birth on it. If you would like to order one, here is an application form.

Senator HAWKINS. Pick any date you want?

Mr. DAVIS. Pick any date you want, so with well-intended regulations, we can ask for a social security card, and there is no reason why workers would question these cards, and so if anybody wants to order one, here is an order blank.

Also here is a group of birth certificates that they were using in this ring to document the birth of children.

We estimated based on the data gathered when search warrants were issued, about $500,000 in food stamps had been obtained by this group of two or three women.

I think to stop this kind of activity we have got to stop people from spending the food stamps at the grocery stores that are not eligible to receive them.

We can talk all day about investigating fraud but what have you got when anyone can go. into a grocery store in this country with food stamps, and buy food for them, whether they are eligible recipients or not.

I think there are some things that might be considered that I think are different, that I have not heard mentioned. If we want to keep the food stamp program as it is with food coupons, maybe we want to explore a different color of stamps for different months, and have those redeemed only for the months they are intended to be used in.

As it is now, they can be used for numerous periods of time. Also another possibility is cash grants. I do not quite understand the mail issuance, where somebody has got to get the food stamps. But maybe we ought to explore mailing cash grants for the food rather than mailing food stamps.

To determine the extent of blackmarketing in food stamps, we worked with two prosecutors in the State of Florida, in the city of St. Petersburg and Jacksonville, Fla. With our investigators working with the State attorney's office and the local law enforcement personnel we purchased automobiles, automobile tires, boats, marihuana, stoves, air-conditioners, we equipped an entire apartment with furniture, stereo sets, television sets, clothing, numerous ineligible items in "Mom and Pop" grocery stores, and you may not believe this, but we purchased a funeral with food stamps, so as you can see food stamps can be spent for anything you want. Now, how did we go about finding these people that were providing these items and services for food stamps?

We stood in the food stamp lines at the first of the month and asked people where we could get rid of the food stamps, and we found out from these people in the food stamp lines where we could get rid of them.

The area of mail issuance is one that deeply concerns me. I was talking to an administrator of another State the other day, and he said they were willing to accept a 1-percent loss in mail issuance and mail food stamps to the entire State.

I was very glad to hear Senator Helms mention this morning that we need to count these small amount of losses up.

My best estimate is that a 1-percent loss nationwide would be somewhere in the amount of $100 million each year; that is, if we

accept a loss of 1 percent. I do not know whether you are willing to accept a $100 million loss to mail out stamps to all people in the country, but I cannot accept it.

I recommended in 1975 that another possibility of stopping the trafficking in food stamps was countersigning the food stamps. I do not think every food stamp has to be countersigned. I think you could countersign the cover at the food stamp office and maybe have the people at the grocery store verify the signature, as you would travelers checks, or as you and I would when cashing a check.

People will say that this will create a long line at the grocery store. I do not think it will create any longer line than you or I do when we present our check cashing card at the store.

It has been mentioned before that we are the only State that is doing monthly matching of wages, and as Ms. Loepp indicated, it may be a little early to discuss the results, but I am optimistic that this will have a great impact in the food stamp program as it did on the AFDC program in Florida.

We started in 1973 using income matches with the AFDC recipients, which was about 3 or 4 years before HEW ever got the idea, and we were very successful in this endeavor.

In closing, I would like to leave you one thought, I grew up in north Alabama, and my parents received commodities, and I also received free lunches at school. Back then I swept a couple of floors every afternoon in the schoolhouse to pay for the free lunches, and I did not think there was anything wrong with it, as a matter of fact I enjoyed it.

The CHAIRMAN. Did anybody make fun of you?

Mr. DAVIS. No, sir.

The CHAIRMAN. Did you feel your dignity was diminished?

Mr. DAVIS. Sir, I felt I was earning that lunch, and I was proud. The CHAIRMAN. So you were not humiliated by being someone who worked for his lunch?

Mr. DAVIS. No, sir.

Senator HAWKINS. How well did you learn to sweep the floor? Mr. DAVIS. I did it very well and I still do it—at home.

When using commodities, I never heard of anybody trading peanut butter for guns or marihuana and automobiles either.

I would like to thank you very much for the opportunity to be here today and share with you what we have done.

As far as our matching systems, we would be glad to share our knowledge with any other State, and I am open to any questions you might have.

Senator HAWKINS. What happened to the women you mentioned caught in the ring in Miami?

Mr. DAVIS. They are all serving jail time.

Senator HAWKINS. So they actually put the women in jail?

Mr. DAVIS. Yes, ma'am.

Senator HAWKINS. What do you think is the major irregularity in the current food stamp program, the No. 1 major irregularity? Mr. DAVIS. You mean the problem with the administration of the program?

Senator HAWKINS. Yes.

Mr. Davis. Well, I think many of the things that Mary pointed out that we tried to do in the State of Florida, are some of the problems we recognized there. I think we have been effective in the training of employees, and I think if the Department of Agriculture had granted the requested waivers back when we first asked for them, we could have made some real headway at that time, rather than just telling us that they had no authority to grant the waivers.

Senator HAWKINS. Documentation, you favor that?

Mr. DAVIS. Yes. We began our fraud investigative effort in the AFDC program in 1972, when it was running wild, and at that time there was not sufficient documentation.

Senator HAWKINS. Senator Helms has a question.

The CHAIRMAN. Senator Hawkins, I know you are very proud of these officials who are all such obviously good citizens.

I think it is self-evident that they are not here to meat-ax the food stamp program. They are here to plead, as I understand it, for the kind of reforms that would be fair to the recipients and fair to the taxpayers of the country.

Now, I want to commend both of you, and I have only one or two questions.

You heard the Acting Inspector General this morning when he said in short form that the purchase requirements were probably a deterrent to fraud. Do you agree?

Mr. DAVIS. Well, in 1975 the record would show one of my recommendations was to do away with the purchase requirements. We were having a tremendous amount of problem with the workers in the State of Florida ripping off the cash in the office. Senator HAWKINS. Say that again.

Mr. DAVIS. The workers were taking the cash in the office. They were ripping off the cash.

We had had several cases at that time where this was going on. They were falsifying the records and putting the cash into their pockets.

They were faking the files and records, and it would be a zero cash purchase, and in fact, the people had paid $20, so I recommended at that time, for that particular reason, to eliminate that particular element of fraud in the food stamp program, to do away with the purchase provision would certainly stop that, and it certainly has.

But I am sorry to report that we have about three cases going on right now where the people putting the postage on envelopes in the food stamp offices for mail issuances are just taking the food stamps in the envelopes, rather than the cash.

You are never going to stop all of the crooks in the country. I think all we can do is tighten the controls and try to stop it at the front end.

It would delight me if we could stop the fraud at the front end. I am sure I could find a job somewhere else.

The CHAIRMAN. This is my last question, Madam Chairperson. Your State obviously is in the forefront of investigation of fraud and abuse.

How did you get into this, was it just observation of what was going on?

Mr. DAVIS. Yes, sir, I think it was the tremendous concern back in 1972 because of what the quality control samples were showing, and the Florida State Legislature established a division of public assistance of fraud in the office of the auditor general.

We are an agency to investigate fraud in the public assistance programs. It is strictly a State initiative, and we were almost discouraged by the Federal Government at the time, but we all get along real well now, particularly in USDA.

The CHAIRMAN. I want to commend you again on your testimony, and to say again, Senator Hawkins, I know you are pleased with these folks.

Senator HAWKINS. Yes, we are, and I like you, would like to go on record that I join Senator Helms in wanting to preserve the integrity of the system. We want to feed those that cannot provide for themselves and do the compassionate service that we feel should be rendered. But it is interesting that in preserving the dignity of the recipients, that the fraud and abuse has become so prevalent that everyone is outraged in every poll that I have seen. You just receive letters and comments from the person standing in the grocery store line, about what they witness in front of them or behind them, and the clerks taking the money, they indicate the same. Since the economy is not doing well, people watch their pennies so closely, and they become outraged at some of the commodities that are purchased with those food stamps. So, it is our desire to be compassionate and get rid of the fraud and the waste and the easy access you are talking about to this system. I really appreciate what Florida has done, and we would like to cut down on the 21-percent fraud in our State.

You know, we are well on the way to becoming one of the first in the Nation, and still we have abuse.

Mr. DAVIS. We have our own State laws against trafficking, you know.

Senator HAWKINS. Thank you.

The CHAIRMAN. Thank you.

We now have a panel of witnesses. With your indulgence, I intend to go right through the lunch period, because you have been sitting here a long time patiently.

The next witnesses will be a panel, three of whom are from North Carolina, Dan Hudgins, LaÑelle Eakes, Mitchell Stotts, and Jeff Peterson.

STATEMENT OF DANIEL C. HUDGINS, DIRECTOR, DURHAM COUNTY DEPARTMENT OF SOCIAL SERVICES, DURHAM, N.C. Mr. HUDGINS. On behalf of my colleagues, I would like to express my appreciation for the opportunity to appear before you and discuss the food stamp program.

As the current director of a county social services department in Durham, N.C., an urban area, and the former director of a rural county social services department, I have been exposed to both the benefits of the program and the problems associated with its administration.

In addition, I come to you as president-elect of the North Carolina Association of County Directors of Social Services. In this capacity I would indicate that local social services directors in North

Carolina strongly support the food stamp program. For many citizens our departments are the agencies of last resort, and we are concerned that the Reagan administration proposals would transfer the funding of many human service problems to local governments where there is limited taxing authority. As you consider proposed changes in the food stamp program, we urge you to look at the overall impact these changes and changes in other human service programs have on recipients. Hunger and malnutrition are national problems that need comprehensive solutions. The impact of the loss of food stamp benefits must be considered in the context of what other resources are available.

Since I am sure you are aware of the results of the Field Foundation studies, I will not repeat them for you. I would add, however, that from my observation, I would agree with the foundation's results and add that I believe the food stamp program is probably the most successful of the poverty programs in fulfilling the objectives for which it was established.

Being responsible for administering not only the food stamp program but the aid to families with dependent children and the medicaid program, I can compare these programs and their regulations. While all the programs are fraught with administrative problems, I would state to you that the food stamp program, in terms of complexity, does not compare to either the aid to families with dependent children or the medicaid program in the degree of complexity and administrative difficulty. As an example of this I would point out to you that in North Carolina the average eligibility worker in food stamps carries two to three times as many cases as does an eligibility worker in the aid to families with dependent children program. However, many of the Reagan administration proposals will significantly increase our administrative burdens with a corresponding increase in administrative costs. At this time North Carolina, as well as a number of other States, is planning to integrate the eligibility process for food stamps, aid to families with dependent children, and medicaid. For this reason I would urge that before changes are made in the administration of the food stamp program that you assure that a comprehensive look is being taken at all of these programs so as not to further complicate the eligibility process at the local level. I think the suggestion was made that Senator Dole be involved since he chairs the Finance Committee.

At this point, I would like to respond to a number of the Reagan administration's proposals for changing the food stamp program. The first proposal which I will speak to is the prorating of the first month's benefits. Realizing that some changes will be made in the program, this is one change that is acceptable and appears to be an appropriate cost containment measure and would have minimal impact on program administration.

The offset of food stamp benefits due to the receipt of school lunches is a different situation. Not only would this proposal create serious administrative problems in terms of both increased costs and errors, but is also a regressive measure in its impact on recipients. If this proposal is implemented it will result in reducing food stamp benefits for families with school-age children who receive free lunches and since this reduction would be the same on all