Even with restrictions, TANF, SNAP benefits still abused

COLUMBIA, SC (WIS) - In South Carolina alone, tens of millions of taxpayer dollars are paid out every year in food assistance to needy families. While many need the resource, we found some are abusing the system.

Over the past three years, food assistance in the Palmetto State has nearly doubled.

"Many, many, working families qualify, they get some help in being able to purchase their food," said Linda Martin, deputy director of economic services at the Department of Social Services.

The assistances, known as the Supplemental Nutrition Assistance Program, or SNAP, makes navigating the grocery isle a little easier. It's essentially food stamps on an EBT card.

"Pretty much with the EBT card you can buy anything that's food or drink that you can eat," said Martin.

However, there are restrictions. You can't buy pet food, soaps, paper products, household supplies, prepared foods, vitamins, medicine, alcohol or tobacco.

So then why are places named Prime Tobacco & Beer Outlet, Anyday Inn and Store, Cooks Bakery that serves prepared food on the list?

"What we do find in South Carolina and in rural states, is that we have a lot of people that don't have an easy method of transportation. A lot of our clients shop at convenience stores when they need to," said Martin.

We questioned if these smaller stores are following the protocol laid out by the USDA.  Turns out, that's where the greatest amount of fraud occurs.  Get this, USDA statistics show fraud cases in South Carolina rose 1,000 percent from 2010 to 2011. Here's what's frightening: no ones keeping track of what's being bought with your tax dollars .

"We can tell the number of transactions, we can't tell what people buy, but we can tell the number of transactions at each store that's licensed for EBT," said Martin.

Ultimately, there's no way to see how your tax dollars are being spent. DSS tells us the EBT cards are coded and that's supposed to prevent the sale of unauthorized goods.

"Nobody would do that, because immediately it would -- the card won't scan, cigarettes, it won't allow," said Martin.

But we know the USDA catches some stores through undercover stings. Last year, 146 investigations were completed in the state and there were 15,000 investigations nationwide. Fifty-four retailers in South Carolina were sanctioned for program violations.

"So if we see a tiny convenience store that's doing about the same volume of business as a Walmart, then we know we've got a problem with what people are buying in that convenience store," said Martin.

Of those 54 in South Carolina, 22 were fined and 32 were permanently disqualified for trafficking SNAP benefits. That's exchanging benefits for cash. We know 25 of the stores that received disciplinary action were right here in the Midlands. We found not only does it happen on a store level, but it's also happening between people in the program.

"People just exchange them back and forth so many times, and you're not supposed to do that," said one person who preferred to stay anonymous. "They even have something on the back of the cards saying unauthorized use is against the law.

Still, it's widely known there is a market for the cards that allow you to shop tax-free.

"They will give the person cash in return they will get their food stamps card," said the anonymous person.

Customers say having an ID isn't a concern.

"When you go to check out, no one is asking for your ID, no one is asking to verify the name or anything, so it's so easy to use and it's so common between my friends and I that we exchange cards if someone needs to use it," said the person.

The USDA is trying to crack down on the problem. They've changed the legal definition of trafficking to include people who exchange food stamp benefits for cash. When we questioned if it was possible to receive cash from the card, we were told no.

"But not without committing a crime, there is no way to be able to get cash off of an EBT card," said Martin.

Someone who has the card sent us a picture showing us there is a cash option when your total appears.

"If you take your EBT card to a retailer and say how about charging me $50 in groceries to my EBT card, but don't give me the groceries, give me the $50, and the retailer agrees to do that, then they would be breaking the law," said Martin.

It's an offense punishable by loss of benefits or more severe with fines up to $250,000 and 20 years in jail or both. The problem isn't just with EBT cards. The TANF, or Temporary Assistance for Needy Families, funds have also come under fire. They have less restrictions than EBT.

"You get a very small monetary stipend to help support you while you look for work," said Martin.

TANF funds are worth about $260 a month for a mother with two children. Applicants are thoroughly screened and the assistance only lasts two years.

"We check Social Security numbers, we check Social Security disability, we check Social Security survivor benefits. If you're working or getting unemployment, we check all of that before we approve a case," said Martin.

Despite the safeguards, federal officials still found issues. While EBT is sold for cash to get food tax-free, it's where TANF cards are being cashed in.

Last year, in Los Angeles, $1.8 million in TANF benefits were withdrawn in casinos. In Atlanta, $150,000 in benefits were accessed in liquor stores. We asked DSS where those debit cards are being used or withdrawn in the Midlands. They claim because the information is tied to a bank account it's federally protected, although we know the information has been released in other states, still they tell us.

"I'd love to say nobody ever goes out and uses a food stamp card for something they're not supposed to or buys liquor with a debit card that they're not that they really need for their family," said Martin, "but I know that's not true."

So what's to keep it from happening here? Nothing, said Martin.

"It's really been northeastern states that give much more generous benefits that were, first became aware that cards were being used in liquor stores, and strip clubs, but that has not been the case in South Carolina," said Martin.

Still, the state received $18.8 million between July and now that they simply don't account for.  The Center on Budget and Policy Priorities found only one in four TANF dollars goes into cash assistance for families.

"It's simply a difficult technical problem to put a solution in for debit cards, they're really working on it," said Martin.

That solution however, isn't coming until 2014. That's when the government will restrict certain ATM's so the cards cannot be used at casinos, strip clubs, or to buy alcoholic beverages.

Even then, officials doubt that will stop the fraud 100 percent. There's no way to stop someone from using a regular ATM, then spending that cash at one of those businesses.

"It's really going to be a pretty difficult task," said Martin. "It's easier to restrict things when you have and EBT card, an electronic benefits card, than when you have a debit card."

We really tried to get at where this money is being spent and cashed in. They simply can't tell us. Congress is looking at the issue and will spend through summer looking at the issue. If they find a lot of abuse, the program's future could be in jeopardy.

Copyright 2013 WIS. All rights reserved.