bargain. there are numbers of ways this happens. we've seen different schemes over the years where retailers get creative about shopping the card. >> the people with food stamps, do they tend to try to commit fraud in other government programs, like section 8 housing? >> i don't believe we have any data on that. i will say we do on occasion do joint investigations with other government agencies like hhs, which manages medicare and medicaid program. sometimes there will be recipients involved in all of those programs. >> how much money could a store owner who traffic in food stamps mikely make illegally? >> i think you'd want to look at it on a per benefit basis. you can range. there are some very small retailers who in the context of

their business make thousands of dollars. there may be other larger retailers or smaller ones who engage in multiple transactions who can benefit by hundreds of thousands of dollars or even millions. some of our investigative results will show restitution sentences that can range from hundreds of thousands to millions. >> okay. just so we kind of know if there are citizen watch dogs and people out there looking for this type of problem, can you give us the example of the most elaborate scam involving store owners your office has investigated? >> well, i think we certainly have a number of cases going on. most recently we've seen situations where there have been runner employed who will take cards from recipients and take them to many different retailers and swipe those cards to get benefits. there will be a group of retailers who work together to

do this. there's very complicated schemes there. >> miss faulkner, you probably also have seen this type of thing. could you share what one of the most egregious fraud cases you're aware of. when that happens, do you see children deprived when their guardians engage in s.n.a.p. fraud? >> i think any time there's fraud there are children involved especially when it relates to the s.n.a.p. program. what i'd like to share with you is a more sophisticated trend and i think inspector fong touched on it. in s.n.a.p., a recipient will go to a restaurant or bar, a place that would not accept the cards. they would do there, the restaurant or bar would go to the grocery store and buy $200 worth of groceries for the bar restaurant and give the recipient half, 75%, something off the edt card. it cuts out, you never really

see the bar restaurant transaction. what you see is the recipient using to buy $200 worth of groceries at this particular grocery store. that's a little hard to track. being stricter on retailers will help this problem. you cut out the restaurant being used to get the money. you see that in pennsylvania sometimes. >> i see my time has expired. thank you all for what you do to make sure those people in need get the food they need. i yield back. >> chair thanks the gentleman from tennessee and recognizes the gentle lady mrs. spear. >> thank you, mr. chairman. i want to compliment the chair of this committee in recognizing the important funk we have to look at government programs and evaluate the fraud. having said that, i want to compliment everyone on the panel. i think you have a 98% grade.

a 98% grade is something we should be applauding. a 1% fraud rate is just remarkable. i'm very impressed by what you're doing. here is my question, are we spending more with the budgets for fraud detection and iag than we're generating in restitution or repayments? yes, inspector general fong. >> i'll be happy to comment on that. i will say our budget in the ig's office is around $85 million a year, and we bring in, on average, $14 or $15 for every dollar appropriated to us. >> so you're valuable in what you're doing. here is my concern. there has been a recommendation i think by the ig that you review retailer applications for

criminal records. it makes a lot of sense. why aren't you doing it? >> thank you very much. we have received that recommendation that we rely on something called the ncic, national crime information center data. avis former director and i used that system through the state police in the states i was in. one has to be a law enforcement agency in order to access those data. we can't do it as the f & s. the oigf it had the resources, it could possibly do so. we're not allowed to -- you have to be a law enforcement agency. >> all right. i understand what you're saying under-secretary. so then this is to general fong then. how would you suggest we review the criminal records then? what do we need to do to accomplish that? will it give us enough bang for the buck? if we invest in doing that, will we save a significant amount so

it would be worth our while to do it? >> that's a very complex question. the under-secretary is right, we have been back and forth on this issue as to the best way to get criminal background information. i think right now the application form has been revised to require a certification under penalty of criminal prosecution, and i think that's a very kbogood mov. i think we continue our discussions on this. right now we do not have the authority as the ig's office to run these checks for this purpose. we will need further consultation. >> we're able i know in california to do background checks for child care providers. i can't believe the federal government, as talented as it is, cannot find a way to create a means by which this background check can take place. i would encourage the committee to pursue this and find a way to achieve that.

the other issue i wanted to draw attention to was this issue of suspension and debarment. ands it there were 600 wholesalers and retailers convicted but none of them have been suspended or debarred. the rational for not doing this is that it's costly. well, you know, democracy is costly. i don't think wi can use the argument that it's costly. if we have evidence of convictions, and these retailers have violated the laws and we don't debar them, then shame on us. anyone want to respond to that? >> if i can answer that, the preamble to do new regulations on s.n.a.p. precludes wick because of statutory language that provides for statutory disqualification. in every day english let me say we rely on our taking owners of

corporate groups out of the program. as i mentioned earlier in my testimony we've been negotiating with the general services administration to have these folks listed on the listing that they operate where people who are permanently barred from doing work with the government, they will now be listed on this list that goes to all federal agencies. in our view will achieve what debarment is intended to but allow us to take them out without extended due process hearings that drag this out on and on and allow people to stay in the program during that time. >> all right. my time that ha expired. thank you, mr. chairman. >> thank the gentle lady. the chair will now recognize mr. meehan. >> thank you, mr. chairman. you sit well in that seat. i'm very appreciative of all of

the panel for the work that you do, the significantly important work that you do. i want to attach myself to the comments of the doctor earlier in our shared interest, first and most importantly delivering these services to those in need. to the steextent we're able to effectively root out the fraud, more is available for those purposes. miss faulkner, i notice there was some testimony, i did want to correct the record to the best of my understanding, there was some testimony today about the pennsylvania administration's guidelines with regard to point at which there would be original begins of ability. there was a proposal. to the best of my understanding, there was collaboration on the part of the governor's office and they have made a significant change with regard to that guide line so that it's far more

realistic. is that accurate? >> yes. what i'd like to say, been referring to the asset test, which was always in place in pennsylvania until 2008. but it's apples and oranges. the acid test is something different. yes, the governor reinstated it and increased the threshold to $9,000 in -- and $5,500. it has been increased, has always been in place. it's apples and oranges to the fraud we're talking about today. >> i wanted to make sure. i want to express my deep appreciation in a short time you've developed a good reputation for the work you're doing in that office. >> thank you. >> i'm particularly interested for the work relating to this concept, between 8 and 15% of the fraud is associated with trafficking. it would seem to me this is a choke point, that we would really be able to work on. now, is there some things you do that you see characteristics that take place when there is

trafficking that help you to identify those that may be the most suspect? >> what we've been doing in pennsylvania is we have a dedicated unit. we have fraud, but we have osd, which is really a unit that focuses on s.n.a.p. what we find in pennsylvania is that's been growing of the fraud hasn't been reducing. so we have worked with federal and local d.a.'s offices to try to reduce what's going on with the retailers and recipients. what we find is that once the federal government determines who the real -- these stores are, we then come in and tell them who the recipients are in order to close the loop. the recipient is the one that starts the ball rolling in this. >> it would seem to suggest if you're seeing an increase, that is one of the -- that's contrary to the important progress that we've been able to make through the electronic process. you've given testimony right now

about earlier that creative criminals can find ways around the system. are you looking for patterns and other kinds of things that help us get to those? i'm particularly interested in the retailers because they are the ones facilitating the ability. >> i'm sorry to interrupt. one of the things we did notice with the realtors is that they would have whole dollar amounts. you would go to the store and see $100 used. that's one of the things they used to determine if this could be some type of fraud. we do follow that. people going to the same stores all the time. those are just indicators. they are not always determinative. we look at those things to see if trafficking is occurring there. we have, like i said, a small unit in the office right now, supervisor and three people working on this entirely. we are hoping to expand it more. that's what we see in pennsylvania, that there's a need to investigate this more.

i can't talk about the federal government or other states but in pennsylvania we see a need -- >> do states work with other states so that while you're looking at patterns within your own state, are you able to check with new jersey or delaware or maryland to determine whether you're watching your efforts to see if there's patterns that exist among some of the same individuals? >> i think the concern is i did reach out to new jersey. they handle their s.n.a.p.s differently. every state is different. while i personally have done some reaching out, i haven't been able to connect in determining whether there are patterns in states. >> thank you. as a former prosecutor, i am sort of quite surprised by the concept that we aren't able to take the very simple information that's contained in the ncic, one of the fundamental databases we use oftentimes. i would really appreciate the work of you individuals to help us identify what we can do.

i would be delighted to work with the gentle lady to do what seems like a common thing. i would ask your sis answer in following up and submitting to us whatever recommendations you have that would make it easier. i once again applaud the work of each of you for the efforts that you do. thank you. >> i thank the former distinguished u.s. attorney mr. meehan and would now recognize the gentleman from norm, mr. townes. that you very much. let me begin with you, can you explain what kind of control system the s.n.a.p. programs uses to assure that people only truly eligible for s.n.a.p. are

receiving it. what do you have in place to detect it? >> thank you very much. as was mentioned at the outset i was state health and services director in three states. of all the federal and state benefit programs administered, the food nutrition service long preceding my time here puts a particular emphasis on what is referred to as quality control era meaning people need to be eligible for the program. they have to demonstrate their eligibility by virtue of pay stubs or other sources of information. also we have to make sure when i present myself i am who i say i am. that qc program, that error rate has gone from historically up in the 8 to 9% rate to below 4%. that has been achieved by encouraging states to use put pell databases. for example in the states i worked in, when somebody would

come in and apply we'd check against the labor department, irs, child support program list for new hires every state has to maintain. so security has something called the social security list, the u.s. department of health and human services has another list. the acronym of which is p.a.r.i.s. now some 47 states rely on that database alone. back in 2000 only 16 states used it. the office of the inspector general, among others, has urged us to make sure that states make use of these particular databases. so there are a variety of ways to assure, one, i am who i am. when i report my income, it is that which is truly income that is coming into my household. >> let me ask you this. how does the s.n.a.p. era

compare to other programs. >> i haven't tracked them lately but i think it's one of the best among federal state benefit programs. i know at a state level, governor's office, i know this directly, pay attention when the qc error rate is made known to each state. we do this individually. we punish the state that falls below certain minimums around qc error rates and reward states who do an outstanding job thain regard. >> let me ask you, miss fong, you mentioned the amount of indictments. you know, my question to you would be what is the conviction rate? sometimes we read about indictments and that's all we hear. sometimes people get all excited because there's an indictment but no conviction. what is your conviction rate? >> i'll be happy to provide that for the record but my recollection of the data is we have a very high conviction

rate. it's a significant percentage of our indictments. >> the reason i sort of raise this question, i was thinking in terms of the question nat gental woman from california, it's a piece of budget you bring in, not a part of your budget that would also be a certain amount. i'm not sure how much. i was sort of looking to see in terms of the profit involved here based on your budget, based on the amount you are actually retrieving. >> i'm just retrieving some data here. just to give you a general sense of it, in the last few years our monetary results in s.n.a.p. alone have been almost $30 million. i think i should just make sure i provide that for the record. our conviction rate is close to 50%. >> right. the reason i ask this, you know, i don't view this committee as one of those i gotcha

committees. i view it as a committee that's working to save the government money and make certain that people that are supposed to get service, that they get service and that we have an obligation and responsibility on this side of the aisle to work with you to try to make certain that that happens. i want you to know that's my reason for being on it for like 30 years. that's my purpose. i hope my purpose never changes. thank you very much, mr. chairman. >> real quick. mr. concannon, you said you punish the folks whose states have a bad error rate, how do you punish them. >> we sanction states both by we can recover, penalize them financially. we spend them letters, warning letters saying basically you're falling below a certain threshold. our goal obviously is to get that error rate down so we provide technical assistance and training, but we put them on

notice. over a period of five or so years, i think we've sanctioned some 17 states. i'll make sure i verify that, but that's what i recall. i know it can be a financial penal. we do pay attention to the performance of states because we know it affects the very consumers members have been asking about this morning. >> thank the gentleman. when this committee was looking at medicare or medicaid fraud, i require the hearing. there was outrage, appropriate outrage that the entities that engaged in the fraud were still doing business with the government. i think the gentleman to my right expressed appropriate outrage. my question, mr. fong is the same as mr. cummings was then. when you have recidivists, repeat offenders, what do we heed to change about the debarment process that is the default instead of

disqualification. disqualification is an insufficient penalty to me for recidivist offenders. >> i believe that the government suspension and debarment process is an effective process. and usda has implemented regulations. as a whole the department could do a better job of implementing that. i think there are concerns as the under-secretary expressed about timeliness and length of time. i think we need to engage in those discussions because my understanding is if you've got somebody convicted of a criminal felony that disqualification while it may be effective vis-a-vis the food stamp program, it's not effective for other government programs. if you've got a criminal conviction, it should be a pretty quick process because the conviction in and of itself is sufficient evidence to proceed. it should not take a long time to do this. maybe a month, two months.

>> let me say this. i distinctly remember spending four days in a courtroom prosecuting a lady for disturbing a school. and i spent three days in a courtroom prosecuting someone for throwing an ice tea cup at a d.e.a. agent. so resources and time should not be the only barometer by which we decide whether a case should be prosecuted or not or else we would never prosecute petty crimes. whatever needs to be changed in the process, i hope you'll give all of us that have expressed and interest in it a list so we can put a little more teeth into the punishments when people systemically defraud the government. i want to move ncic has arrests that don't result in convictions, pardonments, expungements, other information

law enforcement may have an interest in seeing but they are not convictions. but the remedy is very easy because schools do it and churches do it and after-school programs do it. just have one ncic trained operator on site and then redact the nonconvictions. the notion that we can't do background checks on people who want to do business with the government, people do them all the time for schools, churches, everyone does it. redact the information. go to a law enforcement agency that does track convictions. go to the court clerk's office. there's a way to get that information other than ncic. and if there needs to be an exception to ncic for government agencies that are looking at fraud, i can't speak for the gentleman from maryland but i'll be happy to do that and i don't think law enforcement would

resist is one bit. miss fong you mentioned a 50% conviction rate. i would have been run out of office if i had a 50% conviction rate and i don't think mr. cummings would have been hired as often as he was hired if he had one. that strikes me as a low conviction rate. is it because you're negotiating a civil instead of a criminal punishment? does the statute need to be changed? what needs to be done so we don't swing and miss half the time? >> let me take a look at that data. i want to make sure i get you the right percentage and i'll provide that for the record. when we do that we'll provide with you our insights on that. >> all right. my final question for you is this. if i wrote the numbers down right, you said there's 900 cases, 600 of which are against retailers.

i think your energy and efforts should be directed at retailers but not to the total exclusion to the individuals who are providing a market, if you will, for this kind of fraud. what do your numbers look like on prosecuting individuals who either sell their cards for cash or otherwise engage in fraudulent activity? >> let me just generally address the approach that we take on law enforcement. we focus our efforts on the retailers, because when we go to the u.s. attorneys offices for federal prosecutions, they have certain thresholds for prosecution which involve dollar amounts, et cetera. so the dollar amounts tend to be on the retailers side, which are much higher. when it appears there are recipients involved, which there usually are, they partner with the state prosecutors because those tend to be violations of the state and local laws.

so most effective are when we take resources to federal prosecutors state prosecutors work on the individual recipients and we can approach all of those as a global kind of approach. >> that sounds like a perfect marriage. you need witnesses against retailers and sometimes recipients make very good witnesses. with that the gentleman from massachusetts. >> thank you very much. this is exactly the type of oversight we need to be doing on programs. if we're going to have programs where we agree we need to reduce hunger and fraud can't be allowed if we're going to have public support behind it, this is a good thing for the community to be doing. in my district in massachusetts we had groups working very, very hard to try to reduce hunger. they have seen a 40% increase in people accessing soup kitchens and pantries. with the economy the way it is, it's been very, very difficult for them. massachusetts is the only state i'm aware of that actually that

has line item on this type of issue, mass emergency food assistance program. all my folks working hard on this, when they see a proposal 20% cut for s.n.a.p. program, it's panic. they want to make sure fraud isn't an issue as well but they want to make sure they have the resources. when i hear the numbers of 4% down to 1% on fraud, 20% cutting the budget, i understand why they are looking that way. we have over 15,000 people in our district that benefit from these programs. i guess the 35% of them have a household member over 60, 41% have a household members under 15, talking seniors and children. it's important we get this right. julie fontaine, who does open door, ansberg to beverly, they serve 2200 families, hunger, bootstraps, a lot of people working very hard on that. we need to know we're focusing,

this is a situation of fraud we have to do. i do make the note, this committee has a broader portfolio. on the subcommittee which i sit, we've been looking at contracts in afghanistan. i just noted on food service i've asked the subcommittee to have a hearing on that. we've asked defense logistics agency thought they were overpaying the food distributor in afghanistan $780 billion and asked for that money back. that's serious, serious money. we need to do it on this program. i'm impressed mr. concannon you're continually working on this and your numbers are keeping it down. we need to do it across the board. we can't allow it to happen. the focus here, you think you have it down below 4%, maybe as low as 1%. is that correct? you're trying to get the new permutations of how people might defraud. you have a new website. >> we have a new website set up a month ago. later in the spring will be promulgating regulations that

will increase financial responsibilities when a store is taken out of the program and sold to a new owner i've been interested in increasing financial responsibilities, it's a cost of doing business, flip the store. we continue to add layers. >> you had an issue with facebook and craigslist, how did you attack that. >> we did. we notified and that's what the inspector general was talking about new types of fraud, several examples that way recently. we've written to craigslist, some of the other social media sites but we've also amended our regulation that even the simple intent, expressed intent to sell benefits constitutes a violation. we consider that trafficking. you'll be out of the program. >> you've tried to increase fines for falsifying information, things of that nature? >> we have indeed. we have strengthened again requirements, look for a variety of, for example, tax.