However, because of such lenient regulations the program has lost the respect of the American taxpayers and has fallen from grace with persons who must administer it on a day-to-day basis.

There is no reason why this program cannot be one in which the taxpayers of this country are proud. Before such pride can be achieved, however, the regulations must be written with a combination of sensitivity and commonsense.

Only those associated with the program on a day-to-day basis know the complexities and potential areas of abuse in the program. This is why I strongly urge you to get past State and county administrators and establish contact with eligibility workers, eligibility supervisors, and fraud analysts for comment on proposed regulations prior to any action which would make those regulations permanent ones.

Thank you.

The CHAIRMAN. I want to congratulate you on a splendid statement. You are articulate.

I noticed you have a nodding acquaintance. She has been talking, and you have been nodding, but really, I want the staff to give me a copy of this so I can send it to Secretary Block in the Department, because you put your finger on it in a clear and articulate way.

You have emphasized where it is obvious the program was intended to help those who needed help, and it is now a run-away program, and it must be depressing to you to see what could be done and what is not being done largely because you are hemmed in.

Ms. EAKES. Thank you.

The CHAIRMAN. We will be glad to hear from you, sir.

STATEMENT OF MITCHELL STOTT, FRAUD ANALYST, DURHAM COUNTY, N.C.

Mr. STOTT. Thank you, Mr. Chairman.

I am Mitchell Stott, and I am employed with the Durham County Social Services as a fraud analyst specializing in the investigations of recipient food stamp fraud, and in this capacity I have had the occasion to be confronted with many situations involving food stamp overissuances, which is nothing more than wasted Federal dollars.

These overissuances have resulted from varying degrees of clientrelated fraud, client misunderstandings, agency errors, and program manipulation.

Over the past several years the public has been constantly informed that fraud in the food stamp program is minimal. Statistics tend to show that the percentage of fraudulent recipients is low. These figures only tend to indicate those cases of fraud which have been discovered and reported. Unfortunately, the discovery and reporting of fraud is no better than program regulations will allow. Current regulations regarding verification, change reporting, expedited services, and even the food stamp application itself extremely limit a local agency's potential of preventing or discovering fraud. Basically the recipient's word is all that is used in determining eligibility. Income must be verified, but only when the recipients report that they have income.

This concept places the interviewer entirely at the mercy of the applicant's honesty. Unfortunately, all too often, the applicant is not 100-percent honest. In Durham County, N.C., we currently have a recipient caseload of approximately 6,500 households. At this particular point in time, there are between 600 and 800 cases of suspected food stamp fraud pending investigation.

The CHAIRMAN. Will you repeat that?

Mr. STOTT. The total recipient caseload for Durham County is about 6,500. Right now we have a caseload pending investigation of 600 to 800 cases.

The CHAIRMAN. That is more than 10 percent.

Mr. STOTT. Yes, sir, and I would like to go on to say that the cases are being referred for investigation at the rate of between 40 and 70 cases per month, and to take this, these figures, and add them to the fact that the ways we can determine or discover fraud are so limited, it really is truly an amazing figure.

Basically we are limited to an anonymous phone call or an innocent slip of the tongue by the recipient, before we can actually discover a fraudulent case.

A system of checks and balances, there are none. It is my feeling that if an area was targeted for a statistical study of fraud, abuse and misrepresentation, where each and every case was investigated to the nth degree, we would all be astonished at the alarmingly high percentage of recipients not accurately reporting their household situation.

This is not saying that in every case where the recipient has not accurately reported their situation, there would result an overissuance, but in many cases it might. At this particular point in time where social programs are being examined for possible waste, it is imperative that the Federal Government take action to implement a food stamp program which no longer makes it easy and beneficial for any individual who applies to misrepresent their situation in order to receive Government benefits to which they may not be entitled.

The local government agencies which actually determine eligibility must be given the leeway to investigate each applicant thoroughly in an effort to prevent fraud.

In these instances an ounce of prevention is certainly worth a pound of cure. The theory that all beings are inherently honest is idealistic and irreproachable, but in the food stamp program it costs the taxpayers unnecessarily.

The food stamp program can be and should be an effective instrument in aiding the needy. In its current state, however, it barely aids those that cannot better their situation while serving as a crutch for those who will not. For food stamp purposes, I feel we have come to a milestone where it is essential that Congress define the truly needy, and then we need to build the program from there.

I know in North Carolina, right now, any individual living alone with a monthly income of $284 would be eligible for $10 per month in food stamp benefits, and a large number of the elderly who receive social security and are living alone fall into this category, $10 a month roughly translates into 4 gallons of milk per month.

This is utterly outrageous while on the other hand, any single able-bodied individual who will not work is eligible for $70 per month, with virtually no questions asked, and I ask, Is this a societally responsible program?

To sum up my thoughts, I feel that current estimates of fraud and abuse in the food stamp program are drastically underestimated, I feel the eligibility worker must be given the right to use his judgment to insure that only the truly eligible will receive benefits.

I feel a system of checks and balances must be established for the detection of fraud, I feel the entire program must be refocused to increase assistance to the elderly and disabled, and most of all, to reiterate what Ms. Eakes said, regardless of what direction Congress intends to go, it is imperative that an extensive effort be put forth in intensifying and coordinating any regulatory proposal with immediate feedback from the eligibility segment.

I think this would greatly reduce the potential for nebulous regulatory terminology, program loopholes, and virtually eliminate areas susceptible to abuse.

Sitting here today, I have had an opportunity of listening to a lot of statements from witnesses and Senators, and several things have been stated, of which I feel the Congress' intentions are unquestionable.

One thing in particular, Congress passed last year the legislation regarding 75-percent reimbursement for the investigation and pursuit of fraud. In North Carolina to date, and as you well know, the food stamp program in North Carolina is totally sponsored between the Federal Government and local government we have yet to see this 75-percent reimbursement, and the problem seems to be that we are termed analysts instead of investigators.

Here we need to determine what was your intention as Senators, and where this will be corrected down the road.

This makes the difference of doubling our investigative staff and capacity when funding is increased from the 50 to 75 percent. I just wanted to get that out.

Thank you, Senator.

The CHAIRMAN. Sir, I commend you. You see me lean over to my staff, I asked them to make a note of this, because really what this Congress needs to do is to talk to you, by you I mean all of you on the firing line.

Maybe we need to read fewer editorials and listen more to people who know what they are talking about.

I judge that you do not agree with those who scoff at the suggestion that there is waste in the program?

Ms. EAKES. I would not beg to differ with that.

The CHAIRMAN. Thank you.

Our next witness is Jeff Peterson.

STATEMENT OF JEFF PETERSON, ELIGIBILITY WORKER,

ALEXANDRIA DEPARTMENT OF SOCIAL SERVICES

Mr. PETERSON. A lot of the testimony has already been covered, what I want to say, and I am in pretty much agreement, but I want to give examples maybe to highlight what has already been said.1

One of the things, I do not know if there has been discussion as of yet; the aliens whose children are eligible under the program regulations, their children born in the United States, all of the income that is earned by the aliens is totally exempt, therefore children of ineligible aliens receive higher benefits than children of U.S. citizens.

Now, these children are citizens; they are born in this country. I do not know whether they should be entitled to more advantage simply because their parents are not citizens at the time they are born.

There is one client that is going on the program, their children are born in the United States, they have been getting monthly benefits.

The father has a grant from his own country of $20,000 a year studying here in the United States, so these children are not necessarily in need, but under program regulations, these children can participate totally within the law, and receive maximum benefits, although their parents are not in any need of it whatsoever.

You were saying that we have to give a 10-day notice period before we can take action.

When we discover fraud is in existence for several months, and unless we know the exact fraud, we cannot reduce the stamps. We have to wait 2 months.

If we do not know the exact amount of the income, we have to send an expiration notice, and we have to give them an additional month-and-a-half benefits, because we do not know exactly how much they are earning, even though we know they are earning, so the average letter can only be used now to the certification period where we know what the facts are; however, when we are trying to solicit information, because we know someone is working, but we do not know how much income they have, we cannot use the adverse action, we have to expire the case, and give them an additional month of benefits.

Also, you were talking about household composition. Right now we have a case where a client had a $45,000 house which he transferred to the name of his daughter. He was not made ineligible in the program, because he was participating in the program at the time that he transferred the home, so he does not transfer the property to become eligible; however, now he is participating in the program, and his daughter is charging him rent to live in the house he just gave to his daughter, and so he has a deduction for that, and his daughter is earning a fair income, but it is enough to care for herself and her father.

I do not know that it should be the business of the country, of the State, to interfere or to take over responsibility for traditional family roles.

I believe a child should care for their parents if they are able, and parents should care for their children if they are able, and I think we encourage the decay of the family structure by taking over the responsibility for family units, where sufficient income exists to meet the needs of the family, but simply because they say they are purchasing separately from the rest of the members of the house, they are entitled to benefits under the food stamp program;

as long as they are living separately and living in the child's house, they are eligible for participation.

It seems like a waste to me. Also we have many instances where fathers and mothers of the same child will be living in the same household, and because the father will not exercise responsibility for the child, and the mother and father are not married, we have to approve the case for the mother and the child, or the father and the child alone, and we cannot count the income that the father is now earning, so that the father of the child may earn $20,000 a year, but because he is living with the mother of the child, rather than married to the mother of the child, the mother of the child and the child can continue to get benefits at a high level.

One recommendation I would make is that children, when people are living together, they be required to have their financial circumstances jointly considered, rather than just because they are not married, and in our society there is no longer the social structure of condemnation for living together and not being married, that people living together, whether they have joint children or not, should be required to participate on the program as one unit rather than two. If there are brothers and sisters, or parents and their children applying separately, the children and the parents have their own case, there is 9 percent more food stamps issued because of that division.

In other words, the child may be 18 and living at home and the parents may have their own food stamp case, and because they say they will purchase separately, they are entitled to 9 percent more food stamps than normally required.

If they applied together, they would get 9 percent less food stamps.

One more thing I consider important, that fraud that exists in the country is, well I heard it estimated at 15 percent, that would make it $450,000 a year at the present level for 1981.

We have a 14-percent conviction rate of cases referred. We had 155 cases referred in the last 2 years, or 26 convictions.

Right now the client is convicted in the city of Alexandria, they are removed from the program, they can move to Fairfax, 3 miles away, get back on the program, and there is no legal sanction we have to prevent them from participating in Fairfax at a complete level.

I do not know why, but they are only prosecuted in the locality. Within the same State they can move and get benefits.

If there is conviction, all they have to do is move across the border. We catch most of our fraud; we have a State income printout that matches our food stamp client, his number with income reported in the State, so that when we discover maybe 6 months later that the client had been working and not reporting that income, we discover it by his social security number; however, clients working in the District of Columbia or Maryland, we have no way of determining the income from that client, there is no way to catch those people, and we have no way of catching people participating in more than one locality at one time.

We have no cross reference, as in Alexandria or Fairfax, so in order to check this situation, which I think is absurd, we ought to have social security numbers of all food stamp recipients indexed.