applicants, recipient and the general public of the income verification system. This campaign should further improve income reporting.

In addition to this income verification system, Florida plans to inititate a similar verification system to determine the accuracy of reported SSI/SSA and AFDC income. These tracking systems will be implemented by September, 1981.

Question. 2. Verification of Savings and Checking Accounts. You indicated that in the AFDC program, Florida has implemented a system of verifying savings and checking accounts. Would you describe how this is done currently in AFDC, and how you would envision this procedure helping verification in the food stamp program?

Answer. In the Florida AFDC program, an applicant who declares the ownership of a savings and/or checking account is requested to sign a Financial Clearance form which authorizies the financial institution to release information to the agency regarding these resources. In the Food Stamp Program, verification of resources can be made only if there is reason to question the information provided by the applicant. Regulations to be implemented in June, 1981 will permit the verification of resources prior to certification of an applicant. This will provide for more accountability in the program.

Question. 3. Mail Issuance. What percentage of recipients in Florida receive their food stamps by mail issuance? What categories of recipients? What has been your experience with the rate of losses-real or fabricated-claimed by intended recipients, especially with regard to rural versus urban losses. (Feel free to outline what safeguards or procedures you have developed to deal with mail issuance.)

Answers. During the period October through December 1980, approximately 32 percent (121,478) of Florida's food stamp households (379,619) were issued coupons through the mail each month. The value of the coupons issued was $27,988,968 and the amount reported as losses was $332,328 which is a loss rate of 1.18 percent. Mail issuance is available for all categories of recipients. The majority of the recipients who receive their coupons in the mail are the elderly, handicapped and those in rural areas with transportation problems. Urban areas have a higher loss rate than rural areas.

Currently the agency is experimenting with the following measures to deal with mail issuance losses. These measures are implemented in various project areas and are not yet applicable statewide.

(1) Mail issuances are staggered over the first ten days of each month instead of mailing them all on the first day.

(2) Participants are removed from mail issuance after one loss is reported. (3) Certified mail is used for allotments which exceed $165/month. This is only being done in two local offices because of the high cost of certified mail. (4) Mail issuance is limited to allotments under $128/month in one local office and $200/month in another local office.

(5) Mail issuance is pre-sorted by zip code.

(6) Mail issuance is prohibited for households which share post office boxes or have general delivery addresses.

The State Food Stamp Office is conducting an analysis of these experiments to determine which procedures are most effective in reducing mail losses.

We are also considering the following procedures for implementation:

(1) Mail issuance would be discontinued to all recipients except those who are elderly, handicapped, have transportation difficulties or can sufficiently demonstrate their inability to pick up their allotment.

(2) When certain high loss areas are identified, mail issuance would be discontinued for all recipients in that area. This would primarily apply to certain zip codes or housing projects.

(3) Centralize mail issuance in urban locations.

Question 4. Expedited Services. What percentage of your caseload applies for benefits under the category "expedited service"? I have heard from a number of local and state administrators about problems associated with obtaining sufficient verification of information furnished by recipients applying under expedited services provisions. Do you have any suggestions regarding means of tightening up the administrative procedures and verification of such applications?

Answer. In Florida, about 28 percent of our monthly applications are expedited. This includes initial applications as well as applications for recertification. There should be some provision for expedited service for those with immediate needs.

We suggest the following measures to tighten up the expedited service process: (1) Limit eligibility to applicants who have no income and who do not anticipate income for two weeks.

(2) Limit eligibility for expedited service to initial applications. Applicants for recertification should not be certified under expedited provisions because if they apply for recertification on time, they will receive stamps for the next month during the first 10 days of the month; and

(3) Applicants for expedited services should be required to verify resources, identity, residence and household composition as a condition for certification. Question 5. Workfare. I understand that St. Petersburg has recently begun a workfare pilot project. I recognize that information may be sketchy at this early stage, but based on what information you have, do you have any observations to make about workfare requirements, implementation, or any initial statistics on participation levels?

Answer. Statistics gathered from the St. Petersburg workfare project during the period January 16 through April 10, 1981 reveal the following:

"The number of individuals referred to the county sponsor was 1,497. 376 of these individuals were referred to job sites. 169 were sanctioned for failure to comply and 105 individuals were exempted for good cause.

"The county referred individuals for 6,052 hours of work, however, only 2,859 hours were actually worked. The types of jobs available are primarily maintenance, clerical or day care. The no show rate is approximately 50 percent. Many employers, therefore, only offer jobs which are non-essential."

The goals of a workfare program must include provision of employment opportunities which enable participants to become economically self sufficient.

The jobs to be performed under workfare provisions should have the potential for permanent employment or provide job experience and training that enhance the recipient's ability to locate other employment opportunities.

To assist you in thinking about this subject, I am attaching a copy of a special report commissioned by the Florida Legislature entitled "Work or Welfare".1

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

Mr. Chairman and members of the Committee: It is indeed an honor for me to be here today. I am aware of your interest and concern in curtailing opportunities for fraud and abuse and other criminal activities in the Federal Food Stamp Program. I am confident this effort is appreciated by all taxpayers. There are those who would have you believe that anyone receiving food stamps is committing fraud. On the other hand, there are those who would have you believe little or no fraud exists in the Food Stamp Program. Neither of these opinions can be supported by fact. My testimony, however, is based on data gathered in the State of Florida since 1972. Nineteen hundred and seventy two was the year that the Florida Legislature established the Division of Public Assistance Fraud in the Office of the Auditor General to investigate irregularities in the administration and expenditures of public assistance monies in the State of Florida. As a result of this continuing activity, during calendar year 1980, we referred a total of 1,870 cases of fraud and abuse in public assistance programs to the appropriate Florida State Attorneys. These 1,870 cases had an estimated dollar value of $2.4 million in overpayments and overissuances associated with the fraud. Further, 1,584 of the 1,870 cases involved fraud relative to the Food Stamp Program. Of the $2.4 million that I previously mentioned, $1.4 million of the overpayments and overissuances was in a form of food stamps. The prosecutors in Florida prosecute in excess of 80 percent of all cases that we turn over to them each year.

Without going into extensive detail as to the credentials of our Office, and credibility of the testimony I plan to give today, I have attached, as exhibit A to the full text of my testimony, narrative pages from our last annual report to the Florida Legislature. This will give you an insight as to the total activity carried on by the Auditor General's Office in Florida and the result of that activity, specifically as related to the prosecutions and court actions. Accordingly, I can move on to the specific area of fraud and abuse in the Food Stamp Program. My testimony might lead you to believe that Florida has a unique problem as related to fraud in the Food Stamp Program and that other states do not have any fraud. To this I would answer, we are only unique because we are attempting to do something about the problem of fraud and abuse in the Food Stamp Program. Many states have made no such effort.

In November of 1980, Report Number 80-6 was submitted by the investigative staff of the Senate Committee on Appropriations to the Sub-Committee on Agricul

1 Retained in committee files.

ture, Rural Development, and Related Agencies. This report deals with an overall strategy to combat fraud and abuse in the Food Stamp Program. In the Report it was indicated in fiscal year 1979, 24 states reported no prosecution of food stamp fraud and 12 states reported 10 or less prosecutions. When considering that 36 states reported no, or 10 or less, prosecutions of food stamp fraud, it is no wonder one may surmise that Florida could have a unique problem in food stamp fraud. However, it is my opinion that if these other 36 states were pursuing the investigation and prosecution of food stamp fraud as we are, you would find all states have similar problems as to those that exist in the State of Florida. Report Number 80-6, as referenced above, went on to indicate that in fiscal year 1979, Florida and Texas accounted for about 28 percent of all food stamp fraud prosecution in the United States. Texas, as Florida has done, has attempted to do something about the problem.

We have found food stamp fraud can be broken down into probably three categories; recipient fraud, ring activity, and organized activity. By recipient fraud I am simply referring to those eligible, or ineligible, recipients who do not disclose all pertinent facts concerning their family situations and receive more food stamps than they are entitled to receive. In ring activity, I refer to groups of people who travel in somewhat of a less than organized manner to various counties within a state or between states and receive food stamps several times within a given month. Then there are those activities that are well organized. In one such case in Florida, we found an estimated $500,000 worth of food stamps were received by a group of 3 or 4 people over a period of time. I mention these three different types of fraud activity because I think in order to make recommendations, and for you to consider remedies, each one of these has some unique characteristics that must be addressed. Accordingly, different remedies are required to eliminate or reduce the fraud and abuse in each of these specific areas. Before addressing these things specifically, I would like to summarize for you the results of a study we did on food stamp roles for those recipients of food stamps in the month of November, 1979. In addition to this summary I have attached, as exhibit B to the complete text of my presentation, that entire report.

We concluded, by the use of generally accepted statistical projections, that 15.8 percent of the November, 1979 food stamp cases in the State of Florida received part or all of their food stamps through probable misrepresentation of the facts. The projected dollars associated with the approximate 15.8 percent overall fraud rate was $4.1 million 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 for 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 percent error rate was an additional $1.5 million. When combining the projected 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. Again, let me reiterate that I do not feel Florida has a unique problem. This problem may exist in equal or some instances of a higher proportion in other states if similar studies were done. To my knowledge, no other study on a state-wide basis such as this has been done.

I think there are several problems that attribute to the fraud rate in the Food Stamp Program. Among these are: the rapid growth that has taken place in the Program over the last few years; the regulations issued by the Food and Nutritional Services of the U.S. Department of Agriculture, in many instances, handcuffs the states' efforts to verify and document the facts presented to them by the food stamp recipient; the Food and Nutritional Services has not been responsive to the states' requests for waivers intended to tighten up on the eligibility requirements; the lack of state efforts to investigate and prosecute for fraud; and, a general passive attitude of the Food and Nutritional Services concerning fraud. It has been my experience that rather than admitting that the Food Stamp Program has many weaknesses which attribute to fraud, Federal level administrators have preferred to bury their head in the sand and ignore the problems. I think one fine example of the lack of response from the Food and Nutritional Services was exhibited by the fact that it took approximately two years to issue final regulations after Congress had passed the act allowing for 75 percent funding for investigative and prosecution effort in the Food Stamp Program.

In 1975, when the Senate Sub-Committee on Agricultural Research and General Legislation was holding hearings on Food Stamp Reform, Senator Helms filed a statement for the record which said, "By closing loopholes, correcting defective

elements of the eligibility formula, tightening work requirements, and curtailing opportunities for fraud and other criminal activities, the Food Stamp Program can be restored to the purposes originally intended when it was first inacted." I regret, in my judgment, to inform you that this in fact did not happen with the 1977 legislation which resulted from the Hearings in 1975. In attempting to correct problems in the Program, we must face up to the fact that we have created another form of currency in this Country. In fact we have created scrip, very similar to the military scrip used by the United States at overseas bases at one time. The scrip (food stamps) is very negotiable on the streets. This was also pointed out in Senator Helms' statement in 1975, where he said: "A thriving blackmarket exists for food stamps. Food stamp coupons are as easily negotiable as cash and have no identifying requirements upon them." After we recognize and accept this, we can see why we have so much organized activity to "rip_off" the Food Stamp Program. As previously eluded to, we had a case in Dade County, Florida, where an estimated $500,000 in food stamps had been obtained illegally through organized activity. A small group of people were putting together all of the documentation needed to have people certified for food stamps. To demonstrate some of this documentation, I have several documents (exhibit Cˇof full text) to show you. One being phony birth certificates that were being used, another being plastic social security cards which were easily obtainable for $3.00 each in Miami, and counterfeit insurance documents that were used as a part of the overall documentation. As you can see, all documentation was readily available for the Food Stamp Program worker, and in accordance with the present regulations issued by the Department of Agriculture, there was no reason at all why the workers should question the authenticity of these documents. This is so easy to do, I don't think it is an isolated incident. To stop this type of activity, we must, in some manner, make it difficult for those people who are not eligible food stamp recipients to utilize the food stamps in grocery stores. There are certainly many options to curtail this type of activity. Certainly one of them would be to have food stamps countersigned, i.e., signed at the time they are picked up and also signed at the grocery store similar to travelers checks. Another possible solution would be to have the food stamps redeemable at the grocery stores only in the months that they are issued. If people are in true need of food stamps, they would need to spend them during the month they are issued. This could be done by changing the color of food stamps each month and not permitting grocery stores to accept food stamps, or not allowing them to redeem them, after the end of the month they were intended to be issued and used in. Certainly another option would be to do as the military did in overseas bases. That being with extremely short notice, on a periodic basis, to change colors of the food stamps assuring that grocery stores only redeem the new color stamps after that point. This would take, in my judgment, numerous stamps off of the black market. And last, there is always a possibility of required photo ID in which grocery stores are required to assure that the person whom they are redeeming food stamps from is in fact an authorized food stamp recipient. At the present time, grocery stores are permitted to ask people for their food stamp ID cards but are not required to. I submit to you that trafficking in food stamps, or black marketing in food stamps, is an enormous problem. We have carried out three special investigations in the State of Florida in conjunction with the local law enforcement personnel, the respective State Attorney's Office and the U.S. Department of Agriculture's Office of Investigations. With food stamps our undercover agents purchased literally everything in the community. We purchased automobiles, automobile tires, boats, cow manure, marijuana, hand guns, stoves, air conditioners, equipped an entire apartment with furniture, stereos, television sets, clothing, numerous ineligible items in "Mom and Pop" grocery stores, and last but not least, we purchased a funeral with food stamps.

Certainly another way to stop all the trafficking and black marketing in food stamps would be to issue cash in a form of state warrants rather than the now Federal scrip (food stamps) that is being issued. This would also eliminate a problem that now exists in mail issuance of food stamps. Throughout the country, every month we are literally stuffing hundreds of millions of dollars in the form of negotiable instruments into envelopes and mailing them to homes throughout various communities with absolutely no control over who gets them. In Florida we have had security guards who deliver the stamps to the Post Office rip off the system. We have had workers in the Food Stamp Office lift the envelopes before they left the Office, and we have had letter carriers lift them. This results, in Florida, in literally hundreds of people every month who report not receiving their stamps and who are reissued food stamps. I doubt very seriously if any of you people on the Committee, or anyone else in the hearing room, would pay their bills by just stuffing cash (scrip) in the form of negotiable instruments into envelopes and mailing out hundreds of

millions of dollars every month with little or no control. In summary, until we are able to in some manner make it extremely difficult for those people who are not eligible or entitled to receive food stamps to negotiate them at grocery stores, we will never be able to stop the trafficking or black marketing that goes on with the food stamps in this country.

Tightening the regulations that are currently in existence is a must to stop the recipient fraud. As you are aware I'm sure, the current regulations only permit the eligibility worker to verify information as given to them, and in many instances verification is permitted only if the data is questionable. If the workers determine the data to be questionable, they must document in the case file as to why they thought the information was questionable. Another example of an area where the regulations need to be tightened is in the area of home visits. At the present time, if a home visit is desirable, an appointment must be made in advance. Certainly I can respect and appreciate the intent of this regulation, that being the privacy of the people receiving food stamps; however, at the present time, if the recipient says, "no you can't come", the worker can not make a home visit. Let's be realistic, if I was going to commit fraud in an area concerning my household composition, I certainly would not allow the worker to come into my house. I certainly do not think someone such as myself, who is oriented towards criminal investigations, should be permitted to write food stamp regulations. Nor do I think those people who have been writing them in the past should be permitted to write them. In reference to this, and just in general, I think in some manner we must get the Food and Nutritional Services to take a more positive approach towards fraud and abuse rather than trying to ignore that it exists. We must, and I underline must, stop the fraud at the front door. Investigating it after the fact and prosecuting it is not the answer.

I think back to the times in the late 30's and 40's when I accompanied one of my parents to the commodity distribution center. As I recall, the center was an old railway depot in Huntsville, Alabama. We needed the assistance and I don't recall that we thought it was demeaning to receive such assistance, in fact we were glad to have it. I doubt very seriously that there was a tremendous trafficking of commodities on the streets of Huntsville, Alabama. I just can't imagine people standing on the corners trying to sell containers of peanut butter and lard. Also, I recall very vividly the late 40's and 50's when my Mother completed the appropriate paperwork and qualified me to receive free lunches at school. I don't know whether this was Federal or state money; but at the time, I was asked to sweep a couple classrooms every afternoon to help pay for the tickets. I felt very good about that, at least I was earning part of the cost of the free lunch tickets. Today, I would not want to be sued by Legal Services, so I would not recommend that we have people work at jobs such as sweeping classrooms to earn free lunches or food stamps. I make these two points because I would not want anyone hearing my testimony or reading it to think that I do not know what it is like to be poor or to be on the public dole. I have been there. I can appreciate the problems associated with being poor; I believe with all my heart that this Country, being as affluent as it is, should take care of and feed those people that are unable to do so for themselves. In doing this, however, we must recognize all loopholes and problems associated with the current food stamp programs. We must tighten up regulations, we must stop the black market, and stop the trafficking in food stamps. If in Florida we lost in excess of $4 million in one month because of fraud and another $1 million because of errors, I will leave it up to your judgement to conclude as to how much is stolen and lost throughout the country every month due to fraud and errors in the system. Roughly calculated, in Florida, on an annual basis it would mean that in excess or $60 million would be going out to people who were not entitled to receive that amount of food stamps; in other words, enough money to support the program in the State of Florida for one or one and one-half months.

In closing I would reiterate and restate in part, two of the recommendations that I made to the Senate Sub-Committee on Agricultural Research and General Legislation in 1975:

(1) Since food stamps are negotiable instruments, a recommendation would be to countersign the food stamps. It is recognized that this would in some instances make for longer lines at the food stamp offices and the grocery store. It is also recognized that this would not permit the massive mail issuance of food stamps that now goes on. However, as I previously stated that process has many problems associated with it. I think in making such a recommendation also it is worthy to note that with other negotiable instruments used at grocery stores, such as personal checks, the buyer has to produce proper identification in order to get such negotiable instruments accepted. Therefore, in my opinion, the countersigning of food stamps at the grocery store would not produce longer lines at the cashier of the food chains than those that already exist by having personal checks properly approved.