AUDIT: EBT cards being used to gamble, prohibited locations going undetected

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Electronic benefit transfer (EBT) cards are supposed to help people buy food. Also known as Food Stamps or SNAP, the welfare program was not created for the purpose of funding a day at the casino to play Blackjack or 5-card poker. However, some people are now using their EBT cards to gamble at a New York area casino.

After completing a comprehensive audit in July to determine how EBT cards were being used in the state of New York, the Office of the State Comptroller found food stamp recipients were able to use their EBT cards at the Turning Stone Resort Casino, among other prohibited locations throughout the state.

The audit concluded that during a 24-month period of time, at least seven welfare recipients had 20 or more transactions at the native Indian-run casino. In one case, a single EBT card holder conducted more than 70 transactions totaling approximately $3,360.

According to the New York State Office of the State Comptroller, recipients can use EBT cards to make purchases or withdraw cash from a portion of their monthly benefits at participating ATMs and point-of-sale terminals throughout the state.

However, the federal Middle-Class Tax Relief and Job Creation Act of 2012 requires states to maintain policies and practices to prevent Temporary Assistance for Needy Families (TANF) funding from being used in any EBT transaction at a liquor store, gaming establishment or adult-oriented establishment in which performers disrobe or perform in an unclothed state for entertainment.

As for Turning Stone Casino, officials from the resort claim there are 18 ATMs on the premises, two of which are off the gaming floor and operated by a private bank. The other 16, which are on the gaming floor, are controlled by the Nation, said Joel Barkin, vice president of communications for the Oneida Indian Nation. Barkin noted that the casino has 4.5 million visitors each year. According to the casino, the two ATMs where the state comptroller found violations are the machines operated by a private bank.

The NY State law governing EBT usage does not apply on Oneida Indian Nation lands.

As for the audit, according to the state comptroller, approximately 37 million transactions, totaling about $1.9 billion, were made from Jan. 1, 2014, to March 18, 2016, in the state of New York. This equates to an average of 1.4 million EBT transactions per month.

The comptroller’s audit found 183 potentially prohibited locations. At those locations alone, there were 3,483 EBT transactions totaling more than $250,000.

The audit also found that 90 percent of a sample of 100 locations throughout the state were prohibited locations.

Keep in mind, the state agency responsible for monitoring the EBT program is the Office of Temporary and Disability Assistance. The Office receives federal funds under the TANF program to provide benefits and services, and delivers payments from this and other assistance programs (e.g., Supplemental Nutrition Assistance Program, or SNAP) through electronic benefit transfer (EBT) cards.

The audit found that during the two-year period between March 1, 2014, and March 18, 2016, the Office identified 217 transactions, totaling $12,876, by 71 potentially prohibited locations. According to the audit, the Office’s location-focused monitoring has been successful in identifying new potentially-prohibited locations. However, due to its limited scope, such monitoring does not identify existing prohibited locations that continue to accept EBT transactions.

The audit states: “The majority of the improper transactions at potentially prohibited locations were mostly unidentified and unaddressed by the Office. Of the 3,483 transactions our analysis identified, the Office had identified only 197 (5.7 percent) totaling $11,628. Further, of the 183 potentially prohibited locations, 71 (39 percent) were, prior to the transactions, identified by the Office as a potentially prohibited location.”  

The audit continues: “To test the accuracy of our findings, we conducted unannounced visits to a judgmentally selected sample of 106 potentially prohibited locations from a list of 189 potentially prohibited locations that we initially identified from our transaction-focused analysis of all EBT cash transactions. We did not identify ourselves as Office of the State Comptroller auditors during these visits. Six locations (6 percent) had closed or moved since the transaction. Of the remaining 100 locations, we verified that 90 (90 percent) were, in fact, prohibited locations.

We also found the following:

• Two locations advertised the acceptance of EBT cards on their ATMs.
• Three locations were willing to allow a point of sale EBT transaction in spite of the law restricting this activity.
• When asked if they accept EBT cards, two locations were unsure, and a third location suggested using the EBT card in the ATM located on the premises. Subsequent to our unannounced visits, Gaming provided us with the addresses of prohibited locations under its authority. We ran these addresses against the EBT cash transaction data and identified 652 additional transactions totaling $61,066 from five retailers.

In short, the EBT program is an absolute mess.

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