Inquiry Into Early Detection of Welfare Fraud

Inform the applicant of what information is needed to determine eligibility and why that information is needed.

Review the rights and responsibilities for the program with the applicant.

Explain to the applicant their responsibility to promptly report correct and complete information to the EW regarding any change in status or income.

Document the applicant’s level of understanding of their reporting responsibilities.

Advise the applicant of the criminal penalties for making false statements or failing to report information which might affect eligibility. The Intake Investigation Referral process is known as Fraud Early Detection (FRED); its primary intent is to prevent fraud before it happens, but it may also reduce the number of overpayment calculations and collections. The EW refers a case to FRED when a fraud alert appears in the case file or the information provided by the applicant is clearly inconsistent or in conflict with other information known to the agency and the EW is unable to resolve this inconsistency or conflict with an explanation from the client or a third party contact. A FRED referral is required in the following situations: • The father is unknown for any of the children for whom aid is requested. • The whereabouts of any of the absent parents is unknown. 3 • The applicant has not cooperated at any time in the past with the DA’s Family Support Division. • The absent parent’s child was conceived while the family was on CalWORKS. • Identification provided by the applicant appears to be false. The California CDSS Manual, Section 20-007.21, states that “a Special Investigative Unit (SIU) shall be established and organized for the purpose of investigating suspected welfare fraud and suspected violations of law in connection with matters for which [County Welfare Department] CWD has responsibility. The SIU shall be a separate organization, independent of organizations performing eligibility and benefit determination functions.” Under Authority and Responsibility, “the SIU shall investigate any activity, particularly during intake, which may constitute welfare fraud and have access to all CWD files, records, and personnel relevant to the investigations they conduct.” Minimum personnel standards require that each supervisor and investigator be a peace officer. Each of California’s 58 counties can decide where to assign responsibility for their SIUs. According to the State Fraud Investigation Report (January—March 2003), Special Investigative Units (SIU) are located in county welfare departments (27), district attorney offices (20), a cooperative between welfare departments and DA offices (9) and sheriff offices (2). In July 1993, in an effort to improve services, the County SSA transferred the SIU investigative responsibility for welfare fraud to the DA. A plan of cooperation was established that included the transfer of existing SIU personnel to the DA’s office. The merging of the SIU staff and a number of DA investigators created the Public Assistance Fraud Division (PAFD). PAFD is comprised of three investigative units–FRED, General Fraud, and the Income and Eligibility Verification System (IEVS). FRED provides early interaction with questionable new assistance applications to determine fraud before the applicant si granted any type of benefits; General Fraud investigates complex fraud cases which require more investigation, and IEVS matches applicant/beneficiary names and social security numbers contained in various state and federal welfare files with state employment records. In FY 2002-2003, the PAFD received 2,554 fraud referrals. Approximately 95% of fraud referrals are from SS—the remaining 5% came from a variety of sources, such as the Santa Clara County Housing Authority, community complaints, local law enforcement, and other governmental agencies. The state tracks by county the percentage of applicants that are referred for investigation of potential welfare fraud. The 1998-99 Los Angeles County Civil Grand Jury requested an audit of their Department of Social Service fraud investigation rate—at the time, 5% compared to a median rate of 13.5% for other southern California counties, and a statewide average of 7.9%. The Los Angeles County Grand Jury’s ensuing report stated there was no reason to assume that the rate of case referrals should be lower in Los Angeles County than elsewhere. The report concluded: “with proper protocols and staff training, the investigation referral rate should mirror that found in other comparable counties or the statewide average.” 4 Comparative statistics from the CDSS 1st Quarter Report, January—March 2003 (Appendix A) shows that statewide 15% of applicants were referred to FRED. The County had approximately half the applicants for CalWORKS (6,224) as San Diego County (10,693); however, the County referred only 269 (4%) of their applicants to FRED while San Diego County referred 4,115 (38%). Evidence of fraud sustained (proven to be true) totaled 15,303 (36%) statewide, 232 (50%) in the County, and 1,517 (32%) in San Diego County. Increasing the number of referrals for investigation will result in identifying a higher number of fraudulent applications. Detecting fraud earlier, at the application stage, makes it easier to prevent or recover overpayments than after benefits are issued and cases are closed. For example, the County had 6,224 applicants in the first quarter of 2003—at a 4% rate, about 269 were referred. However, using the 15% state referral rate, about 934 would have been referred by the County. Using San Diego’s 38% rate, the number would have been 2,365 or nine times as many. If we apply the San Diego lower fraud sustained rate of 32% (as opposed to 50% in the County), about three times as many applicants would be screened out. At a meeting with the Grand Jury, the Director of SSA stated that his department purposely does not refer large numbers of applicants to investigations like other counties, but said that other counties substantiate less fraud. He further explained that the department did spot check visits to verify information. In interviews with SSA department members, the philosophy was articulated that the preference is to give the benefit of the doubt in awarding benefits to prevent hardship to children. The County SIU prepared a report estimating how much money was saved by FRED in fiscal year 2002-2003. Information and averages were based on data from the Social Services Agency (see Appendix B). According to the County Welfare Fraud Case Issuance Statement for the year 2002, over $1 million dollars, representing CalWORKS overpayments, were paid on 157 cases. San Diego County has been using a more aggressive approach to fraud prevention and detection since 1997. That approach has been designated as Project 100 (P-100). As part of San Diego’s eligibility verification process for CalWORKS applicants, even if there is no obvious reason for denial, the PAFD investigator makes a home visit to the applicant’s address and a voluntary walk-through of the applicant’s residence is requested. The investigator then reports his findings to the Eligibility Worker (EW) for the EW to evaluate the information and determine eligibility. If the information obtained by the investigator adversely affects CalWORKS, the EW sends out a Notice Of Action. If the applicant refuses to cooperate with the investigator’s interview (except for the walk-through), the investigator notifies the EW regarding the applicant’s refusal to cooperate and the EW closes the case. If an applicant wishes to withdraw his request for aid, the investigator includes that information in his response to the EW and it is the EW’s responsibility to re-contact the applicant to determine if he/she wishes to sign a withdrawal form. Finding I Santa Clara County has one of the lowest FRED referral rates in the state, which leads to a greater number of fraud cases not being detected, thus resulting in overpayment of benefits. Higher referral rates to FRED statewide result in a higher total number of sustained fraud cases. Savings from a greater denial of unlawful benefits could amount to millions of federal, state and county dollars.

Santa Clara County has one of the lowest FRED referral rates in the state, which leads to a greater number of fraud cases not being detected, thus resulting in overpayment of benefits. Higher referral rates to FRED statewide result in a higher total number of sustained fraud cases. Savings from a greater denial of unlawful benefits could amount to millions of federal, state and county dollars.