property, other income producing property, a life insurance policy and a pension fund, and expensive household goods and personal belongings and still qualify for food stamps if his assets were not out of keeping with those of other families in his communityprovided that his current income fell sufficiently to permit him to qualify. This can occur because of the limited nature of the current assets test."7

This statement is misleading. No household can have assets over $1,500 (not including the household's home, lot, car, personal and household goods, life insurance policy, income producing property and tools used to earn a living), or over $3,000 if the household consists of more than one person and includes an elderly person. A boat or vacation home would always be counted as a resource (unless they were income producing).

The wording "normal to the community" in the regulations is to allow States the latitude to take regional differences in property value and property holdings into consideration. The wording does not mean that upper income families are eligible for food stamps. The resource criteria permits the food stamp program to provide assistance to families during crisis situations but before they have lost all of their assets. C. STUDENTS, STRIKERS, "VOLUNTARILY" UNEMPLOYED

"The eligibility requirements of the current program also permit students, strikers, and others who are voluntarily unemployed to participate in the program.'

At this time, there are no statistics available on the number of students participating in the food stamp program. The best estimate is that unmarried students comprise less than 1 percent of all participants.

Most students are already ineligible for the program because of a new regulation recently put into effect. This new guideline bars from participation any person over 18 who is a student and who is properly claimed as a tax dependent by an ineligible household. Only students coming from families who qualify for food stamps or students who are financially independent of their parents are eligible for the food stamp program.

Some strikers may also participate in the program. Here, again, there are no reliable figures on the number of strikers participating in the program, although the number appears to be very small.

Under the present law, strikers are simply treated like any other applicant for food stamps. They must be certified under regular procedures as having income below the guidelines and liquid assets of less than $1,500, and must register for work at another location. To treat strikers any differently would be to use the food stamp program to favor one side of a labor dispute.

Finally, there is concern about those considered to be "voluntarily" unemployed. Under the current food stamp program, all able-bodied unemployed people between 18 and 65 who are not students or caring for young children must register for work before they can participate in the food stamp program. All registrants are further required to

7 See p. 29.

See p. 30.

accept any suitable employment offered to them. In fiscal year 1975, 206,344 people were terminated from the program because of failure to comply with the work registration requirement..

One of the strengths of the food stamp program is its inherent equality. Everyone with the same income is treated alike, regardless of the source of income. This characteristic distinguishes the food stamp program from other public assistance programs which restrict eligibility to the aged, to mothers with children, or to some other category. The only exception to this rule is that recipients of AFDC or SSI are automatically eligible for food stamps. The major food stamp bills now before the Senate would remove categorical eligiblity for public assistance recipients.

III. "CHISELERS AND RIP-OFF ARTISTS"

A. FRAUD

"The food stamp program began as a small $14 million experiment in 1962. By 1976, it will cost over $6.6 billion a year-a 47,000 percent increase-and it is a well-known haven for the chiselers and rip-off artists. Only a few weeks ago, a national magazine advertised a booklet that told people how to obtain food stamps even if they earned as much as $16,000 a year. So much for the spirit of self-reliance.'

-Address by Secretary Simon before the 32d Annual Junior Achievers Conference, Bloomington, Ind., August 12, 1975.

"Chiselers and rip-off artists in my view are those people who take advantage of the program in a manner which breaks the law. They may be participants who supply inaccurate information on complex application forms which are not adequately checked in State issuing offices. They may be clerks in grocery stores who accept stamps for non-food items or exchange money for stamps. They may be mail clerks who pilfer authorization-to-purchase cards. They may even be welfare workers who create fictitious cases in order to obtain food stamps illegally." 10

The issue of fraud in the food stamp program is one that has caused a great deal of controversy. The official USDA record indicates that only 0.08 percent of the average monthly caseload participated on a fraudulent basis in fiscal year 1974. In spite of this low figure, Secretary Simon characterized the program as "a well-known haven for the chiselers and rip-off artists."

" 11

"Against this background, those who would point to conviction rates of less than one-tenth of one percent as evidence of an abusefree program, are misled. In a program used by a total of 29.4 million people in fiscal year 1975 it simply does not seem credible that only 0.08 percent of them abused the program. The figure of 0.08 percent of the average monthly caseload does not only cases convicted of fraud. State agencies can establish inst food stamp recipients who the State agency feels are participating and set up collection procedures to recover

the benefits these participants fraudulently obtained. These claims are included in the fraud rate. All together, 17,480 claims were made against food stamp recipients in 1974, most of them for suspected fraud.

The only evidence Secretary Simon presents to support his contention that the fraud rate must beʼhigher than 0.08 percent is a listing of 29 individual cases of food stamp fraud.

In addition, all abuse of the program is not the responsibility of recipients. If USDA has reason to believe that a grocery store may be acting in violation of food stamp regulations, a special compliance visit is made. In calendar year 1974, USDA officials made 40,980 compliance visits to retail food stores. These visits resulted in disqualification of 657 retailers from participation in the food stamp program. There were also 709 prosecutions of retailers during this period.

In addition, in 1974, $295 worth of counterfeit food coupons were discovered. Thefts of cash and coupons amounted to $456,528, including thefts from the mail. Twice in 1974, caseworkers were found to be defrauding the program for a total of $9,790.

In summary, there is a very small amount of illegal activity connected with the food stamp program. Of this small amount of fraudulent activity, only a part is the responsibility of recipients.

"These are the 'legal abusers'-those who are indeed eligible and who take advantage of the program even though they are not in the category of the truly poor who the program was created to serve." 12 Those Secretary Simon calls "legal abusers" are simply those eligibles who he does not feel should be entitled to food stamps. These people are eligible under guidelines established by the Congress and by USDA, guidelines the Treasury Secretary does not agree with. This hardly makes such people "chiselers and rip-off artists," however.

B. ERROR

"Of the cases surveyed, 17 percent were ineligible because of error in certification. More than half of these, or 8.8 percent, were clearly ineligible because they had misrepresented their income or some other fact. The remainder of these were ineligible because of computational errors or technical omissions in the certification process, and because they had failed to register for work, as the program requires.

13

Errors in issuance of food stamps differ from fraud. Errors are unintentional mistakes made by the food stamp applicant or the eligibility worker. Recipients are responsible for about half the errors, eligibility workers for the other half. Error in the food stamp program is generally caused by the complexities of food stamp program administrative procedures. A substantial error rate does not at all imply that the food stamp program is filled with chiselers and people who do not need food stamps; errors simply mean that some people who apply and do not meet eligibility criterion are admitted to the program, that some food stamp program participants are overpaying or underpaying for their food stamps, that some program participants have not completed or have forgotten to sign a work registration form, and that some people who apply and should be receiving food stamps are denied access to the program. 'Error is not fraud.

12 See p. 14.

18 See p. 27:

USDA's most recent accounting of food stamp error covered the period from July to December 1974. In reviewing non-public assistance households, which are about one-half of all food stamp households errors were found in 54 percent of the cases.

However, this does not mean that 54 percent of the people on the food stamp program are ineligible. 91.2 percent of the households reviewed were eligible based on financial criteria. Only 8.8 percent were ineligible based on financial criteria.

Another 8.5 percent of households reviewed were ineligible only because of technical errors, eg., incorrect work registration forms, computational errors, procedural omissions.

Of the total bonus dollars issued, 91.6 percent were issued to eligible households; 8.4 percent were issued to households found ineligible based on basic program criterion. And 9.1 percent of bonus dollars were issued to households found ineligible only due to program complexities.

The errors in the food stamp program are attributable about equally to administrative agencies (45.5 percent) and program participants (54.5 percent). The real cause, however, is the complexity of the food stamp program itself.

As a result of errors in the food stamp program, 10.7 percent of the sampled households paid too much or received too few food stamps; 26 percent paid too little or received more than the correct food stamp allotment; 7.3 percent of those denied access to the food stamp program were actually eligible; and 8.8 percent of those non-public assistance households receiving food stamps do not meet basic program criteria.

TABLE 8.-Percent distribution of error cases by source of error

Income:

15. 0

21. 9

4. 7

3.9

Information incorrect or incomplete..

28. 3

26. 2

TABLE 9.-Percent distribution of error cases by type of error

It is important to note several factors when reviewing the error rate of the food stamp program:

-All the error rates apply only to non-public assistance households which comprise about one-half of the food stamp program caseload. Public assistance households are automatically eligible for the program and should have a much lower error rate. Therefore, error rate statistics should not be applied to the entire food stamp program caseload. -Errors made by food stamp program participants do not constitute fraud. Most are unintentional errors caused by the difficulty of understanding a very complex program.

IV. NUTRITIONAL IMPACT OF THE FOOD STAMP PROGRAM

"Despite the initial goal of the program to assure a nutritionally adequate diet for participants, it is becoming increasingly evident that food stamps do not always achieve that objective. Improving nutrition__is_a difficult problem related to consumer information and established eating habits to which I know this Committee has given considerable attention. But there seems to be a growing consensus that the program does not have the nutritional impact it was intended to have." 14

Though nutrition education is necessary, it is not sufficient to provide the poverty-striken and the working poor with adequate diets. Buying power is the first step in allowing the poor to purchase a nutritionally adequate diet.

Three studies cited by the Department of Agriculture show that the food stamp program does have positive nutritional impact.

A study conducted in 1969-71 by J. P. Madden and M. D. Yoder of Pennsylvania State University, found significant nutritional improvements in iron and thiamin intakes among food stamp participants. Small improvements were found for protein, phosphates, riboflavin, and niàcin.

Results of a study done in 1973 by the Economic Research Service, USDA, indicated that homemakers receiving food stamps had better diets than both homemakers in the food distribution program and those eligible for but not participating in a food assistance program.

A study by Sylvia Lane at the University of California found that diets of participants in the food stamp program appear to be nutritionally superior to those of comparable nonparticipating low-income households.

Though not enough studies have been done to prove the precise nutritional value of the food stamp program, the studies that have been done show that food stamp program participants have better diets than low income households not participating in the program.

14 See p.19.