- The Washington Times - Tuesday, October 24, 2006

Illegal trafficking in food stamps has fallen 74 percent in the past decade, largely because the program switched from paper coupons to plastic debit cards, a government watchdog says.

However, some retailers — especially those who run small groceries and convenience stores — still conspire with recipients to cheat the government, and the Department of Agriculture (USDA) should make more of an effort to crack down on them, the Government Accountability Office (GAO) said in a report.

In the early 1990s, trafficking in food-stamp coupons was rampant, with losses estimated at more than $800 million a year — almost 4 cents on the dollar.

Trafficking occurred when recipients illegally sold their coupons — usually for half their value — either to retailers or to “middlemen” who bought coupons in bulk and resold them at a discount. Either way, the unscrupulous retailers redeemed the coupons for full value and pocketed the difference.

In 2004, after two decades of experimentation, the food-stamp program switched entirely from paper coupons to Electronic Benefit Transfer (EBT) password-protected debit cards.

The switch allowed food-stamp recipients to purchase food like other consumers who use debit or credit cards in a grocery store’s swipe machine. It also ended costs associated with printing, mailing, collecting and shredding coupons, and allowed for some government monitoring of transactions.

The password-protected EBT cards made trafficking much harder and “largely eliminated the middleman,” the GAO said. By 2005, the food-stamp trafficking amount fell to $241 million, or 1 cent on the dollar.

EBT hasn’t completely foiled trafficking, especially among small retailers, the GAO warned. For instance, a recipient may ask a dishonest vendor to ring up a $100 “purchase.” After the customer swipes the EBT card, the vendor gives the person $50, pockets $50, then seeks $100 reimbursement from the federal government.

The USDA should do more to catch these illegal food-stamp transactions, as well as retailers who apparently plan on defrauding the program, the GAO said. It cited as an example an unidentified store — stocked with candy, cough drops and aspirin — that rang up almost $200,000 a month in food-stamp sales before being shut down for trafficking by the USDA.

A USDA spokeswoman said yesterday that the agency is preparing a formal response on the GAO report. But internal data show that, in general, the agency is moving “in the right direction on all integrity fronts in the food-stamp program,” said another official, who spoke on the condition of anonymity.

The food-stamp program issued $29 billion in benefits to nearly 26 million people last year. The maximum monthly amount of benefits for a family of four was $506.

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