When we put them into jobs which simply make them earn their public assistance, whether it be food stamps or AFDC, the administrative expenditures for setting up programs like that do not justify the continuing cost while having those individuals continue on public assistance.

They are very costly, they are not cost effective. They do little in reducing the caseload.

We would strongly advocate that the training and employment opportunities need to be developed by States and can be developed by States.

Again, it is an individual thing that each State must look at in terms of its own economic circumstances, its wage structure, and all of the cost of living within that particular State.

In conclusion, I would like to comment on the administration's proposed reductions in the food stamp program, and, first, I have to say, we are concerned with any reductions that shift the costs to the State, that severely undercut the level of support for the elderly and children, and acts as a disincentive to employment of adult recipients.

The administration's proposal to pro rate the initial allotment to a food stamp household depending upon the time in the month that a household applies for stamps, and the proposal to tighten administration through simplifying or eliminating excessive regulations should result in program improvements without serious impact on recipients.

The administration's proposal to require determination of eligibility based on income received 30 to 90 days prior to the date of application, as opposed to projected income, has both positive and negative implications.

On the positive side, this proposal would eliminate those individuals who recently had adequate income from employment and are likely to return to that employment in the near future.

It would also provide some check on the number of expedited determinations if the States are given authority to require documentation of income for expedited cases prior to certification.

On the other hand, the longer the period of past income that is required for determination of eligibility, the greater the possibility of undue hardship on households which experience a sudden change in circumstances.

If the proposal includes mandatory monthly reporting of income, as it would almost have to do to be effective, additional State funds will be needed to implement this provision.

The need for additional administrative funds is based on four assumptions, and I feel it is necessary to share these with you, because we are using what we feel is the minimum: that households on fixed incomes will not be required to report income monthly; that States will be able to eliminate existing notification requirements if a monthly household report does not change a household's allotment, that food stamp households will bear the cost of postage related to monthly reporting, and that no more than 25 percent of the new households required to report will have a change in their allotment.

Now, that is of course an estimate.

Given these assumptions, the number of interim changes which Florida alone would have to process would increase by 212,000 per month. The total estimated cost for staff to carry out this activity would be $6,800,000.

Now, there are other alternatives. The alternative would be to go to a more sophisticated computerized system, which would require considerable time to develop, and Florida already has an automated food stamp information system, and it still would need 24 months. So what we are talking about is with an increase of 212,000 pieces of paper per month, let us say to process, at the minimum requirements that I have outlined here, it is a considerable expenditure.

Nevertheless, I think we would have to say it amounts to a more accurate reporting, and that while we support the concept of retrospective accounting, we recommend the accounting period not exceed 30 days, and that the increased administrative burden created by this proposal be funded 100 percent by Federal funds. The administration's proposal to cancel the adjustment of allotment levels, we have concern because it obviously affects the elderly, and it impacts most heavily on those persons likely least able to meet their needs: the elderly, children, and the long-term unemployed.

We estimate that this proposal will impact 164,000 of Florida's food stamp recipients who are elderly and/or recipients of SSI, and the cancellation of the additional child care deduction may serve as a disincentive to employment.

The administration's proposal to deduct the cost of school meals from the household food allotment for each child eligible for a school meal, if not implemented with caution, could reverse years of improvement in child nutrition.

There are 300,000 school age food stamp recipients in Florida. The average cost of a school lunch in the administration's proposal is 65 cents; the average food stamp meal benefit is only 38 cents. If the household food stamp allotment is reduced by 65 cents a day, the household would lose $11.50 per month, per child.

This would result in a total annual loss of benefits in Florida of $31,050,000. If on the other hand the household food stamp allotment is reduced by a value equal to the average stamp benefit per meal, the household would lose $6.70 per month, per child. This procedure would result in a total annual loss of benefits in Florida of $18,090,000.

What I am suggesting is that we must look at the total food stamp meal rather than the $0.65 we are looking at now.

If this proposal is approved, we strongly urge that the reduction per child not exceed the value of the average food stamp benefit per meal.

If the reduction in the food stamp program to 130 percent of the poverty level is necessary, it will amount to an elimination of approximately 5,700 households. This proposal would not have any impact on administrative costs because the number of households affected is so small.

I am interested in your comments that you should stop the fraud on the front end.

Ms. LOEPP. The criteria, the eligibility criteria. If you require documentation and verification of all of those eligibility criteria which influence the amount of food coupons, you will eliminate some of the ease with which the program can be abused.

I think that what I am saying, and I used, I believe as an example, where simplified eligibility which is not that far off to what we were doing with AFDC in the 1970's, to what we are doing

now.

Senator HAWKINS. Would you favor providing police and other law enforcement officials with access to the food stamp applications for the purpose of verification?

Ms. LOEPP. The proposal I just made, if we had the necessary documentation and verification on the front end, I would think that law enforcement, you are thinking of police or State attorney, or something like that, they could be better used in the actual prosecution of those who are fraudulently receiving those stamps.

What I am saying is to eliminate the ease with which you enter the program, and thereby eliminate the need, you cut down the fraud.

Senator HAWKINS. It is too easy to get into?

Ms. LOEPP. Exactly.

Senator HAWKINS. What are the various problems with verification?

Ms. LOEPP. Right now the only verification permitted at this point is income.

An individual can falsify the number of persons in the household. We need to verify that an individual comes in and claiming that his is a six-member household, we need to have documentation that this is indeed a six-member household and not a two- or threemember household.

I think that incomes and savings and checking accounts need to be verified. We are doing it now in AFDC programs. It is possible. It can be done, and we need to have regulations which will allow us to do that.

It is imperative that we not submit the number of staff people in this Nation, try to determine eligibility for food stamps, to the subjectivity that they must go through, the judgments they must make, and the regulations they must interpret. If I were one of them, and if I did not have sufficient training, or if I am somewhat intimidated in my approach, or in my contacts with the client, I will have less reason to question somebody..

Senator HAWKINS. The degree of skepticism among the administrators of the program on the local level exists concerning the applicants who come in, and say we have got 16 members of the family, or four, or whatever, I am trying to put myself in the role of an administrator who is kept out from really checking on these things, certainly they must develop a feel as to whether there is a misrepresentation, do most of your people feel substantial savings could be achieved if they were given the authority to verify?

Ms. LOEPP. I am not sure that the line worker has viewed it from the standpoint of savings. I think in my contacts with the line staff around the State, I have run the gambit in terms of perhaps, you

know, the regulations allow it, why should I get upset about it, to the overzealous, perhaps those who want and do attempt to go further than the regulations allow, and then we end up in conflict. with legal services because we are harrassing people. Then there is the other element that says anger because there is a feeling that they do not have the authority to question.

"Reason to question" is very loose when you can use terms like document and verify. Those can be defined very specifically to everybody's understanding. "Question" just cannot. It does not result in the necessary information we need to make sure that each one, I am speaking hopefully from a worker's standpoint, that we feel we can be satisfied that the eligibility has been determined, and determined accurately with the exception of perhaps false documentation, which I would hasten to point out is also becoming more prevalent in this program as well as others.

The CHAIRMAN. That is a very eloquent statement.
Senator HAWKINS. Mr. Davis?

STATEMENT OF BILLY G. DAVIS, DIRECTOR, DIVISION OF PUBLIC ASSISTANCE FRAUD, OFFICE OF THE AUDITOR GENERAL, STATE OF FLORIDA

Mr. DAVIS. That is a tough act to follow.

I would start off by saying I certainly appreciate the opportunity to be here today and point out as being head of the State Investigative Agency in the State of Florida, investigating food stamp fraud, I do agree we should stop fraud at the front door.1

I am not concerned with working myself out of a job, but I do agree we should stop it at the front door, and I do want to point out we have statewide responsibility to investigate fraud.

We are a separate agency from the agency administering the food stamp program. However, we work very well together.

I was going to say, perhaps we are the odd couple here testifying, because we do agree on many matters.

There are those who would have you believe that anyone receiving food stamps is committing fraud, and then there are others who testify that they believe little fraud exists. Neither of these statements can be supported by facts.

I would comment that we are only unique in Florida because we are trying to do something about fraud in the public assistance programs since 1972. I feel that fraud does exist in Florida, also that it exists in other States. Also, that less would exist in other States if those States implemented the type of effort we have in the State of Florida.

This morning in testimony it was pointed out that food stamps have become a form of currency. I have in my testimony that I too believe food stamp coupons are a form of currency. As a matter of fact, they are very much like script used at one time by the military at overseas installations.

I came here in 1975 to testify before similar hearings, and in going back through the testimony in 1975, I found that Senator Helms filed a statement for the record and said in part:

A thriving blackmarket exists for food stamps. Food stamp coupons are as easily negotiable as cash and have no identifying requirements upon them.

'See p. 408 for the prepared statement of Mr. Davis.

Senator, in 1981 it still exists as it did in 1975. I think we all recognize that we need to look at several measures in stopping fraud.

I might go back just a moment, I do think there are several things that created the problem we have now with fraud in the food stamp program. Many of them have been mentioned before, and I will not go back on those.

I agree with Mary, that the regulations issued by the Department of Agriculture have handcuffed the States' efforts to verify the facts presented to them by recipients.

I think also the States have to take some responsibility, because many States have not created any effort to investigate and prosecute for fraud in the food stamp program.

I would like to summarize briefly a study I did in the State of Florida, or that I supervised, I should say, for the food stamp rolls for the month of November 1979. I did attach to my full text the complete report we made on that study.

We concluded, and we did this by the use of generally accepted statistical sampling methods and projections, that 15.8 percent of the November 1979 food stamp cases in the State of Florida received all or part of their food stamps through the improper misrepresentation of the facts.

Projected dollars received by fraud were $4.1 million for the month of November 1979 out of the total food stamp issuance during that month of approximately $28 million. This 15.8-percent fraud rate is a conservative estimate because the basis of our projection was only those cases where we had sufficient evidence to warrant a referral to the proper prosecuting authority. In addition to the fraud rate, we concluded that approximately 14.5 percent of the food stamp cases in that month received a total, or partial, overissuance of food stamps because of apparent errors. The dollars associated with this 14.5-error rate were an additional $1.5 million. When combining the project dollars associated with the fraud cases and the projected dollars associated with the error cases, it meant that approximately 21 percent of the food stamp dollars distributed in Florida for the month of November 1979 were distributed because of fraud or error.

Senator HAWKINS. What was the percent?

Mr. DAVIS. Twenty-one percent of the dollar value.

Again, I want to say I do not think we are unique. I think the fact that we have looked at the problem and pointed out what the problem is, and that it does exist, we are unique in that sense, but I do not think we are the only State that has fraud. No other State to my knowledge has ever done such a study as we did.

I think also to demonstrate the type of organized activity that goes on, I would mention to you one case we worked on for about 15 months in Dade County. We always seem to get back to Miami for some reason, where an organized group of two or three women had set up files in their homes; were going out recruiting people off the streets and were putting together complete sets of documents to get these people qualified for food stamps. Then we have here social security cards they used that were ordered from a firm in Miami for $3. All you had to do was put down your name, and for $3 you get a social security card, you can also put your date of