STATEMENT OF EUGENE L. STOCKWELL, ON BEHALF OF THE NATIONAL COUNCIL OF THE CHURCHES OF CHRIST IN THE U.S.A.

Mr. Chairman, and members of the Senate Agriculture Committee, I am Eugene L. Stockwell, Associate General Secretary for Overseas Ministries of the National Council of the Churches of Christ in the U.S.A., with headquarters at 475 Riverside Drive, New York City.

The National Council of Churches brings together in cooperative relationships 32 constituent denominations, which are extensively involved in national and worldwide denominational and ecumenical ministries of mission and service, involving the membership of more than thirty-seven million U.S. citizens. The Council does not speak for those denominations as such, but officially delegated representatives of those denominations make up the Governing Board of the Council and determine its policy and practice.

I also speak here as a former Commissioner of the Presidential Commission on World Hunger, appointed in 1978 by President Jimmy Carter, which Commission presented its final report in March 1980, just a year ago. On many issues there were divisions of view in the Commission, made up of a bipartisan membership, but on one issue there was unanimous agreement, namely:

"Federal feeding programs such as the School Lunch; Women, Infants and Children; and Food Stamp Programs have been very successful in addressing the problems of hunger and malnutrition in the United States." (Overcoming World Hunger: The Challenge Ahead, Report of the Presidential Commission on World Hunger, page 185).

Furthermore, one of the central recommendations of the Commission in the domestic area was that:

"The Administration and the Congress act to remove the expenditure limit on Federal funding for Food Stamps, to increase resources for all domestic feeding programs which have a demonstrated record of success, and to improve outreach efforts and certification procedures to increase participation among eligible citizens, with special attention to utilizing the resources of local private voluntary organizations." (page 190)

Proposals now before Congress radically to reduce the Food Stamp program of our nation fly in the face of these sober recommendations. I am certain that none of my fellow Commissioners would gainsay the right of a new administration to institute a wide range of new and different policies from those pursued by a predecessor administration, but I am sure that it is also clear that none of us who served on the Commission could rest easy with any change in policy direction which would cause physical hunger to many of our poorest fellow-citizens, and there seems to be little question that a major cutback in Food Stamp assistance will produce exactly that result.

The Presidential Commission on World Hunger believed that the elimination of hunger, at home and abroad, could be achieved substantially by the year 2000, at least in its worst aspects. But such success, the Commission fully realized, is dependent on the political will of government.

"The outcome of the war on hunger, by the year 2000 and beyond, will be determined not by forces beyond human control, but by decisions and actions well within the capability of nations and people working individually and together." (page 185)

The National Council of the Churches of Christ in the U.S.A. believes that the threatened cut in the Food Stamp program, along with cuts in other feeding programs, raise the specter of very real hunger among our poorest citizens, an outcome we deem utterly unacceptable in this wealthiest civilized nation on earth.

If, for instance, there were to be a reduction of $1.8 billion in 1982 in the Food Stamp program, it would appear that 2,000,000 Americans would be directly affected by loss of such assistance. Forty-three percent of those who receive such aid would receive fewer stamps. Worst of all, the elderly and the working poor would be hit the hardest. If one remembers that right now the Food Stamp benefits received by participants averages out to about $1.30 per person per day-hardly the basis for a sufficient diet and barely enough as a supplement for already meager incomes-it is not difficult to envisage a terribly serious impact on nutrition and health from a large-scale cutback in assistance.

As I understand it, the administration has marked the Food Stamp Program for cuts of $1.8 billion in fiscal year 1982, and a total of $11.7 billion by fiscal year 1986. Savings would be realized primarily by:

Reducing food stamp allotments to families with schoolage children who may receive school lunches;

Setting a gross income level of 130 percent of poverty for eligibility;

Determining eligibility by income in a previous period rather than by current income;

Ending the annual inflation adjustments on deductions from income used to calculate benefits; and

Revoking scheduled improvements in deductions and in the way in which benefits are adjusted to reflect food price increases.

These cuts would mean both smaller benefits and fewer recipients. Some 1 million persons, in 400,000 households, would lose eligibility; most of them are the working poor. Benefit levels for all recipients would be affected, but families whose allotments would be cut by up as to $11.50 per month for each school-age child would bear the worst immediate burden. Many of those families are among the poorest of the poor. Failure to adjust deductions for inflation would institute an unrelieved increase in the burden recipients bear as more and more of their own limited dollars over the years were claimed by rising costs of other necessities, particularly energy.

What is at stake here, Mr. Chairman, is not just a proposal that attacks the poor and threatens hunger in our land. What is at stake is our commitment as a nation to the ideals we proclaim about liberty and justice for all. A philosophy which penalizes the poor while favoring the wealthy circumscribes the liberty of the least fortunate of our citizens and makes a mockery of the justice they have every right to expect. We speak these days of spending additional billions for national security and defense, yet at this very moment we face the imminent possibility of widespread insecurity for our own people here at home. No talk of a "safety net" will provide comfort or food for those who in reality see their meager dependence on Food Stamps eroded or eliminated.

As a member of the Presidential Commission on World Hunger I urge you to stand firmly against the efforts to cut the Food Stamp Program. We need to build on our successes, not demolish them, and there is no doubt that the Food Stamp Program, with whatever imperfections it may have, is demonstrably a successful and compassionate national effort to feed the neediest of our people and to combat malnutrition.

As a representative of the National Council of the Churches of Christ in the U.S.A. I urge you to face this issue not only in terms of economics but principally in terms of morality and justice. I fear that if we lose this opportunity to help our neediest citizens by the continuation, indeed expansion, of the Food Stamp Program we will be claiming for ourselves the description of being an immoral minority who turn a deaf ear to the claims of millions of needy persons in our land.

Mr. Chairman, we look to this Committee, which in the past has taken leadership in this matter, to reassert again its defense of the neediest and to stand against an unjustifiable onslaught on the Food Stamp Program so greatly needed by our nation today.

Thank you.

STATEMENT OF ANDREW J. PASDEN, JR., FORMER MEMBER, INVESTIGATIONS STAFF, SENATE COMMITTEE ON APPROPRIATIONS

WAYS TO ELIMINATE WASTE IN THE FOOD STAMP PROGRAM

Mr. Chairman and members of the committee, my name is Andrew Pasden, and it is a distinct honor to appear before you today on a matter as important as the food stamp program. The topic of my testimony is a report entitled "need for an overall strategy to combat fraud, worker errors, and regulation loopholes in the Department of Agriculture's food stamp program." The report is based on a review in which I participated while a staff member of the investigations staff of the Senate Committee on Appropriations. The review was performed at the request of the Subcommittee on Agriculture, Rural Development, and Related Agencies; and, the report was submitted to them in November 1980. My prepared statement highlights the major findings, conclusions and recommendations in that report.

The review indicated a general agreement that the food stamp program is making a significant contribution to the nutritional well-being of needy Americans.

However, the program, as currently administered by the States, in accordance with Federal regulations, particularly vulnerable to fraud and abuse. An unknown amount of benefits issued in the program is wasted because of fraud by recipients, errors by program workers, and loopholes in food stamp regulations. Some of the persons interviewed during our review estimated that the losses could be as high as 20 percent annually-or about $1.8 million of the program's $9.2 billion total cost in fiscal year 1980.

Inadequate verification of applicant eligibility

The vast majority of the approximately 300 State and local administrators, fraud investigators, and eligibility workers whom we interviewed during our review, told us that it is very easy for ineligible persons to get onto the food stamp rolls, and for eligible persons to receive more benefits than they are entitled to. Officials in each of the 7 States we visited said the Federal regulations were too lax regarding verification of eligibility information and seriously restricted their ability to detect and prevent fraud.

According to Federal regulations in effect at the time this review was conducted, eligibility workers were required to verify only the applicant's reported income, alien status (if applicable), and any utility expenses that exceeded established standards. Any other data used to determine eligibility and benefit levels could only be verified if it was considered "questionable."

To be considered questionable, the information given on the application form had to be inconsistent with other statements made on the application, with information on previous applications, or with information received from other sources by the State agency responsible for the food stamp program. In addition, where verification was required to resolve questionable information, the regulations required special documentation in the applicant's case file. The documentation was required to explain the reasons why the original information was deemed questionable and what additional documentation was used to resolve it.

Eligibility workers told us they often believed applicants had provided them incorrect or misleading information, but they did not question it further because they were afraid that their interpretation of what constitutes questionable would be second-guessed and held against them by their supervisors. State administrators told us they were concerned that advocate and legal aid groups would challenge additional verification efforts. Most of the workers and supervisors told us that time was not the problem, and that it would be more than worth their while to check applicant-furnished data further and prevent overissuances at the outset of a client's participation in the program. However, as a result of the regulations, many applicant-furnished assertions went unchallenged, even when they appeared unrea

sonable.

State officials were even more critical of the lax verification procedures used to issue food stamps to destitute households under expedited procedures. They characterized the situation as a "give-away program." In accordance with the Food Stamp Act, such households must be given a month's supply of food stamps within 2 days of their application. According to regulations issued by the Department's Food and Nutrition Service (FNS), destitute households are those who have little or no income at the time of application, even though they may receive income at some other time during that month.

Households can be certified for 30 days under expedited procedures and are required to undergo normal verification before they can continue to receive food stamps. State officials and eligibility workers told us that they had interpreted the regulations to mean that expedited services had to be provided after verifying only an applicant's identity and address. They said such a practice was probably resulting in overissuances, but had no hard evidence to prove it.

However, FNS, in cooperation with the State of Texas, performed a special study of expedited services. They found that 7 percent of the households certified under the expedited procedures were, in fact, ineligible to receive any food stamps. The 7 percent ineligibility rate is twice the rate experienced in the rest of Texas' food stamp population. We concluded that Texas' ineligibility rate for expedited services was probably not representative of the nationwide situation because Texas was making a considerably greater effort than the other States we visited to verify as much applicant-supplied information as possible prior to granting stamps under expedited services. Thus, the percentage of ineligible households receiving stamps under expedited services is likely to be even higher in other States.

At about the time we issued our report, FNS began another study of expedited services in New Jersey which should cast additional light on the extent of overissuances caused by this service. The committee may wish to request that FNS provide the results of that study.

In January 1981, FNS issued revised verification regulations including some applicable to expedited services. If, as stated in our report, the final version is substantially the same as that proposed in August 1980, the regulations could result in a significant reduction in food stamp overissuances.

We stated that the revised guidelines should require states to verify those eligibility factors found to be most error prone. Instead, the revision makes the additional verification optional.

Lack of fraud prosecutions

Despite the susceptibility of the program to fraud, only a few states actually detect and prosecute such activities. Three states accounted for over 50 percent of the prosecutions reported to the Department for fiscal year 1978, and two of these three accounted for 28 percent in fiscal year 1979. No one, including the Department's inspector general, knows how much money is lost nationally because of food stamp fraud. This is partly because, until very recently, FNS has not even required that states report on their prosecution activity.

Several state and local officials told us that fraud could be causing as much as 50 percent of the dollar value of overissuances identified by FNS' quality control system. The latest available dollar loss estimate from that system projects losses of about 10.2 percent of all benefits issued-or almost $1 billion a year. The only attempt of which I am aware, to statistically measure the amount of money lost because of food stamp fraud was performed by the auditor general of the state of Florida. That study concluded that 16 percent of all the recipients given food stamps in Florida during November 1979, received all, or part of their benefits through "probable misrepresentation of facts"-resulting in a statewide projected dollar loss of $4.1 million for that month alone. I will not go into the details of that study because I understand that a representative of the auditor general will be providing testimony at these hearings.

To illustrate the program's vulnerability to fraud and abuse, our report described a situation in Florida in which an organized ring, headed by an individual woman, obtained an estimated $131,000 in food stamps by enrolling at least 130 fictitious households. The ring fabricated all documentation needed to satisfy the program's verification requirements, including birth certificates, proofs of income, social security cards, and resident addresses. The state's attorney, who successfully prosecuted this case, summed up the situation as follows:

"The manner in which this woman successfully met every requirement of the food stamp program with completely fictitious documentation and information illustrates the necessity for strengthening the requirements concerning eligibility to receive food stamps."

Again, I defer to the Florida auditor general's office for details on this case because that office participated in the investigations.

Present legislation does provide FNS and the states with the tools needed to pursue fraud cases, but as the figures have shown, most states appear to be disinterested in pursuing such cases, even with increased federal funding to serve as an incentive to do so. In our report, we recommended that FNS require each state to report on their current and planned antifraud activities as they relate to the food stamp program, including any factors which might be inhibiting their efforts in this area. Based on these reports, we recommended that the Secretary of Agriculture implement a nationwide strategy to combat food stamp fraud.

Food stamp regulations contain costly loopholes

In addition to overissuances created by fraud and errors, an unknown amount of federal money is lost daily because of loopholes in the food stamp program's regulations. Because of these loopholes, many recipients get more benefits than the Congress intended and others, whom Congress never intended to participate, receive food stamps.

Officials in every state we visited expressed concern about these loopholes and said they had submitted written comments to FNS in which they identified and explained the ramifications of many of these loopholes when the regulations were originally proposed. The state officials said that FNS ignored their warnings and retained the loopholes in the final regulations. Following is a brief description of the four loopholes we discussed in our report.

1. Full month's allotment in month of application.-Recipients are given a full month's allotment of food stamps in their initial month of participation regardless of the time of the month they apply-even if it happens to be the last day of the month and they may be given another month's allotment the next day. Section 11(e)(3) of the act says that state agencies must provide eligibile households an allotment retroactive to the period of application. FNS, in section 273.10(a)(1) of its regulations defines the period of application as the entire calendar month in which the household filed its application. We took the position in our report that the practice of providing food stamps for the days preceding the date of application is questionable. Most of the state and local officials agreed with us. One eligibility worker summed up the situation quite aptly. He said he never understood the regulation because it appeared to provide food stamps for "retroactive eating." FNS had no statistics on the percentage of the food stamp population that is in its initial month of participation. However, because people are continuously moving in

and out of the program, the percentage is relatively high. For example, we were able to determine that in Texas, for the 7-month period ended September 1980, an average of 9.2 percent of the recipients were in their initial month of participation. In Wisconsin, we found the percentage to be 16.1 for the 5-month period ended June 30, 1980. At such levels, prorating benefits from the date of application would provide a substantial program savings. In our report, we estimated that if only an average of 5 percent of the nation's food stamp population were in their initial month of participation at any given time, nearly $250 million could be saved in fiscal year 1981 merely by prorating benefits based on the time remaining between the date of application and the end of the month.

We recommended that FNS revise its regulations to define the period of application as beginning with the date of application and prorating the benefits from that date.

2. Ineligible aliens' income and resources ignored in determining households' eligibility and benefits.-The act restricts participation in the program to residents of the United States who are either citizens or aliens meeting specific criteria. Yet, the regulations expressly prohibit eligibility workers from considering the income and resources of an ineligible alien living in a household when determining that household's food stamp eligibility or benefit level. As a result, according to state officials, households with incomes and assets in excess of eligibility limits could be receiving food stamps. State officials questioned the logic of such a regulation, especially in situations where the ineligible alien is that household's principal wage earner. In one county, officials told us they believed some legal aliens actually tell food stamp workers that they are illegal aliens, because their incomes, if counted, would make the entire household ineligible for the program.

Congress recognized the existence of this loophole and closed it when it enacted the food stamp amendments of 1980. Those amendments became effective on May 26, 1980, but, FNS has not yet issued regulations to implement this change in the law. We recommended that because the amendments provide no discretion in this matter, and funds continue to be wasted, FNS should take action to implement this change immediately.

3. Replacement of stolen food stamp coupons.-Under current regulations, state agencies routinely reissue food stamp coupons to recipients who claim to have had them stolen after receipt, in the amount recipients attest was stolen, as often as the recipients make such claims, and even when the recipients' negligence contributed to the theft.

The regulations do require recipients to sign a statement attesting to the theft, and to submit proof that they reported it to the local police. However, the regulations do not place a limit on the number of times any household can have stolen coupons replaced, nor do they place a maximum on the value of coupons that state agency must replace in any one instance. If attested to by the recipients, the agency would be required to reissue coupons valued in excess of the recipient's current month's total allotment.

In an audit performed in Dade County, Florida, the Department's Office of Inspector General found that in the 11 months ended May 1980, 994 food stamp allotments reported as stolen and valued at $128,030 were replaced in that county alone. Of the 994 replacements, 103, valued at $13,570 involved recipients who claimed to have had coupons stolen more than once. The OIG found one recipient who had his allotment replaced five times within a nine-month period, for a total of $700. We recognized in our report that some recipients truly have their food stamps stolen though no fault of their own. However, we believed that FNS should limit its liability in the area. It should be noted that other income security programs do not reissue benefits in such instances.

FNS issued proposed regulations on January 27, 1981, to alter its position in this area and the public comment period on that proposal closed March 30. The new regulation, if adopted as proposed, would limit the number of times any one household could have stolen coupons replaced to only once during a six-month period. In addition, under the proposed regulations, the amount of any replacement could not exceed one month's allotment.

We had recommended that FNS place a definite limit on the number of replacements it would make to any household within a specified period such as only once during a 12-month period. Also, we recommended that FNS not replace all the coupons a household claimed as stolen, but instead provide coupons only for the days between the date the theft was reported to the police and the end of the month. FNS' proposed regulations go a long way toward closing this loophole, however, they do not go as far as we had recommended in our report.

Standard utility allowance not prorated.-Food stamp households can be living in and sharing the costs of a dwelling with other households and getting credit for the