Food & Nutrition [Volume 12, Number 1]

              February 1982 Volume 12 Number 1
Oepository ·
PftOPfRTY OF tHE
liBRARY
r t: 11 z 51982
Unrvers,ty of North Carolina
at Greo!lsboro
While the Food Stamp Program is one of the most visible social service
programs, with millions of food stamp transactions taking place daily in the nation's
grocery stores, often unnoticed are efforts to control fraud and abuse.
This issue focuses on such efforts. Articles look at ways federal, state and local
dministrators are working to improve their programs and develop better monitoring
techniques, often with the help of sophisticated computer technology. Page 2
--- - . - --------- - - --· - - - · ·----
California
Sets Up a New
"Vendor Specific"
System for WIC
A
Also in this issue is an article on
one state's efforts to work more
closely with grocers who accept
food coupons from participants in
the Special Supplemental Food Pro­gram
(WIC). Using a new computer­ized
system to monitor WIC sales,
the state has been able to save
money and extend WIC benefits to
additional women, infants, and
children in need of supplemental
food aid. Page 17
Safe
Food Stamp
Dollars
Throughout its turbulent history, the Food
Stamp Program has been troubled by
charges of waste, fraud and abuse. While the ex­change
of food stamps for food is a common
sight, subject to the scrutiny of all, largely unseen
are efforts by federal, state, and local govern­ments
to improve management, reduce errors,
and police for fraud and abuse.
In the years since the Food Stamp Program
became a nationwide program, federal and state
management and monitoring techniques have
been developed and refined to respond to an
ever-increasing Congressional and public demand
for the elimination of fraudulent and abusive
practices.
These monitoring techniques are intended to
separate those who would abuse or defraud the
program from the millions of food stamp par­ticipants
and the great majority of retailers and
other handlers of food stamps who abide by the
rules.
The job of monitoring the program for error,
abuse, and fraud is complicated by a number of
factors: The program is large - 22 million people
in 8 million households receive benefits. The
determination of eligibility for the program and the
amount of stamps for which households are eligi­ble
vary according to a household's size, income,
expenses, and available resources.
2
,,The Fo
Program od _Stamp
assistanc:~ov•des vital
Nation, and o the Poor ot this
tod· We are d
Jrect that h I etermined
Pie for Who . ~ P. to the Peo-k~
e~ it out~~ ~~~s Intended and
cr•mmal elem e hands ot
can afford t ents. None ot
tions ot the ~ tolerate viola- us
and we are ood s_tamp law
not gomg t ,
Secret. 0.,, John R~r~~~~:gricutture
Also, the program continues to evolve - new
laws and regulations are frequent. And because
of the nature of the food stamp caseload, ranging
from the working poor to welfare recipients, to
those who are temporarily out of a job, turnover
is significant.
Recent legislation makes significant changes to
better target benefits, improve management, and
reduce program costs. The changes make it
easier to identify those who incorrectly obtain or
misuse food stamps, and they give states added
financial incentives to pursue and prosecute fraud
more aggressively.
In the articles that follow, we take a detailed
look at these legislative changes and at other
federal, state and local initiatives to combat fraud
and abuse and reduce waste in the Food Stamp
Program.
Food and Nutrition
Highlights
of New
Legislation
Among the major federal initiatives
are legislative and regulatory
changes aimed at tightening up the
program and making sure benefits
go only to people who are eligible for
them.
Recent legislation adds new
reporting and accounting require­ments
to give a more accurate
picture of recipients' financial cir­cumstances.
For those who commit
fraud or deliberately misrepresent
or withhold information that may af­fect
their eligibility or benefit levels,
there are increased penalties. There
are also added incentives to en­courage
states to investigate and
prosecute fraud.
Investigations have shown that the
authorization-to-purchase card
(ATP) has provided some opportunity
for abuse of the program. The ATP
card is a check-like card that lists
the amount of food stamps a
household gets each month. Partici­pants
exchange their ATP cards for
food stamps at authorized issuance
centers, which may be banks,
currency exchanges, or food stamp
offices.
Two major changes are aimed at
eliminating opportunities for AlP­related
abuse of the program. By Oc­tober
1982, state welfare agencies
will be required to use photo iden­tification
systems in all food stamp
project areas with 100,000 or more
recipients. Food stamp recipients
in these areas will show their I.D.
cards when exchanging their ATP
cards for stamps.
The purpose of the I. D. system is
to prevent ineligible persons from ob­taining
food stamps illegally and to
discourage eligible persons from at-
February 1982
tempting to get a double allotment
of food stamps by reporting their ATP
cards as lost or stolen and re­questing
a duplicate.
Seventeen metropolitan areas
are scheduled to implement the photo
I.D. system, or an approved alter­native,
before November 1, 1982. Ap­proximately
4.93 million food
stamp recipients, or 1.8 million
households, will be affected.
Another change that is already in
effect throughout the country
tightens procedures for replacing
food stamps and ATP cards that
recipients report lost, stolen, or
destroyed. The change is aimed at
protecting food stamp recipients
against legitimate verifiable losses
while limiting the government's
liability for unverifiable losses.
As a result of rules issued in
November, the federal government
will no longer automatically replace
food stamps that recipients claim
have been lost or stolen. In the past,
food stamp recipients could
receive a replacement for their food
stamps if they reported them lost or
stolen.
All of these changes are man­dated
by legislation. Some are con­tained
in the Omnibus Reconcilia­tion
Act, Public Law 97-35, enacted in
August 1981. Others are provisions
of the 1980 and 1981 amendments to
the 1977 Food Stamp Act. The
most recent legislative changes are
contained in the Agriculture and
Food Act of 1981, Public Law 97-98,
enacted in December.
USDA's Food and Nutrition Service
(FNS) has responsibility for writing
and issuing regulations to implement
these changes.
Here are more details: -New reporting and accounting
requirements. States are required to
be using a periodic reporting and
retrospective accounting system by
October 1, 1983. The previous law
made retrospective accounting an op­tion
for states.
Under periodic reporting, most
food stamp households will have to
make monthly reports of their finan­cial
circumstances. The only food
stamp participants who will be exempt
from this requirement are migrant
households and households com­posed
only of elderly or disabled
people who have no earned income.
Under retrospective accounting,
once a household is certified for food
stamps, benefits will be calculated
on the basis of the family's financial
circumstances during a previous
month. Benefits will no longer be
calculated on the basis of the
family's financial circumstances dur­ing
the month they apply. Migrants
are the only exception to this
requirement. -Changes in verification rules. To help
make sure information on food
stamp applications is accurate, new
rules give states more authority
and flexibility in verifying information
on certain application items.
Previously, states had to have found a
problem on a food stamp applica­tion
and documented it before they
could verify the information further.
These new rules went into effect in the
spring of 1981. -Social security numbers. Social
security numbers will be required
for all household members, including
children without countable income.
Previously, only persons with count­able
income, including children,
had to have social security numbers.
This change will help keep better
track of total household income and
the number of people in a
household. -Wage matching. States will be re-quired
to match computer wage data
of recipients' reported income
against data available from state
social security or unemployment
offices. This computer wage matching
is one way of decreasing certifica­tion
errors by catching under­reported
and unreported income
-and avoiding overpayments. Warning statement on food stamp
applications. Food stamp applica­tions
will be changed to prominently
display in boldface lettering a warn- ·
ing statement. It will state that any in­formation
the applicant provides
will be subject to verification by
federal, state and local officials. It
will also say that if the information is
incorrect, the applicant may not
3
receive food stamps and may be
prosecuted for knowingly providing
incorrect information.
Penalties for fraud and misrepre­sentation.
Legislation makes several
changes in the fraud provisions of
the Food Stamp Act.
First, in addition to being dis­qualified
for fraud, one could also be
disqualified for intentionally mak-ing
false or misleading statements,
anct· for misrepresenting, hiding or
withholding facts. Also, violating any
state statute relating to the use of
food stamps will be cause for dis­qualification.
In addition, there are new standard­ized
disqualification periods. In­dividuals
found to have committed in­tentional
misrepresentation or
fraud-either by an administrative
hearing or by a court-will be dis­qualified
for 6 months for the first of­fense,
12 months for the second,
and permanently for the third.
Previously, persons found to have
committed fraud by an administrative
hearing were disqualified for only 3
months. If they were found guilty of
fraud by a court, they were dis­qualified
for 6 to 24 months.
A household with a disqualified
member will not be allowed any in­crease
in food stamp benefits if the
increase is a result of the
disqualification. -Mandatory penalties for felonies and
misdemeanors. Legislation also
mandates penalties for felony and
misdemeanor offenses, including
mandatory jail sentences for second
and subsequent felony offenders.
Courts may permit offenders to work
instead of going to jail unless the
offense involves the redemption of
stamps.
Persons will be guilty of felony of­fenses
if they knowingly use,
transfer, acquire, alter or possess in
any manner not authorized by food
4
stamp law or regulations, food stamps
or ATP (authorization-to-purchase)
cards worth $100 or more. They will
also be guilty of felony offenses if
they knowingly redeem stamps that
have been obtained in any of these
ways. If the stamps or ATP's are worth
less than $100, they will be guilty of
a misdemeanor.
For the first conviction of a felony
a person will be fined up to $10,000.
Persons convicted of second and
subsequent felony offenses will be
jailed at least 6 months and not
more than 5 years and may also be
fined up to $10,000. If the offense
involves the redemption of food
stamps, the minimum sentence will
be 1 year.
Upon the first and subsequent
convictions of a misdemeanor, a per­son
will be fined up to $1,000 or
jailed up to a year or both. This
penalty is the same whether or not
the offense includes the redemption
of unauthorized stamps.
In addition to the above penalties,
the court may also suspend any
person convicted of a felony or mis­demeanor
up to an additional 18
months consecutive to that period of
suspension mandated under the
new standardized disqualification
periods. -New incentives for states to in-vestigate
and prosecute fraud. To
encourage states to investigate and
prosecute fraud, USDA now funds
75 percent of state costs of con­ducting
fraud investigations,
prosecutions, and hearings. It
previously funded 50 percent. As a
further incentive, states can now
retain 50 percent of all the fraud
claims they collect. -Photo identification cards. The
Food and Nutrition Service issued
final regulations in October 1981
requiring food stamp recipients in
large metropolitan areas to show
photographic identification cards
when receiving their food stamps.
The new I.D. system is required by
Public Law 96-249, the 1980
amendments to the 1977 Food Stamp
Act. The amendments require state
agencies to use photo identification in
any areas where the Secretary of
Agriculture and the Department's Of­fice
of the Inspector General
believe their use is necessary to
reduce the level of issuance-related
fraud and waste.
In areas using the new I.D.
system, issuance agents (who are un­der
contract with or employed by
the state) will be required to check
each participant's photo I.D. serial
number on the participant's ATP card.
State officials will later check the
number recorded on the ATP card to
make certain the correct house-hold
used the ATP card to obtain
stamps. State agencies will be
billed for any losses that result from a
duplicate issuance because an
issuance agent failed to record the
recipient's photo I.D. number on
the ATP card.
State welfare agencies will be re­quired
to use photo I.D. systems by
November 1, 1982 in food stamp
project areas with 100,000 or more
recipients. Areas where all
recipients receive their stamps by
mail or where the Food and Nutri­tion
Service approves an exception
may be exempt.
USDA will consider granting excep­tions
to one or more of the
minimum photo I.D. requirements for
any state agency that can
demonstrate that its alternate I.D.
card or system will provide ade­quate
protection against fraud.
Smaller areas may also be required
to install photo I. D. systems if FNS and
USDA's Inspector General's Office
find it would be useful to protect
program integrity.
Food and Nutrition
In areas where the I. D. card is man­dated,
all food stamp households
will be required to have a member or
an authorized representative get
and use the I. D. card as a condition of
eligibility. However, exceptions will
be granted for households that are
certified by out-of-office interviews,
households certified under the Sup­plemental
Security Income and
food stamp joint processing
procedures, as well as certain other
types of households.
If households fail to comply with
the photo I.D. requirements, they will
not be allowed to participate in the
Food Stamp Program. Previous rules
permitted state agencies to use
photo I. D. cards only with the consent
of food stamp participants. Under
the old rules, states could not deny or
delay benefits when household
members could not or would not be
photographed.
Mandated photo I.D. cards are
serially numbered, signed by the
person photographed, and laminated
after signature. They include a
color photograph and contain the
household's case number or other
identifying information. -Food stamp and ATP card replace-ment.
New rules tightening
procedures for replacing lost or
stolen food stamps and A TP cards
went into effect in November 1981.
February 1982
Under the new rules, if a household
reports that it never received its
ATP card through the mail, a state can
deny or delay replacement of the
ATP if documentation exists that the
household's request is fraudulent.
The new rules allow states to replace
ATP's and stamps in 10 days rather
than 5 days, which was the allowable
time before. In the case of the
ATP's, this change will give states
more time to see if the original ATP
had been used to obtain stamps.
The new rules also limit the num­ber
of ATP's and food stamps a
household can have replaced in a
6-month period:
For ATP's or stamps which were
not received, a household is limited to
two replacements in 6 months.
For ATP's which were received and
then stolen or destroyed in a
household disaster, such as a flood or
fire, the limit is one replacement for
each type of loss in 6 months.
For stamps which were received
and subsequently destroyed in a
household disaster, the limit is one
replacement in 6 months.
Replacement of stamps lost or
stolen after receipt is no longer
allowed.
State issuance liability. States are
held liable for any financial losses in­volved
in the acceptance and
storage of food stamps, and for cer­tain
unauthorized issuances and
overissuances due to state agency
error.
In the future, states will also be held
liable for losses of ATP cards and
food stamps sent through the mail, to
the extent determined by the
Secretary of Agriculture through
regulations.
It is expected that this change will
cause states to cut down on direct
mail issuance, particularly in urban
areas where losses have been high.
Mail issuance will probably continue
in areas where losses have been
less and where it is most needed.
In addition to changes that have
already been made, USDA has anum­ber
of demonstration projects un­derway
to evaluate other ways to
tighten and improve the program.
These include the following: -Analysis of computer-aided wage
matching techniques. Several states
already use earnings reported by
employers to verify income state­ments
of households certified for
food stamps. In one project, FNS is
evaluating the overall costs and
benefits of various wage match
systems. The project will help FNS
in providing technical assistance to
-states. Unauthorized aliens and food
stamps. Another project is examin­ing
the extent to which unauthorized
aliens apply for and are certified to
participate in the Food Stamp
Program. The project will also ex­amine
alternative screening and
verification techniques to minimize
-this problem. Work registration and job searc.h .
A project being conducted jointly with
the Department of Labor tests
several demonstration models to
determine the most effective
method of implementing the Food
Stamp Act's work registration re­quirement.
The project will help con­trol
abuse by deterring or eliminat­ing
from the program able-bodied
persons who are unwilling to accept
or actively seek employment.
5
Looking at the
Redemption
Process
Another area of potential abuse
FNS is looking at is the food stamp
redemption process.
Currently, authorized retailers
and wholesalers redeem food stamps
through local banks by presenting
the food stamps and a computer card
called a redemption certificate (RC)
which reflects the value of the stamps
redeemed. Local banks then take
the stamps and the RC's from the
retailers or wholesalers and send
the stamps to Federal Reserve banks
and the RC's to the Minneapolis
Field Center.
Studies have shown that the
value of the stamps ultimately
processed by the Federal Reserve
banks is appreciably more than the
value of submitted RC's. While
there may be legitimate reasons for
such discrepancies, the possibility
of fraud on the part of redeeming
stores or even banks cannot be
ignored.
To improve its ability to detect
fraud in this area, FNS began a test
last April of a redemption process
which, for the first time, allows for
reconciliation of food stamps and
6
RC's at the Federal Reserve. Under
this system the Federal Reserve
bank gets both RC's and food stamps.
The test is being conducted in the
Atlanta district of the Atlanta Federal
Reserve Bank. This includes 334
banks in Georgia and Howard County,
Tennessee.
Along with the revised process,
FNS is also testing a revised RC.
This RC, which uses more advanced
computer technology, promises to
lessen the chance of erroneous en­tries
and make falsification more
easily detectable.
Preliminary results of this new
redemption process and RC are
positive, suggesting that at a
reasonable cost a system can be
developed that can account for all
of the food stamps deposited in a
Federal Reserve Bank.
New Rules for
Wholesalers
In another measure designed
to reduce the potential for
redemption-related abuse, in Decem­ber
FNS issued new rules that will
significantly reduce the number of
wholesalers authorized to accept
and redeem food stamps.
Under these new rules, all of the
2,300 wholesalers currently
authorized have had their
authorization withdrawn and are be­ing
reauthorized only if they are
needed to serve as redemption out­lets
for the following groups: non­profit
cooperative food purchasing
ventures; group homes for the
blind or disabled; treatment centers
for alcoholics or drug addicts;
shelters for battered women and
children; and retail food outlets
which have no access to a bank.
Those wholesalers authorized to
serve treatment programs, group liv­ing
arrangements and shelters for
battered women and children will only
be allowed to accept food stamps
in exchange for food.
Wholesalers were authorized to
redeem food stamps when the
program first began to remove any
obstacles that might prevent retailers
from participating in the program.
But rather than continuing to allow
retailers to give the stamps to
wholesalers who then turn them in to a
bank, USDA decided that the best
way to avoid any potential for misuse
is for retailers to take the stamps
directly to the banks themselves.
USDA's Inspector General
recommended restricting
wholesalers' participation in the
program after investigating several
cases where wholesalers were il­legally
redeeming improperly ob­tained
food stamps.
Combating
Criminal
Fraud
While federal food stamp managers
work to tighten and improve the
program, USDA's Office of the In­spector
General (OIG) is concen­trating
on a different front: to combat
criminal fraud and protect the
program from those who discount,
counterfeit, and traffic in food
stamps. OIG agents also investigate
thefts from the mail, from issuance
offices, and from buildings where
food stamps are printed.
The work of the Inspector General's
Office ~has gotten considerable
public attention during the past year.
Food and Nutrition
Their efforts led to the indictment
last spring of an organized crime
figure in New York who the U.S. At­torney
said stole $29 million worth of
food stamps. Also last year, OIG in­vestigators
worked with the Secret
Service to break up a ring of coun­terfeiters
who sold undercover agents
$1 million worth of counterfeit food
stamps.
Investigating food stamp viola­tions
is not new for the OIG. They have
been auditing and investigating the
Food Stamp Program as part of their
responsibilities since the Food
Stamp Act was passed.
The office consists of 400
auditors and 300 investigative agents
who at least twice a year have
special training to update their
knowledge about the Food Stamp
Program. As a result of their training
and through working in the field
with the program, they are able to
recommend changes to program
managers and give input on
legislative proposals.
Ninety percent of OIG agents and
auditors are in the field in seven
regional offices-New York;
Hyattsville, Md.; Atlanta; Chicago;
Kansas City, Mo.; Temple, Tex.; and
San Francisco.
"Operation Sandcrab," a 6-month
investigation in southeastern
Virginia that ended last September, is
an example of many investigations
of illegal food stamp trafficking that
the OIG conducts throughout the
country.
In this operation, 40 arrests were
made in six cities of the tidewater area
of Virginia; $50,000 of merchandise
and over $7,000 in cash was
recovered. OIG undercover agents
exchanged food stamps for cash,
cars, stolen guns, television sets,
stereo equipment, microwave ovens,
clothes, tires and drugs, including
heroin and marijuana.
OIG supervisory special agent
Bob Bramhall, who works out of the
Hyattsville office, coordinated the
operation with the cooperation of the
U.S. Attorney, Eastern District of
Virginia, the U.S. Marshals Service,
Virginia Commonwealth Attorneys,
Bureau of Alcohol, Tobacco and
Firearms, and police departments
throughout the Tidewater area.
"We're the food stamp man," is
how Bob Bramhall describes his un­dercover
activities. "We live with
February 1982
these people. Our agents speak their
language and deal with them on
their terms so these people think we
are not the law-we are, in fact
crooks." He adds that they are careful
not to entrap, that the willingness to
deal is always on the other person's
part first.
In "Operation Sandcrab," they dealt
with neighborhood grocers,
burglars, waitresses, and persons
suspected of dealing with drugs
and stolen property. As a result, they
solved burglaries from Alabama to
New Jersey and uncovered a major
burglary ring operating in eastern
Virginia and northeastern North
Carolina.
This investigation brought the num­ber
of indictments for food stamp
fraud in the first 9 months of 1981 to
600. Over 90 percent of those
resulted in convictions. Since 1975,
OIG investigations have resulted in
more than 2,000 indictments for food
stamp violations.
tion the program's integrity. To keep
the problems in perspective, USDA
Inspector General John Graziano
says:
"By and large the program works
well. A great number of people are
being fed an adequate diet, and we
probably don't know of a better way
to get that number of people fed ade­quately.
"Until we can change human
nature, you're always going to have
people who will attempt to bypass the
system and try to obtain some ad­vantages
they are not entitled to.
"There are a number of people in
the Congress, in the Food and Nutri­tion
Service, and in the state and
local governments who are all
dedicated to trying to eliminate
fraud, waste, and abuse in the Food
Stamp Program; and in time we will
be successful."
article by Bonnie W. Polk
photos by Larry Ranna
Helping the OIG meet the retailer
investigative need of the Food
Stamp Program is the Food and Nutri­tion
Service's Compliance Branch.
This unit was formed in January 1977
when OIG realized that due to its
staff limitations and other priorities it
would need help in this area. Since
that time OIG has delegated the
authority to the Compliance Branch
!~:: .:~1 ~rge the program
of . great number
people are being fed
adequate diet, and we an
probably don't k
way to get that now of a better
number of
to conduct retailer compliance in­vestigations.
The creation of the new compliance
unit has enabled OIG to concen­trate
its efforts on felony-level food
stamp trafficking operations. An
added bonus is that the retailer in­vestigations
done by FNS com­pliance
officers can yield informa­tion
leading to criminal investiga­tions
by OIG. (See the separate
article on the FNS Compliance
Branch on page 14.)
When looking at fraud, waste
and abuse in the Food Stamp
Program, it could be easy toques-peoplf!
fed adequately.
h
Until we can change
uman nature ,
going to h ' you re always
will ave people who
attempt to bypass the
system and try to obtain
some advanta
entitled to. ges they are not
There are a number of
people in the Congress .
the Food and N . . ' '"
and in th utrttlon Service
e state and local '
gov-:rnments who are all
d~dl~ated to trying to
ehmmate fraud .
b . , waste and
a use '" the Food St
Program d . . amp
' an '" time we will b
successful. '' e
JU ShD A I nsP_ector General
o n Graz1ano
l ,
7
States
Crack Down
on Fraud and
Qualify for
Special
Funding
All around the country, states are
becoming more active in investigating
and prosecuting food stamp fraud.
Public attention, as well as new
federal regulations, is encouraging
state and local administrators to
tighten "front-end" certifying con­trols
and crack down on abuse.
The focus of state fraud control
efforts is on recipient fraud. The
responsibility for monitoring food
stamp caseloads for those few
recipients who abuse the program
lies with the state. Each state,
depending on the resources
available to it and its own state laws,
emphasizes fraud pursuit,
prosecution, and penalties differently.
Most recipient fraud cases in­volve
$100 or less in food stamp
benefits and are handled at state­or
county-run administrative
hearings-meetings of a state or
county food stamp official, the
recipient charged with program
abuse, and a hearing official.
The more serious fraud cases,
such as those involving large sums of
money, trafficking, or conspiracy,
are tried in the criminal courts. Oc­casionally,
a fraud case is referred
to the federal courts when the state
lacks the resources to prosecute
the case or because of the federal
government's involvement in
developing the case.
8
Preliminary data from fiscal year
1981 show state agencies conducted
5,100 fraud hearings which
resulted in 3,600 people being drop­ped
from the program. States also
conducted about 19,000 fraud in­vestigations
involving $6.2 million
in potential recoveries. Approximately
4,500 of these cases were
prosecuted, resulting in the recovery
of $4.4 million.
Most investigators agree that most
recipient fraud occurs during cer­tification.
People misrepresent their
income or the number of people in
their household in order to qualify for
more stamps. "These are often
tough fraud cases to prove," says Ed
Richards, chief of investigations for
the Texas Department of Human
Resources, "because you have to
prove intent."
New regulations
add incentives
Recent federal regulations
provide financial incentives for states
to investigate and prosecute fraud.
States may now be approved to
receive reimbursement for 75 per­cent
of their costs for investigating
and prosecuting fraud. In addition,
states can keep 50 percent of money
they recover from proven fraud
cases.
Federal administrators are
hopeful that these financial incentives
will encourage states to get tough
with food stamp fraud. According to
Joe Mclin, national coordinator of
the 75 percent funding initiatives,
"We've been working hard with
state and local investigators and
prosecutors, explaining the
program to them, trying to help them
through administrative require­ments,
and showing them how they
can use the federal money."
Some states have been reluctant to
apply for 75 percent funding
because regulations require state in­vestigative
units to break down
costs between food stamps and other
welfare fraud in order to show that
federal reimbursements are being
spent only on food stamp abuse.
"There are ways around this
problem though," says Tom Mc­Quillan,
Joe Mclin's counterpart in
the Food and Nutrition Service's
Mid-Atlantic Regional Office. "The
state investigative units need to get
together with their financial manage-ment
people and work out a cost
allocation plan. It's workable. We want
to get investigators out of the
business of financial management."
State investigative units appear
to becoming convinced. Between Oc­tober
1980 and October 1981, the
number of states approved for 75 per­cent
funding doubled to 36.
Funding used
in several ways
According to Mclin, 75 percent
funding can be used to cover direct
and indirect costs involved in in­vestigations,
prosecutions, and ad­ministrative
fraud hearings. However,
most states are not using the
money to help pay for costs of
prosecutions.
"Right now," says Mclin, "only
Florida is claiming 75 percent reim­bursement
for food stamp fraud
prosecutions on a statewide basis."
The Florida state agency has an
agreement with 20 state attorneys
who make up the Florida Prosecuting
Attorneys Association. Under the
agreement, the association is reim­bursed
at a fixed rate by the state
agency for each case prosecuted. The
association then reimburses the
appropriate prosecutor's office.
However, Mclin points out, not
all states are set up to handle this type
of arrangement. The state of Texas
is extremely active in food stamp in­vestigations
and receives 75 per­cent
funding for the costs of these in­vestigations.
But no mechanism ex­ists
for any cooperative agreement
with the state agency for the flow of
75 percent reimbursement for
prosecutions on a statewide basis.
Prosecutions are handled by more
than 250 county and district attor­neys,
and the state absorbs the cost.
One alternative to statewide
agreements such as Florida's is to set
up service-provider agreements
between county welfare offices and
local district attorneys. "This would
help get the federal money moving
Food and Nutrition
where it needs to go," says Mclin.
In Philadelphia, the district attorney
has submitted a proposal to the
state for an agreement between the
city and the state agency.
Approaches vary
among states
What makes a successful state anti­fraud
unit? The logistics and
organizational structure of anti-fraud
units vary from state to state. In
some states, investigators are
assigned to specific social service
programs. In other states, an in­vestigative
unit operates outside of
program areas.
In Iowa over a year ago, the state
formed a new investigative unit by
pooling investigators who had
previously been assigned to specific
programs. The unit is headed by In­spector
General Charles Sweeney,
who is operating his unit on a
"profit-making" basis.
By cracking down on abuse,
focusing on recoveries, and taking
advantage of 75 percent funding,
Sweeney sees his office recovering
d is simp\e it
''
pursuing trau we've
Pport. . . . d t
ou have su t the hea o
Y pport o h
had the su e's given us t e
our agency. H ·n and probe.
authority to go~ \e in the .
He's shown pe P an't be atra•d
agencY that theY c b\etns that
to \ook at the P,~o be atraid ot
exist:-thehy c:~encY \ook
'mak.ng t e
more money than they spend on in­vestigations
and prosecutions.
Sweeney is interested in cracking
down on abuses in the system and
making sure people pay back
overissuances of food stamps.
"There wasn't a systematic attempt
before to go after restitution," he
says. "People were convicted, put on
probation, and ordered to make
restitution, but they never did. But
that's no longer the case.
"We've got tight relationships with
probation officers and a computer
system to automatically bill recipients.
If people don't pay, we'll go after
them with legal action or civil
penalties."
According to Texas investigator Ed
Richards, the key to a successful
fraud investigation is the support of
the administrator in the agency.
"Pursuing fraud is simple if you have
support," he says.
When they first began doing in­vestigations
in 1974, he explains,
their group was the "stepchild" of the
department of human resources.
"People didn't like us. And they didn't
want to cooperate with us.
"But," he says, "we've been able to
turn that around because we've
had the support of the head of our
agency. He's given us the authority
to go in and probe. He's shown people
in the agency that they can't be
afraid to look at the problems that
exist-they can't be afraid of 'mak-ing
the agency look bad.'
"The only way to make the
agency look bad is to turn our
backs on the real problems that
exist," he adds. "In fact, we can
help shape the public's attitude
toward us if we can weed
bad.' to make the
The on\y w:!d is to turn our
agencY \o~~e rea\ prob\etns \
out fraud.''
backs on t t we can he P
that exist. \n :\~c:s attitude
shape the ~u we can weed out
toward us''
traud. ''
Ed Richards . ations,
Chief of /nvestrg t of Human
Depart men
Texas
Resources
\-L
February 1982
-
Richards is serious. Texas has
been one of the most active states in
fraud investigations. In 1980, they
conducted 4,067 investigations-
2,500 involved food stamps.
Wage-match
systems help
A key tool in uncovering recipient
fraud is a wage-match computer
system. Because of changeovers,
Texas' wage-match system was
shut down for 2 years, but started up
again this past summer. Within 90
days, says Richards, they had 4,000
referrals on both food stamps and
AFDC (Aid to Families with Dependent
Children) cases.
In December 1981, the state start­ed
programming the computer to
print out and refer cases with the
highest incomes first as a method
of targeting on major abuses.
"The feeling about the Food
Stamp Program is good in Texas,"
says Richards. "It's good because
people know there are problems­they
see there are problems. And
they also know we're doing something
about them.''
Regional coordinators of 75 per­cent
funding are:
New England Regional Office:
Chet Fisken (FTS) 223-0683
Mid-Atlantic Regional Office:
Tom McQuillan (FTS) 324-0206
Southeast Regional Office:
Dennie Johnson (FTS) 257-2881
Midwest Regional Office:
Kevin Pepple (FTS) 353-0578
Southwest Regional Office:
Wayne Scott (FTS) 729-0232
Mountain Plains Regional Office:
Jose Acosta (FTS) 327-5166
Western Regional Office:
Phil Armstrong (FTS) 556-7996
For more information, write:
Joe Mclin
Food Stamp Program
Food and Nutrition Service, USDA
Alexandria, Virginia 22302
article by Dianne Durant
9
New York
Reduces Loss,
Saves Food
Stam.p Dollars
A row of battered mailboxes with
dime-sized locks, chipped brass-tone
paint, and names variously
scrawled or neatly lettered is the mark
of dingy apartment entrances in ur­ban
neighborhoods. These insecure
containers are conduits for food
and shelter payments for millions who
are sustained by food stamps and
public assistance.
Every year hundreds of thou­sands
of dollars in checks and
authorization cards are jimmied out
of the boxes to flow into the un­derworld
exchange.
Until recently, New York City had
difficulty controlling and verifying
such losses. Less than 3 years ago, in
fact, the city was issuing as many
as 27,500 replacement cards each
month to recipients who claimed
they had lost the original document.
While many replacement requests
were legitimate, hundreds of thou­sands
of dollars were lost to
cheaters who claimed losses falsely.
With no way to adequately verify
recipients' claims, total losses were as
much as $15 million a year.
City administrators dealt with the
problem in two ways. In 1980 they
started a system called Rapid Access
Reconciliation to control duplicate
issuance, and they began planning a
sophisticated electronic payment
file transfer system (EPFT) which
could eliminate both food stamp
cards and public assistance checks.
This system is now being tested in
three zip code areas on the west side
of Manhattan.
Rapid access
reconciliation
In 1979, New York City's Mayor
Koch asked the Department of
Agriculture for the authority to
withhold replacement of lost or
stolen food stamp authorization-to­participate
(ATP) cards for 1 0 days.
This would give the city time to find
10
out if the card had been used. He
also asked for the authority to
withhold a replacement when in­vestigation
revealed that the first A TP
had been redeemed, with the client
retaining the right to administrative
review.
The Department agreed to the re­quest
but asked that an improved
reconciliation system for ATP's be
developed, one that would record
the redeemed cards and reconcile
those that had been issued. The
system also had to microfilm the
redeemed cards and provide photo
copies of them quickly. In 1980,
Manufacturers Hanover Trust was
awarded a contract to develop the
system, billing New York City's
Human Resources Administration 13
cents for each card processed and
$1.25 for each photocopy.
Today, when a food stamp client
does not receive an ATP card within 4
working days of the mailing date,
he or she reports the loss to a local
Human Resources Administration
office. The loss is recorded on an af­fidavit,
and the client is told of the
fraud control unit and asked to return
in 5 business days to pick up a
replacement. Information about the
loss is transmitted by computer
tapes to the contractor, who searches
the redemption tapes and
photocopies "lost" A TP's that have
been redeemed. These are sent
back to the local center.
When the client comes back, the
listing of redeemed ATP's is checked.
If the card has not been redeemed,
a replacement is issued. If the card
has been redeemed, the client is
directed to the fraud control unit
where a unique number on the I.D.
card and the client's signature are
compared to the number and
signature on the redeemed ATP card.
If the numbers or signatures don't
match, the redeemed card is con­sidered
a forgery and the recipient
receives a replacement. If there is a
match, replacement is denied. The
denial can be challenged and ad­ministrative
review requested.
During the first few months of
operation, problems with using the
regular ATP card were apparent. ATP
cards are not like checks-there
are no "stop payment" orders-and
each card is good for an entire
month. Although the city could
withhold replacement cards for 10
days, fraud was still possible: the
cheater could simply hang onto his
first card, claim a loss, wait 10 days
for a second card, and later
redeem the first card.
Because studies of redeemed
A TP cards showed that 90 percent
were used in less than 8 days, the
Human Resources Administration
(HRA) was given permission by
USDA to issue cards that expired in 8
days rather than a month. Com­bined
with the Rapid Access Recon­ciliation
system, the 8-day ATP
reduced fraudulent duplicate expen­ditures,
saving $7,095,200 in the
first 6 months of operation.
Food and Nutrition
l
\
]
Martin Burdick, HRA's ad­ministrator
of income maintenance
programs, is pleased with the
system. "Requests for replacements
have declined by 46 percent since
the first month of operation. This has
relieved pressure on the staff and
given them time to concentrate on
eligibility determination and ser­vices,"
Burdick adds. Losses due to
redemption by unauthorized per­sons
are expected to be further con­trolled
by the photo-identification
card requirement implemented
recently.
Contracted costs to pay for the
system are about 36 percent less
than planned because of the decreas­ing
requests for replacements,
which trigger photocopy costs of
$1.25 for each. In addition, the 8-
day ATP cards have not presented
problems for participants, even
though they have less time to ex­change
them for stamps. The per­centage
of ATP's redeemed against
those issued remains constant at a
little over 92 percent.
Electronic payment
file transfer system
During the past 3 years, as New
York City has grappled with control of
fraud and theft of mailed A TP
cards, the cost of postage has gone
up twice and the paper used for the
cards and public assistance checks
has also increased in price. Mean-
February 1982
while, computer technology has
become cheaper and more
sophisticated.
Now, New York City is trying this
technology to provide both public
assistance and food stamp benefits
in three zip code zones. In these
neighborhoods it is no longer
necessary to keep a watchful eye on
the mailbox on "check days"
because a single card issued once
can trigger benefits each month.
The system is based on a
magnetically encoded photo­identification
card. On the day
benefits are due, clients take the
card to any of four Manufacturers
Hanover Bank branches or seven
check-cashing outlets in the pilot pro­ject
area.
After checking the picture and
signature on the client's card, the
bank teller inserts it into a small
telephone-like terminal connected
directly with the computer system.
The teller also inserts a second
card, a "key." Without the client's card
the system cannot be accessed.
When both cards are put into the
computer it prints out a voucher
showing the amount of public
assistance and food stamps on file
for that client. The computer is
notified that the transaction is com­plete
when the cards are removed.
Then the client signs the voucher
and leaves with cash, food stamps,
I. D. card and a copy of the voucher.
"We hope the system will eliminate
fraud, theft, and inconvenience,"
Above: With the EPFT system, each food
stamp participant gets a photo 1.0. that is
magnetically encoded with a special number.
This number, which is invisible to the naked
eye, is added to each new 1.0. card with a
special encoding machine (center).
Clients relations clerks (right) enter into the
EPFT computer the necessary information on
the participants' eligibility and benefits.
says Robin Swank, manager of the
project, "and we hope it saves
money.
The potential for savings is
significant. With the regular system,
public assistance recipients usually
take their checks to check-cashing
outlets where three quarters of 1
percent plus 10 cents is deducted for
the service. This is paid by the
client. For each food stamp transac­tion,
the city pays 95 cents. The
EPFT system ends these payments as
well as postage and paper costs.
Gilson F. Kingman, who helped
direct Manufacturers Hanover
Bank's successful bid to participate in
the pilot project, is enthusiastic
about the new system and anticipates
eventual citywide implementation.
For the client there are many con­veniences.
First, mailbox theft or
loss is impossible. Second, benefits
are always available on a preset
known date. This date is the
staggered day of the month on
which public assistance checks and
ATP's were mailed in the past. It is
known by the last digits of the iden­tification
number. Clients are able
to pick up both benefits at the same
time and these are available the en­tire
month.
11
In addition, the process is fast
and, early results show, accurate. On
the average, it takes tellers about a
minute and a half to complete each
transaction. And, during the first
month of operation, only 6 of the
13,000 participants did not receive
payment immediately.
Now, no one can fraudulently
redeem another's benefits. The
photo-identification card and
signature verification prevent it. In ad­dition,
if a client loses the card, it
can be called "hot" and a stop placed
on it immediately. Replacement
cards and access to benefits can be
issued on an expedited basis.
When a cheater tries to cash in
twice in the same month or
otherwise work the system, the
machine prints out instructions to
return to the photo I.D. office. The
teller does not become involved.
Thorough planning was involved in
preparing for the introduction of
the new system on November 1,1981.
Clients first received a letter with in­formation
about the system, and later
a letter with instructions on obtain­ing
the card. The second letter in­cluded
details about the necessary
documents and the process. The staff
was carefully trained in preparation
for the project.
The area selected for the ·
demonstration is one that has all
assistance categories, a relatively
dense client population with a
bilingual character and "natural"
boundaries (Central Park, Columbus
Circle and the Hudson River) which
limit the geographic area covered.
There are enough (11) outlets in the
area to assure prompt service.
The 13,000 people participating
in the pilot project in midtown
Manhattan are no longer anxiously
watching their mailboxes to await the
arrival of their checks. New
technology may be improving urban,
industrial society's way of bringing
assistance to the needy.
For more information, write:
Robin Swank
26 Federal Plaza
New York, New York 11048
article by Catherine Tim Jensen
photos by Larry Rana
12
Co:m.puters
Help Detect
and Solve
Proble:m.s
Run a program with less staff, a
lower budget, and increasing
caseloads-that's the challenge
facing food stamp administrators
throughout the country. To meet
this challenge, more and more ad­ministrators
are turning to
sophisticated computer systems
which do everything from figuring
out how many food stamps a
household should get to identifying
a grocery store that is illegally ac­cepting
food stamps.
New computer systems allow states
to instantaneously transmit case in­formation
to a central computer from
dozens of separate local food
stamp offices. While states have com­puter
systems that vary in scope
and sophistication based on their
caseload size, management needs,
and state resources, some of the new
systems being phased in in several
states provide a number of advan­tages.
Paperwork and many of the errors
that accompany the transfer of
large amounts of paper between of­fices
can be reduced because most
information is electronically trans­mitted.
Quick computer checks of similar
names and social security numbers
can catch people that apply for
duplicate benefits in different
welfare offices.
Computer systems can compare
food stamp rolls with unemployment
tapes to reveal cases of unreported
income. This is one of the most dif­ficult
types of welfare fraud to
detect.
When changes in welfare grants
and social security amounts affect a
large number of food stamp
recipients, special computer coding
Food and Nutrition
can allow these changes to be
automatically calculated. In the past,
these changes had to be
laboriously calculated on a case-by­case
basis.
Individual eligibility calculations
can also be done by computer,
eliminating math errors while saving
considerable staff time. Staff time
can also be saved by using computers
to automatically print the notices
sent to food stamp clients informing
them of actions taken on their
cases. In Nevada alone, a state with a
relatively small caseload, this in­volves
12,000 to 15,000 pieces of
correspondence a month.
Savings can
be substantial
New Mexico recently automated its
Food Stamp Program using
Louisiana's automated system as a
model. It cost the state about $2.75
million to transfer and modify
Louisiana's system, but once in
place, the system began reducing
costs almost immediately.
According to Lawrence B. Ingram,
Secretary of New Mexico's Human
Services Department, the state will
recover the full cost of converting
to computer within 17 months. Com­pared
to projected operating costs
of $9.4 million annually with a non­automated
system, the state ex­pects
costs to be about $8.3 million
annually with the automated
system. It took less than a year to get
all the state's counties on com­puter.
The system has been operating
statewide since last spring.
Aside from savings, state food
stamp managers are finding the
computerized system makes it easier
to detect program abuses.
Each client must now provide his or
her social security number when
applying for food stamps. The com­puter
checks the applicant's prior
history and cross-checks all counties
for duplicate participation. Ingram
claims this makes it impossible for the
head of the household to be cer­tified
in more than one county.
Matching food stamp rolls
against payroll lists, the state has so
far identified 50 cases as
February 1982
fraudulently participating in the
program. Some of these cases
have been referred to the Attorney
General for prosecution. Over
$75,000 in overissuances have been
filed against these cases.
In addition, food stamp offices have
received a number of food stamps
returned by people who either
received them fraudulently and
were apparently afraid of prosecution,
or who received them in error.
Caseworkers like
the new system
Switching to the computer system
took a lot of work and some adjust­ments
for food stamp caseworkers.
"At first it was hard," says North
Bernalillo county supervisor Clorinda
Arias. "Now the workers feel more
comfortable with it. We find that we
have more accurate information
and better statistics."
Each caseworker received 2
days of intensive training before con­verting
his or her cases to the com­puter.
The key to the process is a
document called the client record
form, which the caseworker uses to
put information into the computer.
Caseworkers use this document to
provide information for eligibility
determination and to change case
data.
The one-page client record form
requires 19 typed pages to explain
the codes needed to feed information
into the computer. It also takes 17
typed pages to explain the transaction
codes-the codes that tell the com­puter
what you want done with the in­formation.
Despite the number of pages
needed to explain the codes,
Clorinda Arias says, "It's a very simple
form to follow. The transactions are
mastered after working with them for
a while."
Forms printed
in green ink
·L
The client record form is one of the
most critical forms, according to
Orlando Fernandez, forms manage­ment
coordinator for the task force
that put together the state's system.
Fernandez used forms from
Louisiana as a base and then made
modifications. For example, he had
the forms printed with green rather
than black ink, which would tend to
obscure the workers' black marks on
the form.
Also, by giving attention to small
details, such as the way a form is
carbonized, he has found he can
reduce postage costs. Instead of
using a separate sheet of carbon
paper, New Mexico uses "NCR" (no
carbon required) paper which
automatically imprints onto a
second sheet. This makes the forms
considerably lighter when they are
mailed in bulk.
Looking ahead over the next 3
years, state managers expect the sav­ings
to continue. Within 4 years,
they project the annual cost per food
stamp case will be about 62 per­cent
of what it was in 1979, before the
automated system.
For more information, write:
Bill Dunbar
Department of Human Services
P.O. Box 2348
Santa Fe, New Mexico 87503
article by Judy Snow
and Phil Canuto
13
Special Team.
Investigates
Retailer
Violations
Billions of dollars in food stamps
exchange hands in grocery stores
across America each year, as
recipients purchase food with their
coupons. It is at this point of exchange
where the greatest potential exists
for violations of the purchasing rules
of the Food Stamp Program.
For over 20 years, USDA has
worked closely with the retail in­dustry,
providing training and
promoting compliance with food
stamp rules. Today, there are approx­imately
230,000 retail grocers
authorized to accept food stamps.
Most grocers
cooperate fully
In the vast majority of cases,
grocers are eager to comply with the
rules, since they are very protective
of the food stamp portion of their
business. Most would not want to
jeopardize their participation in the
program. For many small grocers,
in fact, being disqualified could mean
going out of business. Some of the
larger retail chains actually run their
own internal checks to be sure
cashiers understand and obey food
stamp regulations.
The penalties for noncompliance
with program rules vary with the
severity of the offense. Disqualifica­tion
periods range from 30, 60, or
90 days to 6 months for minor viola­tions,
such as selling ineligible
items worth less than $5.00, giving
more than 99 cents in cash as
change during a transaction, or ac­cepting
stamps for payment on a
credit account.
For more serious violations, such
as selling nonfood items worth more
than $5.00 or selling cigarettes or
alcoholic beverages, stores can be
disqualified for up to a year. Those
caught trafficking or "discounting"
food stamps (buying them for cents
off the dollar value and redeeming the
coupons for full value) are .dis-
14
qualified for up to 3 years, and usually
will also be indicted on state or
federal criminal charges.
The Food and Nutrition Service
has a team of special investigators to
detect retailer violations. Working
out of field offices throughout the
country, FNS compliance officers
do onsite investigations of stores
suspected of violations.
In most instances, stores are
selected for investigation on the
basis of computer analysis of sales
and coupon redemptions. For ex­ample,
a store may be spotted for
redeeming more food stamps than
its total sales would warrant. In some
cases, leads for investigations stem
from complaints from private citizens
and neighboring store competitors.
Disqualifications
often result
This is the most serious area of
violations pursued by compliance in­vestigators,
who are allowed to dis­count
stamps only to a maximum of
$100. At that time, agents from
USDA's Office of the Inspector
General are called in and the case
becomes a felony investigation. Still,
,, I rarel
stamps unyl mention food
d ess th o. I try to talk e grocers
traneous th" about ex-trapment.
I ';:,s to avoid en-my
hand, or Ia: t~e stamps in
on the count em down
~on't say any:~lnOther People
!ng stamps so 9 about us­lUst
try to ~ct ,.~ don't either. 1
else Who come~ .e anybody
food stamps. ','" and spends
FNS Co .
Bill John";~~ance Officer
According to Bruce Clutter,
branch chief of the FNS compli­ance
unit, the compliance officers
conduct more than 4,000 investir­gations
a year. "In more than half
of those cases," he says, "we are
able to document that violations are~t::::=:---------
occurring. And, of the 4,000 stores --------======~
investigated each year, approximately
1,700 are disqualified for various
lengths of time, once all administra­tive
and judicial review procedures
have been exhausted."
FNS compliance officers travel
more than a million highway miles a
year as they work out of area of­fices
in New York City; Alexandria,
Va.; Atlanta; Memphis; Chicago;
Dallas; and Oakland, Calif. Under­cover
tactics and the use of local
aides help them overcome the
barriers of regional dialects and
appearance.
On a typical case, an investigator
enters a suspected store and at­tempts
to purchase ineligible items,
such as soap powder, cigarettes,
beer, appliances, and more. It is
not as easy as it sounds. As many as
five attempts or "passes" are made
at a single store over the course of
several weeks. Usually the in­vestigators
attempt to purchase more
seriously illegal items with each
consecutive pass.
Often investigators attempt to
discount stamps with store personnel.
many times FNS compliance of­ficers
continue to work the case in
cooperation with OIG agents, since
the necessary contacts have already
been made by FNS investigators.
Andrew Hornsby, deputy ad­ministrator
for regional operations
at FNS, was the first chief of the Com­pliance
Branch, and was heavily in­volved
in its formation in 1977. "I think
the biggest achievement has been
the Branch's acceptance by the Office
of the Inspector General and the
legal community in which it
operates-the U.S. Attorney's of­fices
and the courts," he says.
"FNS compliance officers' in­vestigations
stand up in court against
the scrutiny of very shrewd oppos­ing
attorneys. The result is that con­sistently
about 50 percent of the
stores they investigate are found to be
in violation."
In the following article, a com­pliance
officer from the Memphis
office describes his techniques and
shares some of his experiences. To
protect his identity as an undercover
investigator, we have used a
pseudonym.
Food and Nutrition
uyou try to blend in with everyone
else, if you can. The more
you blend in, the less questions will
be raised. If you're completely dif­ferent,
people take notice of that."
Bill Johnson blends in well. He is a
chameleon, slipping into any num­ber
of roles. He is everyone, and yet
no one. But after only a few words
with Bill Johnson, you'll swear you've
known him a lifetime. It is an un­canny
skill, and one that makes him
extremely effective in his work.
Johnson works out of the Com­pliance
Branch's Memphis office,
but he is rarely there. Instead, he
travels constantly throughout
eastern Tennessee, Kentucky, and
Mississippi. With most of his time
spent on the road, Johnson's real of­fice
is the trunk of his car.
One of the first
FNS investigators
Johnson worked in the Food Stamp
Program for many years prior to
becoming one of the new in­vestigators
entering training early
in 1977. His knowledge of the
program was a great help in his
new career. Johnson says his under­cover
expertise was an acquired
skill as well.
"Over the years I've observed
people a lot, their mannerisms, the
way they talk, how they dress. A lot
of times when I'm in stores people
say, 'Where do you work? What do
you do?' I'll say either, 'I've been help­ing
a guy tear down a transmission
on a car,' or 'I'm on a crew paving a
road 8 or 10 miles up.' A lot of times
I'll know that from driving through the
area."
· Along with dirty blue jeans and
grimy shirts, Johnson's disguise kit
includes actor's black makeup, which
bears a striking resemblance to
engine grease when smeared from
fingertips to elbows, with ap­propriate
dabs about the face. No
matter where Johnson is, he per­forms
on cue to make you believe he's
lived there all his life.
"I try to think of something that's
happening in the area," he says. "A
lot of times I'll get a little daily
15
newspaper. Maybe something's
happened that I can talk about."
In one area Johnson works, a
neighborhood school was leveled by
an arsonist a few years ago. "I had
something to talk about then. 'That's
awful, somebody burning down a
school like that.' "
The 5 or 10 minutes an in­vestigator
spends in a store can be
moments of intense pressure, re­quiring
smooth precision in a myriad
of everchanging conditions. The in­vestigator
must always have the
correct response when questioned,
must always be someone he or she is
not.
Johnson often looks in the phone
directory for common names in a
particular vicinity, but using fictitious
names can be tricky. Once, for ex­ample,
when a grocer asked his
name, Johnson offered "Jim Price"
and was asked a string of questions
about where he worked, who he
was staying with, and who his relatives
were.
Suspicious, the grocer looked at
the ineligible items he had already
begun to package and said, "I just
can't sell this stuff here." When
Johnson answered, "I don't want to
cause a problem for anybody, es­pecially
me," the grocer changed his
mind and went ahead and com­plete
the sale.
Every move
is measured
An investigator is actually quite
limited in the things he or she can say
to a cashier or owner. Great pains
are taken to avoid entrapment, any
physical or psychological coercion
that forces storeowners or clerks to
do something they wouldn't or­dinarily
do.
"Whenever I'm talking, I rarely
mention food stamps," says Johnson,
"unless the grocers do. I try to talk
about extraneous things to avoid en­trapment.
I hold the stamps in my
hand, or lay them down on the coun­ter.
Other people don't say
anything about using stamps, so I
don't either. I just try to act like
anybody else who comes in and
spends food stamps."
There is always the fear that one
store under investigation might tip
off another in the same area. Johnson
spends a good deal of time looking
over his shoulder.
16
"I watch things like bread trucks
and soft drink salesmen," he says. "If
I'm working two or three stores in
the general vicinity, I might be in a
store when a soft drink man is
there. Well, if I don't watch it, I might
find myself pulling up to the next
store, and he's in that one, too.
"A salesman might tip off
someone, because, let's face it, that's
part of his sales." If a retailer loses
his ability to redeem food stamps,
he'll sell less of whatever the
salesmen are vending.
Compliance investigators do not
carry weapons of any type, relying in­stead
on their ability to talk them­selves
out of any potentially
dangerous situation.
"In southeast Tennessee, down
below Chattanooga, a man had
been disqualified before, for a year.
I'd heard he was a pretty rough
character. I was getting some
cigarettes, and some beer, and lay­ing
it down on the counter, and a
bread man came in. All of a sudden
the owner just pushed my stuff aside
and took care of the bread man.
"Well, I didn't think anything un­usual
about that, but after the
bread man left he said, 'You've got to
watch these people. You know, I
got caught here once before. Some
guy came by here, bought a bunch
of stuff, and went and told on me.'"
Investigators readily accept the
opportunity to discount stamps with a
violating store. It can lead to the
cracking of a major trafficking ring.
Once Johnson was buying some in­eligible
items in a store and learned
that violators can be extremely
brazen.
"It was so strange. I just asked
this man if he knew where I could get
rid of some food stamps. He look­ed
around and asked, 'Well, how
many you got there?' He started
counting them out and went over to
the wall. There was a little chart
there. He said, 'That brings this much
this week,' as if there was some
kind of futures on food stamps every
week! I sold to him twice and OIG
came in and caught him on a felony."
Each transaction
is documented
After making a 5- or 1 0-minute
pass in a store, an investigator must
spend 45 minutes to an hour doing
the necessary paperwork to properly
document the transaction. Each
item purchased is identified and
described, ineligible or not. Prices
are noted, the number of coupons
spent carefully documented and
deducted from the amount the in­vestigator
had when entering the
store. All of these procedures are
critical to proper accountability in
court. Physical descriptions of the in­sides
of the stores are prepared, as
well as of the cashier present.
After several days of activity, an
investigator can accumulate a
truckload of groceries, which in­clude
beer and cigarettes in a majority
of cases. All of the groceries are
donated to various churches and
charitable organizations, such as
the Salvation Army. In cases where
the organization will not accept
alcoholic beverages, they are poured
out with another investigator or
field office representative acting as a
witness.
Investigators are trained not to let
their personal feelings interfere in
the way an investigation is carried out,
but Johnson recalls a case where it
was an effort to control his anger.
"I was making some positive
buys from a grocer who kept taking
extra stamps from me. He would
ask, 'How many stamps do you have
there?' And it always seemed to be
that I had just enough stamps, no
matter what the price of the goods
was. If I had $29.00, the price was
$28.30." Johnson says he was glad
the retailer was disqualified from the
program, and thus prevented from
stealing from needy food stamp
recipients.
Bill Johnson is a trained
professional who takes pride in his
work and does it well, despite the con­stant
travel and loneliness and
hardships that go with it.
"It's like being on the firing line, I
guess. If we don't catch them, who
will?"
article and photos
by Jim Henry
Food and Nutrition
California Sets Up
a New ''Vendor Specific''
System for WIC
In the Special Supplemental Food
Program (WIG) as in the Food
Stamp Program, the great majority of
participants and grocers are eager
to comply with federal rules. Still, ef­forts
to prevent and prosecute
abuse are an essential part of
program management, and several
states are making strides in this area.
The following article looks at one
state's efforts to improve manage­ment
by using a new computerized
February 1982
system to monitor grocery store han­dling
of WIG coupons. Combined
with ongoing efforts to educate store
personnel, the system allowed the
state to save more than a million
dollars in WIG funds during the first
2 years of operation. Because of the
savings, the state has been able to
extend WIG benefits to an additional
3,500 mothers and children in need
of supplemental food aid.
California has one of the largest
WIG programs in the country. Each
year some 12 million federally
funded, state-issued WIC vouchers
are used by more than 142,000 WIC
participants. Sales of WIC foods total
more than $56 million annually. Un-til
recently, sheer volume alone made
monitoring WIC sales an enormous
task.
In January of 1980, state WIC
managers began using a new system
to monitor grocery store handling
of WIC vouchers. The system, which is
computerized, makes it easy to
identify stores suspected of violating
program rules, such as overcharg­ing
for WIC foods or accepting WIC
vouchers for foods other than those
allowed under the program.
Here's how
it works:
The "vendor specific system," as
its name implies, requires a WIC par­ticipant
to select a specific vendor
(grocer) from a list of grocers under
contract with the state. Once selec­ted,
the vendor's name and WIC
authorization number are imprint-ed
on the participant's WIC vouchers,
and the participant buys WIC foods
only at that store.
"What this does for us," says
Jack Metz, state WIC program direc­tor
"is insure that only those
grocers authorized by the state han­dle
WIC vouchers." Under the old
system, any of the state's retailers
could accept the vouchers. All they
had to do was sign a statement on the
back of each voucher that said that
the WIC transaction was conducted
according to the rules.
Now, there is a signed agreement
between the state and each
authorized grocer. The agreement
states that the grocer understands
the intent of the program and how to
properly handle the vouchers and
that he or she is willing to accept state
scrutiny of the store's handling of
the WIC vouchers and endure ·
penalties for violations.
Because the grocer's authorization
number is printed on each voucher,
a computer can trace a particular
voucher to the store where it was
Left: At a local WIC clinic, a mother chooses
the store where she will use her WIC
vouchers. The vendor's name and WIC
authorization number will be printed on each
of her vouchers.
17
used, and it can show how much a
grocer charged for each WIC food.
Every month WIC participants get a
specific number of vouchers,
depending on their nutritional needs.
There are separate vouchers for
such foods as fortified cereal, frozen
or concentrated juices, cheese,
eggs, and milk and infant formula.
The egg voucher, for example,
allows the user to purchase 2112 dozen
eggs, the value of which cannot ex­ceed
$3.50. Because prices vary be­tween
grocery stores, the grocer
enters on the voucher the amount he
charges for the particular food, and
he is reimbursed for that amount
when he redeems the WIC coupon.
If a store is suspected of overcharg­ing
for WIC foods, an investigator
can compare what a regular customer
pays for the items WIC participants
buy. It is illegal, for example, for a
store to charge $3.49 for eggs sold
to WIC participants when other
customers pay only $3.00.
Since the vendor specific program
began, vouchers submitted to the
state for payment at maximum value
have dropped from over 42.5 per­cent
of all vouchers to around 6.8 per­cent.
The resulting savings have
18
allowed the state to serve 3,500 more
low-income women, infants, and
children per month with no increase in
budget.
Provides other
information, too
In addition to information on what
grocers are charging for WIC
foods, the computer can provide
other information about a store's
WIC business, such as frequency and
volume of voucher redemptions. A
small Sacramento grocery store came
to the state's attention a year ago
when the computer indicated the
store was redeeming more WIC
food vouchers than most of the large
supermarkets in the city.
Suspicious of this booming
business, the state investigated
and found the store was accepting
WIC vouchers for foods not
provided through the program. The
state withdrew the store's authority
to accept WIC vouchers. To date, 410
stores suspected of violating WIC
rules have been identified. Of these,
130 have been suspended from the .
program, 200 given warnings, and 60
cleared of wrongdoing. Twenty are
still under investigation.
While the system is geared to
"get the bad guys out," Metz
emphasizes that's not all there is to
it. The overwhelming majority of the
state's retailers cooperate fully and
follow the rules, and Metz is equally
proud of the state's efforts to
develop a positive helpful image with
these grocers.
Metz and his staff regularly visit
grocers to discuss problems
grocers may be having with WIC
vouchers and to train clerks and
other store employees. The state is
developing printed and audiovisual
materials to help with this training.
In addition, in response to a feel­ing
among some grocers that WIC
participants' attempts to violate the
program were being ignored, Metz in­cluded
in the vendor specific
system a way for grocers to report
WIC participants who attempt to
violate the rules.
Metz and his staff provide
grocers with addressed, stamped
postcards. If a participant causes
problems by deliberately attempting
to violate the rules, a grocer can get
the participant's name and identifica­tion
number from the voucher and
report her by sending a postcard to
the state office.
The next time the participant goes
to the health clinic, she is confron­ted
and warned. Since the reports go
to a central point in the state, even
if the participant attempts to violate
rules at a different store, and is
again reported, the state will have a
record. "Two attempts," Metz said,
"and we suspend them from the
program."
First tested
in one county
The vendor specific system was
tested for a year in Ventura County.
"We needed to have a success record
before we could implement it
statewide," Metz said.
"What we were testing for," he
explained, "was whether vendors
· would participate in a program in
which WIC mothers had to select in
advance where they would shop."
They also wanted to see how the
change would affect WIC participa­tion
and whether they could keep un­authorized
grocers out, penalize
grocers violating the rules, increase
Left: A participating grocer fills in a WIC
voucher, indicating the amount he is charging
for a particular WIC food.
Food and Nutrition
grocer understanding of the program,
and minimize the number of vouchers
submitted at maximum value.
Vendors and WIC participants
were surveyed both before and after
the test. Before the test, approx­imately
70 percent of the grocers said
they would participate, and after­wards
only one failed to contract with
the state. Sixty-seven percent of
WIC participants could forsee no
problems with the system.
Among those who opposed it,
shopping convenience was the
primary objection. After the test, of
the 21,200 Ventura County partici­pants
who received vouchers over a
3-month period, only 35 requested
replacement vouchers for con­venience
reasons.
The pilot test also showed that with
the vendor specific system, the
average value of WIC foods
purchased in Ventura County was
lower than the price of these same
foods statewide. For example, milk
vouchers from Ventura averaged
$1.68, compared to a statewide
average of $1.76. Cheese vouchers in
Ventura averaged $5.63, compared
to $6.17 statewide. Based on these
results, chief state WIC program in­vestigator
Loren Bell expected the
major violation in the .state would
be overcharging for WIC foods.
Management information from
the state's computers not only proved
Bell right but turned up grocers
buying vouchers at less than the value
of the food, selling non-WIC foods,
and telling participants to buy more
food (up to the maximum voucher
value) than they were entitled to.
According to Bell, the vendor
specific system has made a big dif­ference.
In fact, he says, just having
extra contact with retailers has had
a significant impact.
"When we sent out letters ex­plaining
the system and inviting
retailers to contract with us,
vouchers redeemed at maximum
value decreased from 42.5 percent
of all vouchers to 22 percent. When
the new system went into effect, it
dropped to 13 percent. After our first
round of investigations, it went to
8.9 percent. With the second round, it
dropped to 6.8 percent."
In the Ventura project, vouchers
cashed at maximum value varied
between 1 and 5 percent. Metz
believes this is a tolerable range.
"Some stores are just plain expen­sive,"
he said.
February 1982
State officials
are optimistic
Both Metz and Bell are optimistic
about the new system. "Retailers
do not want to lose their WIC
business," Metz said, adding that
the average store in an area with a
relatively large WIC population
probably grosses about $3,000 to
$4,000 a month from WIC sales.
Bell recalls one store in Orange
County that, faced with dis­qualification
from WIC, agreed to
repay the state $10,000. Other
stores, he says have actually gone out
of business after being disqualified.
While the state does not have a
system of fines, in some cases they
will allow repayment of money ob­tained
because of violations.
"We use two criteria," Bell says.
"First, if the store serves a special
clientele that cannot properly be ser­ved
in the immediate area without
the store, we will allow a repayment.
Second, if a store's WIC business
has been low in volume, we will allow
a repayment of overcharges rather
than a severe suspension, which may
not be commensurate with the
violation."
Above: Jack Metz (left) and a state depart­ment
of health computer specialist look over
the computer hardware which scans each ven­dor's
redemptions and compares them to the
"norm".
Metz sees the vendor specific
system as more than just a data­gathering
system designed to catch
some bad guys and make the
program fiscally accountable. He
feels the system is beneficial to both
participants and grocers: "We're
building integrity into a program that's
doing enormous good for an im­portant
segment of our population."
For more information, write:
Jack Metz ·
State WIC Coordinator
WIC Supplemental Food Section
714 P Street
Sacramento, California 95814
article by Dick Montoya
photos by Tino Serrano
19
UNITED STATES GOVERNMENT PAINTING OFFICE POSTAGE
& FEES PAID
U.S. DEPT.
DIVISIOn of PubliC Documents. Washong!on. D C 20402
Official Bus1ness
Penally lor Pnvate Use. $300
Published six times a year by
the Food and Nutrition Service,
U.S. Department of Agriculture,
Washington, D.C. 20250.
John R. Block
Secretary of Agriculture
Mary C. Jarratt
Assistant Secretary
David B. Alspach
Acting Administrator
Food and Nutrition Service
Jan Kern, Editor
Jan Proctor, Art Director
(o)lbod
~Nutrition
Yearly subscription: $7.50 domestic,
$9.40 foreign . Single copies: $1 .75
domestic, $2.20 foreign. Send sub­scription
orders to: Superintendent
of Documents, Government Printing
Office, Washington, D.C. 20402.
The Secretary of Agriculture has
determined that the publication of
this periodical is necessary in the
transaction of the public business
required by law of this Department.
The use of funds for printing this
publication was approved by the
Director of the Office of Manage­ment
and Budget through March
31, 1982.
OF
AGRICULTURE
AGR 101
THIRD CLASS BLK. RT.
PERMIT NUMBER .005-5
Prints of photos may be obtained
from Photo Library, U.S. Depart­ment
of Agriculture, Washington,
D.C. 20250.
All programs of the U.S. Depart­ment
of Agriculture are available to
everyone without regard to race,
creed, color, sex or national origin.
Reference to commercial products
and services does not imply
endorsement or discrimination by
the Department of Agriculture.
Food and Nutrition is a magazine of A yearly subscription is $7.50 for six
the U.S. Department of Agriculture. issues. Foreign subscriptions are
In it you'll find articles on the $9.40. To subscribe, mail a check or
family food assistance and child money order, payable to the Super-nutrition
programs administered by intendant of Documents, to the
USDA's Food and Nutrition Service following address: Superintendent
in cooperation with State and local of Documents, Government Printing
agencies. Office, Washington, D.C. 20402.
•• ••••••••••••• • ••••••••••••••••••••••••••••••••••• :o •• •• •• •
I'd like to subscribe to
Food and Nutrition
magazine, published by
the U.S. Department of
Agriculture's Food and
Nutrition Service.
NaDle ___________________________________________ •• • Street •• • City • •
State Zip Code •• •• •••••••••••••••••••••••••••••••••••••••••••••••••••