Like any government benefits program, the Food Stamps program is susceptible to fraud. Specifically, the electronic benefit cards (EBT Card), through which the program is administered is a card that is easily targeted by those who want to commit fraud. Despite the publicity that typically surrounds EBT fraud cases, it is not a large percentage when compared to the total benefits paid. According to a 2013 NY Times article, the amount of money lost to Food Stamps fraud is estimated to be 1.3 percent annually. That is down from more than 4 percent in the 1990s when paper coupons had not yet been replaced by EBT Cards. However, even 1.3% is a source of concern since the food stamps program distributes billions of dollars annually.
There are three main ways fraud occurs:
The most common is people trying to trade their EBT balance for cash. They will make arrangements with an EBT accepting store owner, typically a convenience store or small, local grocery or corner store. They will be given say 50 cents on the dollar on the value on the card. The store owner will then charge the full balance on the card for items and then submit the full balance claim to the government for reimbursement.
Another way people try to commit fraud is lie about their income in order to meet the income eligibility requirements. This is done through forged documents or under reporting of total income in order to be able to fall within the cut off point. They may also fail to disclose information about their assets so that they will not trigger the resources requirements.
Another way people abuse the food stamps program is to buy items that are not on the approved list. The rules require that SNAP benefits be only used to buy food that has to be prepared at home. Hot food is generally not eligible. People try to get around this rule, especially in convenience stores that accept food stamps. Not only do these stores have food stamp eligible items, but they also sometimes sell hot food. These stores are usually family business so there is opportunity for people to cut deals with cashiers/employees to allow them to trade hot/prepared meals for their food stamps credit, at a sharp discount. People also try to use their food stamps to buy cigarettes, alcohol, tobacco and the likes, all against the rules of the program.
The government has been stepping up enforcement efforts and a lot of high profile arrests have been made recently, including the one in the above video where a store owner in Buffalo, NY would trade cash for food stamps card balances (at a step discount) and then use the food stamps card to buy items at big box retailers for his store. The government obviously wants to make sure that the program is being used for what it was intended for, so you can count on more arrests like these to continue because it is also part of making sure the public has trust in the program and how it is being run.
It is also essential because the total number of food stamps recipients has ballooned after the 2008 great recession and has not gone back to pre-recession levels, despite low unemployment. That has become a concern for politicians, who are looking for ways to trim the budget. The first place they like to look when they want to make cuts is benefit programs like food stamps. The more fraud is reported, the more politicians are likely to face pressure from their constituents to rein in on the program or make changes/cuts. That will only hurt the more then 40 million people who currently depend on the program for nutrition assistance.