the state welfare system and draw accusations of widespread abuse. In fact, for the most part, EBT cards have cut down on welfare fraud. According to the Government Accountability Office, over-payments on food stamp benefits were reduced from 7 percent in 1999 to 3.5 percent in 2009.  In the California case, investigators note that some welfare recipients do travel legitimately to other states for family events and emergencies.  Some of the cards, they point out, were no doubt stolen or otherwise acquired illegally. Unfortunately statistics about actual spending are difficult to come by; once cash is withdrawn using an EBT card, it’s all but impossible to track what that money buys.