Auditor General Jack Wagner Says Welfare Dept. Must Improve Electronic Benefits Transfer Card Oversight

HARRISBURG, Pa., Sept. 14, 2011 /PRNewswire-USNewswire/ - Pennsylvanians receiving public assistance made $5.2 million in out-of-state purchases or cash withdrawals in May 2010 using Electronic Benefits Transfer cards, but the Department of the Auditor General could not analyze the legality of any of the 94,947 transactions because the Department of Public Welfare, which issues the debit cards, refused repeated requests to provide records and supporting documentation, Auditor General Jack Wagner said today.

Wagner, the state's independent fiscal watchdog, said that his auditors requested EBT information from the Department of Public Welfare on Aug. 9, 2010, Sept.  14, 2010, Nov. 15, 2010, and April 21, 2011. DPW repeatedly denied the requests.

Wagner issued a special report today which said that, because of DPW's lax oversight during the Rendell administration, it was impossible to determine whether any of the $5.2 million in out-of-state EBT transactions were invalid or illegal.

"With Pennsylvania still mired in its greatest economic downturn since the Great Depression, taxpayers deserve to know whether state agencies are being careful stewards of their money. I call on the Department of Public Welfare to make all EBT card transactions in its possession available to the public," Wagner said, emphasizing that he would work with DPW to protect the confidentiality of individual recipients.

EBT cards, also known as ACCESS cards, provide public assistance recipients with electronic access to their benefits, from a variety of programs, including Temporary Assistance for Needy Families, the Supplemental Nutrition Assistance Program, Special Allowances, and general assistance. In May 2010, approximately 750,000 Pennsylvanians had EBT cards.  On average, approximately $200 million is spent monthly using EBT cards.

Recipients are able to use their EBT card to obtain cash benefits through ATMs located throughout the state. In addition, recipients are able to make cash purchases and receive cash back through point-of-sale terminals at participating retailers. To be a participating retailer, the retailer needs to apply for a license with the U.S. Department of Agriculture. State law prohibits individuals from using EBT cards to purchase liquor or alcohol.  

EBT card abuse has been a problem in other states. As a result of the abuse of cards in California, former Gov. Arnold Schwarzenegger in 2010 banned EBT card use at certain kinds of businesses in the state, including adult entertainment businesses, gambling establishments, spas and massage parlors, smoke shops (tobacco, cigar, cigarette, and pipe), tattoo and piercing shops, bail bond agencies, and cruise ships. 

Wagner's special report found that the number of out-of-state transactions made in six states adjacent to Pennsylvania mean that the potential for fraud and abuse is high.  Specifically, the volume of transactions could indicate that recipients may be residing in other states or could be involved with inappropriate activity.  In May 2010, there was 72,179 transactions worth over $4 million in New Jersey, New York, Maryland, Delaware, Ohio and West Virginia.

Wagner said because DPW lacked internal policies and procedures related to monitoring recipients' use of EBT cards, DPW management indicated it did nothing to determine how recipients used money accessed with EBT cards.

"The sheer volume of out-of-state transactions disclosed by our auditors demonstrates the possibility that recipients are potentially engaged in costly travel and may be residing in other states," Wagner said. "These circumstances require scrutiny and monitoring by DPW."

The special report on DPW's oversight of the EBT cards is the result of findings reported in an August 2009 special performance audit of the Special Allowance program, which uncovered significant weaknesses related to EBT cards, including some recipients who received almost 100 EBT cards.

Wagner said the findings of the Special Allowance audit necessitated a subsequent audit of DPW and the way it administers EBT cards to deliver public assistance benefits. However, during the course of the audit, management at DPW abruptly ceased cooperation with auditors and denied further access to documentation.

"Management at DPW demonstrated that it did not intend to provide our auditors with information regarding how public assistance benefits are delivered through EBT cards," Wagner said. "Because of this lack of transparency, taxpayers will never truly know the cost-effectiveness of social service programs."

Wagner's special report included eight recommendations to ensure that recipients use EBT cards in a proper manner, including that DPW should:

• Develop an internal review process to monitor EBT card usage to ensure funds are spent in accordance with the intended purpose of the various assistance programs;
• Provide proactive leadership and appropriate policies and procedures to senior management overseeing EBT usage to ensure that they are effectively operating various programs and are held accountable for taxpayer dollars;
• Adequately monitor and resolve inappropriate EBT activity, determining periodically if recipients still reside in Pennsylvania;
• Remove EBT card access to ATMs and point-of-sale card readers that are located in establishments deemed inconsistent with the intent of the social service programs.

Auditor General Jack Wagner is responsible for ensuring that all state money is spent legally and properly.  He is the commonwealth's elected independent fiscal watchdog, conducting financial audits, performance audits and special investigations.  The Department of the Auditor General conducts thousands of audits each year.  To learn more about the Department of the Auditor General, taxpayers are encouraged to visit the department's website at www.auditorgen.state.pa.us.

SOURCE Pennsylvania Department of the Auditor General