Welfare Recipients Trade In Food Stamps For Cash To Buy Drugs & Weapons

Phyllis Fong, in testimony before the House Governmental Oversight and Reform Committee, said food stamp recipients traded their Supplemental Nutrition Assistance Program (SNAP) benefits at a discount to corrupt merchants and retailers in exchange for cash.

"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," Fong said in prepared remarks.

Guns, not butter

Welfare fraud – defined, in this case, as trafficking in the sale of food stamp benefits for monetary gain – is punishable by loss of benefits, fines and even criminal prosecution, CNSNews.com reported.

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

The USDA inspector general also told lawmakers the department was not properly vetting some recipients' Social Security numbers when officials checked for program eligibility. That failure likely has led to the loss of millions per month in taxpayer dollars through fraud, Fong said.

Her office "also has been looking at recipients who misrepresent themselves to receive benefits," she said.

Poor oversight

"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 five states," Fong said. "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 five states were receiving potential improper payments."

"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," she continued. "In total, we estimate that these recipients could be receiving about $1.1 million a month."

While the total figure of potential fraudulent activity may seem miniscule compared to a federal budget in the trillions of dollars, in times when the government is running trillion-dollar deficits and taxpayers are demanding Congress and the president find ways to trim the budget, every penny counts.

And, with a record number of Americans receiving food stamp benefits (the current figure of 46.3 million is up from about 30.8 million beneficiaries at the beginning of FY 2009), it only stands to reason that the fraud is likely to increase as well.

Keeping criminal retailers

Worse, Fong also told lawmakers those retailers who have been convicted of defrauding the government's food stamp program can remain SNAP retailers because the USDA doesn't have a policy to ban them from participation.

The "FNS is also not making use of one of the most powerful tools available to keep bad actors away, not only from SNAP, but from other federal programs they might exploit," she said.

"'Suspension and debarment' is a legal tool that federal agencies can use to protect programs from repeat abusers and ensure that the government does business only with responsible parties," Fong continued. "However, in a recent audit, we determined that FNS did not debar any of the 615 wholesalers and retailers convicted in relation to 208 OIG cases, even though a conviction is adequate grounds for debarment."