Washington State Auditor’s Office Troy Kelley Independence Respect Integrity Controls over EBT Cards and the Eligibility of Card Users Controls over EBT Cards and the Eligibility of Card Users Joint Legislative Audit and Review Committee December 10, 2014 Chris Cortines, CPA, Principal Shauna Good, CPA, Senior

Washington State Auditor’s Office What is an EBT Card, and Who Uses Them Electronic Benefit Transfer cards (EBT cards) allow clients of the Department of Health and Human Services (DSHS) to access food and cash benefits through Automated Teller Machines and point-of- sale devices. Largest programs that use EBT cards: Supplemental Nutrition Assistance (SNAP) provides $1.7 billion in food assistance to Washington state citizens. Temporary Assistance for Needy Families (TANF) provides $220 million in cash benefits to state citizens

Washington State Auditor’s Office 3  Local media reported abuse of EBT cards.  Legislature established the elimination of fraud and abuse as a DSHS priority. Why we did this audit

Washington State Auditor’s Office 4 Why we did this audit  Audits in other states and the U.S. Department of Agriculture’s (USDA) Inspector General recommended improved data analysis to reduce fraud and abuse.  We conducted this audit to see if DSHS is effectively applying such analysis to the largest programs that use EBT cards.

Washington State Auditor’s Office 5  In 2013, DSHS had one of the nation’s highest federally recognized SNAP payment accuracy rates. Recognition

Washington State Auditor’s Office 6 Summary of Findings

Washington State Auditor’s Office 7 Summary of Findings

Washington State Auditor’s Office For SNAP and TANF programs:  Can DSHS improve its use of available data analysis tools to prevent and detect:  ineligible program participation and benefit over payments?  inappropriate EBT card use?  Can Office of Fraud and Accountability (OFA) help improve DSHS oversight and program integrity? 8 Our audit questions and focus

Washington State Auditor’s Office 9 Preventing and detecting ineligible participation and benefit overpayments What we found

Washington State Auditor’s Office 10 DSHS processes are effective at preventing benefits to household members who use an invalid Social Security number, which contributes to its high SNAP payment accuracy rate.  Sampled 60 households that included a cardholder with invalid SSNs.  Samples showed DSHS effectively excludes these members from the household benefits calculation. What we found: Preventing/detecting ineligible participation and benefit overpayments

Washington State Auditor’s Office 11 To improve detection of clients who are no longer eligible because they earned too much income:  DSHS can review employer-reported wages submitted to the Employment Security Department.  Potentially recoverable benefits totaled $786,000 in What we found: Preventing/detecting ineligible participation and benefit overpayments

Washington State Auditor’s Office 12  Clients with high out-of- state card use missed their six-month check- ins at twice the rate of SNAP clients at large, indicating an opportunity to avoid benefits. What we found: Preventing/detecting ineligible participation and benefit over payments Reviewing EBT card use is a tool to detect of out-of- state clients:

Washington State Auditor’s Office 13 Navigating federal rules to improve DSHS detection of out-of-state clients:  SNAP rules require clients to report address changes at their six- month check-in. If clients do not check-in, DSHS stops benefits.  USDA regional office expressed willingness to help DSHS obtain permission to halt benefits sooner if it sees high out-of-state card use between check-ins. With this permission, DSHS could:  Broaden its computerized detection tools to identify all clients with two months of high out-of-state card use.  Ask those identified to explain this right away rather than waiting for the 6-month check-in.  These steps would help DSHS avoid an estimated $280,000 in annual benefits. What we found: Preventing/detecting ineligible participation and benefit overpayments

Washington State Auditor’s Office 14 Charges on EBT cards belonging to deceased clients totaled $476,000 in Our sample results indicate three-fourths of these clients lived alone. To improve its detection of deceased clients, and how it avoids and protects benefits, DSHS can:  Conduct comprehensive cross-checks with the Social Security Administration. This would allow DSHS to stop benefits to some deceased clients sooner.  Deactivate cards or potentially sweep unspent benefits immediately after death rather than waiting a year. What we found: Preventing /detecting ineligible participation and benefit overpayments

Washington State Auditor’s Office 15 Preventing and detecting inappropriate EBT card use What we found

Washington State Auditor’s Office  Replacement cards can indicate clients are selling SNAP benefits for cash.  DSHS initiatives to delay replacement cards and warn clients they could be investigated has reduced the number of replacements by 56%.  Requiring clients to meet and explain why they request a high number of replacement cards is another USDA approved tool to further reduce the risk of DSHS clients selling benefits. 16 What we found: Preventing and detecting inappropriate EBT card use

Washington State Auditor’s Office 17  DSHS has strong processes to monitor transactions at businesses that are prohibited, such as casinos or strip clubs.  Our audit did not identify any transactions at these types of businesses. What we found: Preventing and detecting inappropriate EBT card use

Washington State Auditor’s Office 18 Use of OFA to improve overall program integrity What we found

Washington State Auditor’s Office 19  Number of OFA investigators has not kept up with increase in program beneficiaries.  USDA’s IG has expressed concern about this.  More investigators could help DSHS implement the audit’s recommended data analysis to detect more fraud and abuse. What we found: Use of OFA to Improve Program Integrity

Washington State Auditor’s Office 20  OFA not fully utilized to further strengthen DSHS policies that prevent and detect ineligible program participation.  Strengthened policies should require:  Standardized investigation reports, which caseworkers use to determine whether benefits should be stopped.  Discussion and follow-up between caseworkers and investigators What we found: Use of OFA to Improve Program Integrity

Washington State Auditor’s Office 21  DSHS needs to know outcomes associated with two types of OFA investigations to assure cost-effective use of resources.  Should know percentage of:  Administrative investigations that result in reduced or terminated of benefits  Criminal investigations that result in referrals to the county prosecuting attorney  Referrals to prosecuting attorneys that result in convictions or recoveries What we found: Use of OFA to Improve Program Integrity

Washington State Auditor’s Office 22  More than one-third of OFA’s 33 investigators conduct criminal investigations. However, DSHS estimates:  Only 10 percent of these are referred to a county prosecutor.  OFA does not know what percentage of these result in conviction or recovery.  A second audit is underway to examine whether improved workload allocation and performance measurement can help OFA reduce its backlog of overpayment cases.  SAO plans to publish this audit in June What we found: Use of OFA to Improve Program Integrity

Washington State Auditor’s Office 23 Recommendations What we found

Washington State Auditor’s Office 24  DSHS is actively improving its oversight of EBT cards and card users. Consequently, it:  Has one of the highest payment accuracy rates in the nation.  May receive a bonus from the USDA in  The recommendations that follow should assist DSHS with its ongoing improvements. Recognition before we move into recommendations

Washington State Auditor’s Office 25  Review wages reported to the Employment Security Department for all program participants quarterly.  Contact employers to confirm wages  Submit information on benefit overpayments to the Office of Financial Recovery. Recover excess benefits paid

Washington State Auditor’s Office 26 Avoid benefits to clients who moved out of state  Revise its computerized detection tools to identify all clients who had high out-of-state card use for two or more months.  Obtain USDA approval to:  Send requests for contact to these households  Discontinue benefits to those who do not affirm they are Washington residents

Washington State Auditor’s Office 27  Obtain the Social Security Master Death file to identify deaths that its current cross-matches are not finding.  Obtain permission from USDA to sweep SNAP benefits immediately when deceased client lived alone. Minimize benefits to deceased clients

Washington State Auditor’s Office 28  Require clients who have requested eight or more replacement cards during a 12-month period to meet with caseworkers and explain why, before mailing them another.  Investigate clients who indicate they have misused cards or do not provide satisfactory explanation Reduce the risks associated with client requests for EBT cards

Washington State Auditor’s Office 29  Hire more OFA investigators for additional data analysis to identify more ineligible program participants.  Determine whether its more cost-effective to perform fewer criminal investigations and more administrative investigations.  Empower OFA to further strengthen DSHS policies and procedures to prevent ineligible program participation. Improve program integrity

Washington State Auditor’s Office 30  Questions? Questions and Answers

Washington State Auditor’s Office 31 State Auditor’s Office Contacts Website: State Auditor Troy Kelley (360) Chuck Pfeil, CPA, Director of Performance Audit (360) Lou Adams, CPA, Deputy Director (360) Chris Cortines, CPA, Principal (360) Shauna Good, CPA, Senior (360)