IG: Flood food stamp overpayments might have totaled $10 million

COLUMBIA — Overpayments, including due to fraud, for flood-related food stamp benefits last year may have totaled more than $10 million and included some state Department of Social Services workers who filed for benefits, according to a report by State Inspector General Patrick Maley.

But Maley concluded that DSS was not at fault for the overpayments and that federal guidelines do not require verification of qualifying disaster information provided by applicants.

Lawmakers had been suspicious of fraud in some locations, especially Greenville, where more than 12,000 applied for one-time Disaster Supplemental Nutrition Assistance Program, or D-SNAP, benefits but only 200 applied for Federal Emergency Management Agency aid related to last October's floods.

"The state should be fully aware the low D-SNAP application management controls should not be relied upon to prevent applicants claiming a fraudulent qualifying disaster event in lesser hard hit approved disaster areas," the report concludes. "This may have been the case in Greenville and Spartanburg Counties, which clearly had proportionately less disaster damage than other disaster declared counties as indicated by FEMA reporting."

An audit of flood-related food stamp benefits awarded in 24 South Carolina counties last year found 68 cases of fraud in Greenville County, DSS disclosed in May.

In fact, according to DSS, nearly one out of every four fraud cases it discovered in an audit was from Greenville County.

DSS conducted an audit of 9,029 applications statewide, weighted more heavily in counties like Greenville that had less flood damage, and found 297 that were fraudulent, DSS said in May.

The 68 in Greenville owed a total of $32,373 and were asked to pay the benefits back, according to DSS.

In total, according to Maley's report, 304,365 South Carolina households received $97.2 million in food stamp benefits related to the flood, including $20.7 million given to 124,777 households who received enhanced benefits because they were existing SNAP recipients. The focus of the report was on those who applied for disaster food stamp benefits.

The report estimates that if the DSS sample findings were extrapolated to the entire D-SNAP population, the total overpayment would be $10.4 million, including $2.8 million due to fraud and the rest due to errors by applicants or the agency.

According to the report, 259 DSS workers also filed for D-SNAP benefits from the flood and the claims were audited. In 50 claims, the report found, there were overpayments, including 16 cases in which there was fraud. The percentage of claims filed by DSS workers resulting in overpayments was 19 percent, higher than the 13 percent for the rest of the D-SNAP population.

The report found that one reason is that auditors had access to information about the workers and their income.

To qualify, all applicants for the food stamp benefits were required to have losses from the flood such as property, income or disaster-related expenses. The benefits also were offered to those below certain incomes.

But Maley found that the federal government, in an effort to lighten administrative work and to be sensitive to the plight of those in a disaster, allowed applicants to self-report the qualifying information and did not require them to submit proof.

"Neither the federal nor state governments should apologize for the necessity of using a low management control environment to disburse needed funds to low income citizens for food in the aftermath of a crisis," the report states.

However, the report suggested that in future disasters, state officials could require verifications and information that could be audited later to deter fraud.

DSS, in its official response to the report, agreed with the findings.

"As noted in the report, DSS was operating in the aftermath of a disaster," DSS Director Susan Alford wrote. "The agency's goal was to disburse needed benefits to citizens in an expedient manner while complying with federal guidelines. However, DSS will continue to identify and implement procedural improvements in the event of future disasters."

The agency on Wednesday addressed the issue of overpayments, fraud involving some of its employees.

"Agency employees are not precluded from applying for or receiving DSNAP, or any other federal public assistance program," DSS said in a statement.  "DSS is one of the largest agencies in South Carolina, with offices in all 46 counties.  Of the 179,588 DSNAP applications approved, 259 or 0.14% were from individuals employed by the Department."

In the Midlands, which suffered some of the most extensive flood damage, DSNAP approvals in Richland, Lexington and Sumter counties were about 1.3 times the number of FEMA flood aid registrations. In Greenville County, however, which saw comparatively little flood damaged, DSNAP approvals were more then 50 times the number of FEMA flood registrations. Just 200 in Greenville County applied for FEMA flood aid, but 12,741 applied for disaster food benefits and 10,926 were approved. In Spartanburg County, 200 registered with FEMA, but 9,389 applied for disaster food benefits, and 7,471 were approved.

The one-time benefits, paid for and regulated by the federal government, are based on the number in each household.  A family of two, for instance, would receive $357, while a household of three would receive $511 and a household with five would get $771.

Applicants, according to DSS, were asked at the time of filling out the application to show proof of identity, address and income, as well as proof of unreimbursed expenses or lost income.

Each applicant was interviewed by a DSS worker, had to sign the application and was cautioned against providing false information.

Approved applicants were given debit cards on site that are loaded with funds within a week, DSS said.