May 7, 2012
House Republicans have worked to cut spending the last two years, but as automatic spending grows more and more taxpayer dollars are wasted as a result of fraud and abuse. Instead of slashing spending for our national security, we will make reforms to ensure that each taxpayer dollar is wisely spent.
Waste Fraud and Abuse Within Specific Reconciliation Categories:
- The Food Stamp Program paid out $1.9 billion in overpayments in 2009, according to GAO.An April 2012 undercover investigation by a Memphis CBS affiliate recently found food stamps being used rampantly to illegally buy non-food items including condoms.
- A March 2012 investigation by a Baltimore ABC affiliate found food stamps being used in local stores to buy beer, cigarettes, and being exchanged for cash in stores.In 2011, a Los Angeles CBS station found recipients selling their food stamps on craigslist for pennies on the dollar.
- In Michigan, a woman who won $700,000 in the state lottery in September 2011 was still receiving full food stamp benefits in March 2012.
- According to the USDA Inspector General, two Detroit-area brothers convicted of more than $679,000 in food stamp fraud in 2002 were caught illegally buying food stamps at their store again in 2009 after they were re-admitted to the food stamp program.
- A 2-year joint criminal investigation led by USDA OIG disclosed that the owner, manager, and employees of two SNAP-authorized retailers in Cincinnati exchanged SNAP benefits for firearms, cash, stolen tobacco products, narcotics, and drug paraphernalia.
- According to the a USDA audit, from September 2007 to September 2009, the owner of a Brooklyn food store and her son exchanged SNAP benefits for cash in a series of trafficking transactions that amounted to $1.4 million.
- The USDA OIG found in 2011 that the Food and Nutrition Service did not require states to use the management reports provided by their EBT processors. Thus, neither New Jersey nor Florida (the two states audited) was using these reports to identify potentially fraudulent activities by SNAP recipients. The audit identified over 2,600 questionable transactions using these reports, totaling over $181,700 for a 1-month period.
“Heat and Eat”:
A new abuse of the system has popped up in the last few years, whereby states provide a minimal LIHEAP benefit, such as $1, in order to expand food stamp eligibility and increase benefits. Under Food Stamp regulations, receipt of a LIHEAP benefit, regardless of the amount, enables Food Stamp recipients to maximize their Standard Utility Allowance (SUA). Using the highest allowable SUA in the Food Stamp benefit calculation may make otherwise ineligible applicants for Food Stamps eligible and may significantly increase Food Stamp benefits for many households. Some states are even sending LIHEAP check to households whose utilities are part of their rent just to get them on food stamps.
- In New York 115,000 households got a benefit increase of an average of $118 a month because of $1 LIHEAP checks.
- In Vermont 4,000 residents who live in public or subsidized housing with heat included in rent, received a $5 annual LIHEAP benefit payment that leveraged increases in their food stamp benefits from $10 to more than $60 a month.
- Maine residents living in subsidized housing with heat included in their rent are eligible for a one-time LIHEAP benefit not to exceed $5, which allows eligibility for Food Stamps.
- Washington sent $1 checks to every SNAP recipient in the state. Those token payments triggered an additional $43 million in SNAP benefits.
SNAP Categorical Eligibility:
There are generally two ways to qualify for Food Stamps: 1) Meeting federal eligibility requirements, or 2) Being automatically or categorically eligible for SNAP based on being eligible for or receiving benefits from other specified low-income assistance programs.
But as GAO, CRS, and even USDA have pointed out, a household can be deemed eligible for food stamps even if they receive no other TANF funded service other than a toll-free telephone number or informational brochure.
In total, 43 jurisdictions (40 States, the District of Columbia, Guam, and the Virgin Islands) have implemented broad-based categorical eligibility. These jurisdictions generally make all households with incomes below a state-determined income threshold eligible for SNAP.
In all but three of these jurisdictions, there is no asset test required for SNAP eligibility. Categorically eligible families bypass the regular SNAP asset limits. Therefore, it is possible to be categorically eligible for SNAP but have net income too high to actually receive a benefit.
- The Obama administration has encouraged States to take advantage of categorical eligibility. In a September 2009 memo they write: “We encourage you to continue promoting expanded categorical eligibility as a way to increase SNAP participation and reduce State workloads.” In most states, that means households who receive cash and non-cash benefits under Temporary Assistance for Needy Families (TANF) are automatically eligible for SNAP. If a household is merely given a brochure funded by TANF, they will be automatically eligible for SNAP.
- Another memo from the Obama administration explains: “With broad-based categorical eligibility, state agencies can effectively raise the income limit and raise or eliminate the asset test.”
- In Ohio, a woman with a $300,000 home, a Mercedes, and $80,000 in savings qualified for SNAP because, under categorical eligibility, these resources are not taken into account.
The Prevention and Public Health Slush Fund:
- Pitt County, North Carolina, a recipient of a Communities Putting Prevention to Work (CPPW) grant funded by health care law, used these federal taxpayer funds to place signage to promote recreational destinations including public parks, bike lanes, and more.
- The City of Nashville, Tennessee, which received a $7.5 million Communities Putting Prevention to Work grant, provided free pet spaying and neutering.
- The City of Boston received $1 million for urban gardening as an obesity prevention program.The New York Department of Health used a $3 million taxpayer-funded grant to lobby for a soda tax initiative.
Refundable Child Tax Credit Fraud and Abuse:
- In Indianapolis a long-time tax preparer came forward as a whistle-blower to the local news station exposing how undocumented workers are claiming the tax credit for children who live in Mexico. “We’ve seen sometimes 10 or 12 dependents, most times nieces and nephews, on these tax forms,” the whistleblower told the local news station. "The more you put on there, the more you get back.” The whistleblower who had thousands of examples shared some with the local news: “Here’s a return right here: we’ve got a $10,3000 refund for nine nieces and nephews,” he said, pointing to the words “niece” and “nephew” listed on the tax forms nine separate times. “We're getting an $11,000 refund on this tax return. There are seven nieces and nephews,” he said, pointing to another set of documents.
- A Treasury Report found that in 2010 non-citizens were able to improperly claim $4.2 billion in illegal child tax credits because taxpayers are not currently required to prove their citizenship before to receive the benefit. This will be specifically addressed in the reconciliation package.
General Waste Fraud and Abuse:
While the following examples of federal waste, fraud, and abuse are not necessarily from programs addressed in this proposal, they help to illustrate the fact that it’s not how much the government spends, but how the government spends it.
- The GSA spent $823,000 on a lavish Las Vegas-area conference, including $75,000 for a “Team-Building” exercise, a $31,200 “Networking” reception, and mind reader.
- This year, GAO identified 32 new areas of duplication and 19 additional areas of waste and inefficiency. The report cites duplication in almost a thousand individual programs, costing taxpayers over $300 billion per year.
- A USDA OIG audit determined 30,310 single family housing loan guarantees—with a projected total value of $4.16 billion—were issued to ineligible borrowers.
- A USDA OIG audit found that $280 million of “stimulus” funding for the Forest Service was sent to geographic areas that agency officials had classified as not significantly impacted by the recession, contrary to the stimulus’ requirements.
- College students (who generally do not have full time employment but have access to meal plans) across the country are being encouraged by universities to apply for SNAP benefits. Portland State University in Oregon, for instance, has a website showing students how to sign up for food stamps called, Nutrition, it’s a SNAP!
- More than $300,000 in SNAP benefits was redeemed at tobacco retailers in Oklahoma City between July 2009 and March 2011, according to data provided by the Oklahoma Department of Human Services and reported by The Tulsa World.
- In California, state officials―failed to notice for years that welfare recipients could use the state-issued cards to withdraw taxpayer cash at tribal casinos and state-licensed poker rooms, according to The Los Angeles Times. Casino withdraws averaged $227,392 a month.
- Last week, the Los Angeles Times reported: “Doctors, nurses and social workers from across the country, 107 in all, were charged in what federal officials in Washington called a ‘nationwide takedown’ of medical professionals accused of fraudulently billing Medicare out of nearly half a billion dollars. The amount of bogus Medicare claims totaled about $450 billion.
- In a September 2011 report, the Inspector General (IG) for the U.S. Office of Personnel Management found that improper post-death benefit payments for federal employees averages $100-$150 million annually, totaling over $601 million in the last five years. In one example the IG found, an annuitant‘s son cashed his dead father‘s checks for 37 years. The son‘s scheme, which cost taxpayers more than $500,000, was discovered in 2008, when he himself died.
- Los Angeles redirected $1 million in taxpayer money from the CDBG program intended to help the city‘s homeless to a wealthy international architecture firm designing a NFL football stadium. The company, Gensler, employs approximately 2,800 people and its revenues exceeded $460 million last year.
- An April 2011 report by the IRS found as much as $1 billion or more in tax credits for energy efficient residential improvements are being claimed by individuals with no record of owning a home. Based upon a 2011 review of a statistically valid sample by the Treasury Inspector General for Tax Administration (TIGTA), 30 percent of the individuals who claimed the Energy Efficiency Home Improvement Tax Credit had no record of owning a home.
- A $28.5 million contract awarded by the Department of Commerce to One Economy Corp. included $936,818 spent to create a web-based television series, “Diary of a Single Mom,” which “chronicles the lives and challenges of three single mothers and their families trying to get ahead despite obstacles that all single mothers face, such as childcare, healthcare, education, and finances.”
- An International House of Pancakes (IHOP) franchise was built with federal financial assistance to the Anacostia Economic Development Corporation. According to the Congressional Research Service (CRS), “$500,000 of the $765,000 grant was used as an equity injection in DC Pancakes LLC for a 19% ownership interest.” The new IHOP is located not in an underserved community but in a popular Washington D.C. neighborhood, Columbia Heights.
- In 2011, a $2 million federal grant from the U.S. Department of Commerce Economic Development Administration was made to help pay for a “multimillion-dollar wine exhibition and culinary center” in Washington State.
- In January 2011, fifty employees from the U.S. Department of Veterans Affairs attended an eleven-day conference at a resort in Scottsdale, Arizona. The final cost exceeded $221,000. The purpose of the conference was to “discuss revisions in how disability ratings are assigned for veterans seeking compensation and health care.” To put that number in perspective, that is enough money to pay the annual disability compensation of six disabled combat veterans.
- In its final report to Congress, the Commission on Wartime Contracting estimated that ”[a]t least $31 billion, and possibly as much as $60 billion, has been lost to contract waste and fraud during military operations in Iraq and Afghanistan – at the mid-range of the estimate, this amounts to $12 million every day for the past 10 years. This would amount to wartime contracting waste and fraud costing the taxpayer nearly $4.4 billion in 2011.
- The United States Coast Guard spent more than $24,000 on a float for the 2011 New Orleans Mardi Gras celebration.
- On August 15, 2011, University of Virginia professor Christine Mahoney was awarded $300,000 from the National Science Foundation (NSF) to study how European Union leaders frame their legislative debates to gain advantage.
- Kriemhild Dairy Farms was awarded over $55,000 to purchase and install a new butter packing machine, allowing it to begin offering 8-ounce packages of their “Meadow Butter” made from the milk of their grass-fed cows. The grant was awarded through the Rural Business Enterprise Grant (RBEG) program, which was given $34,930,000 in funding for FY 2011.
- Over $300,000 in U.S. taxpayer money paid for an initiative called Summer Institutes for European Student Leaders. This funding allows high school and college students from Denmark, France, Germany, and the United Kingdom to come to the U.S. at U.S. taxpayer expense to learn about civic activism and environmental leadership at American colleges.
- Researchers at Columbia University received over $600,000 to study how heterosexuals use the internet to meet one another, and how that activity influences their sexual behavior.
- Louisiana received a $5.2 million federal transportation grant to construct the Steamboat Overlook Interpretive Center. The facility will contain interpretive exhibits depicting the history and culture of the steamboat era. At a time when Louisiana has 3,800 deficient bridges, it is unclear why taxpayers are spending millions on a Steamboat Interpretive Center.
For additional information, contact:
The House Republican Conference Policy Office