children-all schools are not on the school lunch program. Children do not eat every day in school either. There are hundreds of things.

As I say, it could become an absolute administrative nightmare. So to say that I support what you are talking about, until I see how it is proposed to be implemented, I would certainly want to refrain from endorsing it.

Senator LEAHY. Mr. Fredericks?

Mr. FREDERICKS. New York State is opposed to it. I believe it would be a tremendous administrative burden, would increase administrative costs and require additional staff. I think the only way to equitably handle a situation like that would be to set up a school reporting system that would report back to the local social services department the actual lunches or breakfasts the child did receive. We have done some projections for Senator Moynihan's office. These are not updated, unfortunately. We did this when the proposal was considered last year.

Based on the thrifty food plan at that time for an AFDC mother with four children, whose children were participating in both the school lunch and school breakfast programs, they would end up owing the Federal Government $7 a month. Now, I don't think that is quite what we were trying to accomplish.

Senator LEAHY. I got a call from one of the school administrators back home. He said, "Patrick, if this is an example of streamlining Government by cutting costs and removing regulations and doing away with the bureaucracy, I would hate to see what it was like if you wanted to increase it in those areas." And I quite frankly could not see how we could do it.

Senator Pryor, do you have any questions? I am going to pass the gavel to you. I am going to go upstairs for another matter. I will be putting some further questions in the record. And I will leave this whole program to the tender mercies of you and Senator Helms. Senator PRYOR. You are very complimentary. Thank you.

Mr. Fredericks, how many people in New York State do you have administering the food stamp program?

Mr. FREDERICKS. I really don't know the answer to that question because we are a State supervised and locally administered program.

Senator PRYOR. Just roughly how many do you have on the State and local level?

Mr. FREDERICKS. In the State we have about 13 people, I believe. Senator PRYOR. Thirteen people?

Mr. FREDERICKS. Yes.

Senator PRYOR. And then the food stamps would actually, could actually be distributed physically on, say, the local levels?

Mr. FREDERICKS. That is correct.

Senator PRYOR. And do you know how many people are involved at the local level in the distribution process?

Mr. FREDERICKS. I don't have the answer to that question, sir. Mr. HARWICK. It would be about 600 in the city of New York. Senator PRYOR. 600?

Mr. HARWICK. That is just NPA.

Senator PRYOR. That would only be the nonpublic assistance households?

Mr. FREDERICKS. That would only be the nonpublic assistance households, because the same worker who does aid to families with dependent children would also determine eligibility for that client; and we have probably another 800 or 900 AFDC workers in New York City.

Senator PRYOR. Why is the social security program administered at a cost of approximately 2 percent or less, and the food stamp program administered at a cost of 10 percent or more?

Ms. PUETT. I would think that probably should be addressed to the USDA officials and not to the States.

Mr. FREDERICKS. I think one of the things that would determine the answer to that question, sir, is that the social security programs are not changing that radically from month to month and from year to year as the food stamp act. We have seen a new program in 1977. It has been amended several times. Each time it has been amended it has created additional work.

It also requires some more frequent determination of eligibility, I believe, than social security.

Senator PRYOR. On that question, or in that area, I should say, we adopted-again, searching frantically and desperately for an alternative to the program as to how we can cut back in some way the growth of the program without really impacting on those who truly deserve and are eligible for the food stamps-but if we went to a regional income test rather than a national income test, would that be acceptable?

Mr. FREDERICKS. Yes, I think that would be acceptable from New York's viewpoint.

Senator PRYOR. It may not be acceptable in Arkansas' viewpoint. I am not certain.

But how would this impact on New York? Would you then get the highest amount per week allocation or per month allocation? Mr. FREDERICKS. I don't think I can answer that without knowing what the basis for eligibility determination would be, sir.

Senator PRYOR. Has there been any study done in this field? Mr. FREDERICKS. I don't believe so, sir.

Senator PRYOR. I have been very interested in the elderly participation in food stamps. And it is my understanding that when the purchase requirement was removed from the food stamp program, we saw a dramatic increase in the elderly participation. And the study reflects and the indication is that the elderly, before the purchase requirement was removed, that they did not have that extra cash to enter and become a participant in the program. Is that correct? Is that a fair statement?

Mr. FREDERICKS. That is a fair statement.

Senator PRYOR. It is also my understanding among the elderly population that many, many thousands of elderly citizens today who are eligible for food stamp benefits are not participating in the program.

Would you address yourself to that? Is that a correct fact, or is that an incorrect assumption?

Mr. FREDERICKS. I think in New York State that it might not be correct, sir. There are obviously some elderly eligible people who are not participating; but by and large, New York State has man

aged to bring into the food stamp program most of the eligible clients.

And in our nonpublic assistance figures, 51 percent of them contain a member who is 60 years of age or older, 51 percent of 720,000 households.

Senator PRYOR. I think the study indicates also that among the elderly there is such an enormous sense of pride that many of them feel like they don't want to participate in a program because many of them consider this a handout.

And I am not saying that it is a handout program, but at least this has been our understanding of the feelings of the elderly population.

Could you comment on this?

Ms. PUETT. I have heard those same statements made by elderly persons. I have personal knowledge of some of them. There is a significant difference in the number of certified households in Tennessee who are eligible for food stamps and those who actually receive them. And how many of those are in the elderly category, I don't know. But there is a difference of maybe 8,000 to 10,000. Mr. HARWICK. We have a demonstration project in Monroe County, a very large county in New York State, which is in essence a cash-out project, which is like if you are older, we write you a check instead of giving you food stamps. And our experience today, well into the project, is that for this set of cases, there has been just no growth. Participation has stayed right where it was when the program started, no caseload growth.

Senator PRYOR. Well, I would like to say on behalf of the committee-and it looks like I am holding the gavel-that I appreciate your testimony. I know the committee does. I think that you brought up some very interesting points. I wish you had found some solutions for us, because I think we are struggling right now to come up with a constructive way out of this dilemma.

And one of the real dilemmas I find and one of the paradoxes, you might say, is the discussion we had this morning with our friends from Puerto Rico as to the extent not only of the number of dollars but also the 57.6 percent of the population in the country that participates in it. I think that is something that must be addressed; because it becomes increasingly difficult for us to explain this to our constituents.

I would like to further invite any other suggestions you have. Don't assume we have the answers in Washington, because we don't. We are looking for people like yourselves to help us find these solutions.

Ms. PUETT. Senator, may I just call your attention to the fact that we have attached to my statement some very specific suggestions?

Senator PRYOR. I appreciate that. I have read that. I do appreciate your specific suggestions and recommendations which you made.

Too often we hear witnesses who tell us what not to do and how not to cut a program, but they never give us a real concrete example of how we might structure the act in these matters.

But I thank all of you very much for coming before the commit

tee.

Our next witness is Mr. Ed Richards, investigator general, Texas Department of Human Resources, Austin, Tex., representing the National Welfare Fraud Association.

Mr. Richards, we welcome you to the Agriculture Committee this morning.

It is my understanding you have a statement. You are welcome to proceed in any manner you wish.

Before we proceed, let's please have as much order as possible.

STATEMENT OF EDWARD L. RICHARDS, INVESTIGATOR GENERAL, TEXAS DEPARTMENT OF HUMAN RESOURCES, AUSTIN, TEX.; ACCOMPANIED BY JIM GRAHAM, DIRECTOR, SPECIAL

OPERATIONS DIVISION

Mr. RICHARDS. I would also like to introduce Jim Graham of our office in Austin, Texas. He is the director of our special operations division; and he is the one who has had a great deal of experience with the Federal regulations. And he gives training for our investigators in Texas.1

The department of human resources in Texas is responsible for the administration of the food stamp program and 19 other public welfare programs such as aid to families with dependent children, medicaid, and child protective services.

I wish to thank the members of the committee for the opportunity to present the views of the department on the need for improving program integrity and controls to better insure that food stamp benefits go only to those entitled to them. The value of food stamps distributed in Texas is expected to exceed $590 million this year. Approximately 395,000 Texas households, or 1.2 million individuals, currently receive food stamps. The caseload has increased more than 60 percent since December 1978.

Within the department of human resources, the investigator general's office is a relatively small unit comprised mostly of former law enforcement officers. The office is responsible for investigation of suspected criminal activity in connection with all department programs.

The office was established in July of 1974. Since then, we have investigated 26,000 cases of suspected food stamp fraud. Of these, 17,000 were found to have involved fraudulent activities, by which $7 million was unlawfully taken from the program.

The majority of the cases are referred to us for investigation by the department's eligibility staff. As of last month, we had a backlog of 10,000 cases awaiting investigation. Due to manpower limitations, we have had to decline investigations of hundreds of cases because action was barred by the statute of limitations.

We believe we are successful in Texas, and that our activities serve also as a deterrent to fraud and corruption. Food stamp rolls have declined in areas where we have concentrated investigative work as newspapers, radio and television report that welfare cheats are being arrested and prosecuted.

From the time our criminal investigations began in 1974, the average amount involved in fraud cases has dropped from about $600 per fraud case to $300 per case. Generally, the cases we work

1See p. 317 for additional material supplied by Mr. Richards.

involve falsification, or failure of the recipient to correctly report income, resources or household composition.

Probably the key to our success is the full measure of support we receive from the department's executives and administrators. We are able to act independently of the various program areas and answer directly to the commissioner, who is the department's chief executive. We are not a law enforcement agency. Our job is to determine the existence or probability of fraud, and to turn over these cases to district attorneys who make their own decisions as to prosecution.

Since implementation of the Food Stamp Act of 1977-which occurred in March of 1979 in Texas-we have found Federal regulations to be the biggest single obstacle to our efforts to prevent and detect fraud. The very rules that are supposed to control the program either create or permit situations in which fraud and corruption can flourish

The complexity of the program works to the advantage of those determined to abuse it. Abuse of any system as complicated as the food stamp program is difficult to present coherently in court, especially when regulations and eligibility-determination procedures change faster than they effectively can be implemented. In itself, the Food Stamp Act of 1977 is a fairly short, concise and understandable document. The regulations which have followed it, however, are not, and fail to achieve the law's intent to reduce program fraud and abuse.

Dealing with Federal regulations, proposed and adopted, is one of the most frustrating aspects of my job as administrator of an investigative unit. When proposed regulations reach our office, we study them and make recommendations to the Food and Nutrition Service on those points which we think make the program vulnerable. Rarely have our comments been incorporated. Also, my office has been visited on many occasions by officials of the U.S. Department of Agriculture. They ask, "How do you do your job? How do you handle such and such? What are your problems?" We tell them about our problems with Federal regulations and they seem to be sympathetic and promise to see that our information gets back to the proper office where changes can be made. Little, if anything, happens.

We would like to suggest that regulatory reform be pushed vigorously. Our recommendations aimed at reducing fraud and abuse include the following:

One, replacement of stolen or destroyed food stamps and authorization-to-purchase cards should be severely curtailed. States need authority to establish policies which reduce fraud in this area. Two, States should be given authority to define when and if expedited services are needed. Eligibility staff now are required to expedite certification when all their instincts tell them that something is wrong. We have found many cases of fraud involving thousands of dollars which are committed within a few days.

Three, the use of photo identification cards deserves consideration. That or some other method of personal identification of eligible recipients could be useful in other public welfare programs as well.