Food stamps at farmers' markets: invitation for fraud?

05/14/2012 01:46:00 PM
Tom Karst

National Editor Tom KarstOn the face of it, expanding food stamp benefits to farmers' markets seems like a winning idea. You are encouraging the purchase of local foods, and food stamp participants have another avenue to purchase whole, healthful fruits and vegetables.

From The Packer's coverage:

Agriculture Deputy Secretary Kathleen Merrigan said the department plans to broaden the use of wireless technology in farmers’ markets currently not able to participate in the Supplemental Nutrition Assistance Program (food stamps).

“SNAP participation at farmers’ markets helps provide fresh fruit and vegetables to families and expands the customer base for local farmers — a win-win for agriculture and local communities,” Merrigan said in a news release.

The funding provided by the 2012 Consolidated and Further Continuing Appropriations Act provides funds for states to provide wireless transaction equipment to farmers’ markets currently not part of SNAP.

Of the more than 7,000 farmers’ markets in the U.S., the agency said about 1,500 use wireless transaction technology.

Since 2008, the agency said SNAP expenditures at farmers’ markets have grown by 400%.

TK: How does the wireless EBT system typically work? This coverage from Virginia describes a common setup.

The Abingdon Farmers Market was a pioneer in the state in setting up the kind of SNAP payment system commonly used now. It allows SNAP benefit recipients to swipe their benefits card at a central market terminal to deduct the amount they expect to spend that day. They receive tokens equal to that amount, which they use to pay the vendors.

The vendors are then reimbursed by the market for the tokens collected.

 

TK: That is all well and good. But after reading about the latest example of food stamp fraud on the USDA's Office of Inspector General website, I have to wonder if expanding acceptance of electronic benefit transfer cards to dozens more farmers markets is another invitation for abuse.

From that story:

In 1998, the U.S. Department of Agriculture (“USDA”) authorized Stryker Avenue Market to accept food stamps, and Ansari affirmed that he had attended retailer orientation and understood the rules regarding the federal food stamp program. Each individual who receives SNAP benefits is issued an electronic benefit transfer (“EBT”) card, which contains a monthly allocated benefit amount that can be used at authorized retailers. The USDA then reimburses those retailers for the benefit amounts redeemed. Only eligible food items may be acquired with food stamps, and some items, such as alcoholic beverages, tobacco products, and cell phone minutes, are strictly prohibited. Moreover, food stamps may not be redeemed for cash.

The USDA-Office of Inspector General (“USDA-OIG”) began investigating Stryker Avenue in 2008. On numerous occasions, Ansari admittedly exchanged SNAP benefits for cash or ineligible items. For example, on July 16, 2008, Ansari swiped a person’s SNAP EBT card for $401.12 and provided that person with $200 in cash. Then, on January 7, 2010, Ansari swiped another person’s card for $131.86 and provided that person $100 in cash. According to a law enforcement affidavit filed in the case, between 2004 and 2009, the average annual food stamp redemption for a similarly sized store in Minnesota was approximately $322,793. In contrast, during that same period, Stryker’s annual redemptions totaled approximately $3.1 million.

 

TK: So this retail store may have been corrupt for years, but the USDA only was able to prosecute it ten years after it was authorized. And fraud from one retailer totaling $3.1 million in five years: mind-boggling!

As much as we assign a "halo" for local foods in general and farmers' markets in particular, the agency should carefully consider the fraud prevention plan in place for each market.

After all, it is not as if being a merchant at a farmers' market absolves one from the temptation to defraud. Don't we recall that some merchants at an LA farmers' market have been known to peddle fruits and vegetables from other states as "home grown" or "local." One Kansas farmers' market was hit with allegations of price-fixing in the way the rules of the market are set for vendors.

With the kind of low-tech feel of farmers' markets, I found it hard to believe that all vendors will be scrupulous. I wonder what kind of "record-keeping" provisions are part of the token exchange system; not much more than a scribble in a spiral notebook, I'd wager.

It will only take the "weakest link"  - a vendor that exchanges cash, not cucumbers for tokens  - for the system to go awry. All of a sudden, the line of customers at that crooked vendor will include more than suburban moms with kids in tow.

In its rush to promote local foods, the USDA must pause to consider how to prevent the opportunity for fraud and abuse of taxpayer money. We won't tolerate being disillusioned with yet another great American institution.



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Jeff Genitempo    
Dakkas  |  May, 18, 2012 at 02:39 PM

By your appearance you don't look like you have been on Food Stamps. A few bad apples does not spoil the bushel.

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