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Ronald Reagan Presidential Library
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Collection: Reagan, Ronald: Gubernatorial Papers,
1966-74: Press Unit
Folder Title: [Welfare] - State Social Welfare Board -
Report on Welfare Fraud, July 1968
Box: P39
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STATE SOCIAL WELFARE BOARD
REPORT ON WELFARE FRAUD
OF THE STATE
ALIFORNIA
STATE OF CALIFORNIA
Department of Social Welfare
JULY 1968
STATE OF CALIFORNIA-HEALTH AND WELFARE AGENCY
RONALD REAGAN, Governor
DEPARTMENT OF SOCIAL WELFARE, 2415 FIRST AVENUE
STATE SOCIAL WELFARE BOARD
SACRAMENTO 95818
J. STEVE WILLIAMS, CHAIRMAN
CHARLES A. BOWERS
DR. WALTER W. DOLFINI
July 29, 1968
ROBERT E. MITCHELL
MRS. DOROTHY 0. NATLAND
MRS. ALEXANDER RIPLEY
ARTHUR R. TIRADO
SENATOR TOM CARRELL
SENATOR H. L. RICHARDSON
ASSEMBLYMAN JOHN BURTON
ASSEMBLYMAN JOHN G. VENEMAN
JACK W. THOMPSON, EXECUTIVE SECRETARY
The Honorable Ronald Reagan
Governor of California
State Capitol
Sacramento, California 95814
Dear Governor Reagan:
Transmitted herewith is the report of the State Social Welfare Board on the subject of welfare
fraud in California.
In response to the charge to the Board contained in your letter of July 11, 1967, we convened
five public hearings. Those who testified represented recipient organizations, county welfare
departments, district attorneys' offices, social workers organizations, public legal foundations
and schools of social work as well as individual recipients and other private citizens. The
transcripts of the testimony adduced at the hearings and the written statements submitted and
considered are available for reading by anyone interested.
The attached report includes a general discussion of the major points developed in the hearings.
A summary of our findings begins on page 18 and our recommendations begin on page 20.
There are methods other than public hearings which could be used to more accurately determine
the extent of fraud in welfare caseloads. One method would be the use of traveling audit groups
nonoriented to social welfare but skilled in fraud detection. The audit teams could make spot
checks of recipients' files throughout the state. This is not necessarily recommended by us but
is pointed out as a more accurate way of determining the true extent of fraud in public welfare
in California.
Welfare fraud is like an iceberg: the total extent of fraud cannot be calculated from the amount
now visible. As is the case with all other crime, much goes undetected. For a variety of
reasons some are not successfully prosecuted. Convictions for welfare fraud do not represent
an authoritative measure of the extent of that crime any more than income tax evasion convictions
or convictions for embezzlement reflect the true extent of the number of people cheating on their
income tax or embezzling from their employer. The incidence of welfare fraud convictions in
California in relation to the caseload, just as convictions for all other crime in relation to the
total population, is small. We were not furnished with any authoritative basis for comparison of
the proportions of each.
Like all other citizens, the vast majority of welfare recipients are decent honest people. Like
all other public servants, the vast majority of social workers and those who administer the highly
The Honorable Ronald Reagan
Page 2
July 29. 1968
complex welfare programs in this state, are hardworking, dedicated people. In carrying out
your basic objective of restoring public confidence in the administration of the welfare system
it is important that not only shall uniform policies and procedures be invoked that will assure
that, whatever its extent, fraud shall be effectively prevented, diligently detected and vigorously
prosecuted, but that, just as with the case of teenagers, the actions and conduct of a few should
not serve to cast down the many welfare recipients and workers in the eyes of their fellow citizens.
That is the objective of the recommendations presented on the pages following.
The Board wishes to express gratitude for the excellent cooperation received from members of the
Advisory Committee on Welfare Abuse as well as the many individuals who gave their time, knowl-
edge and experience on this subject.
We believe that the recommendations contained in this report should be implemented at the earliest
possible date.
Respectfully,
STATE SOCIAL WELFARE BOARD
I.Steve Williams
J. Steve Williams,
Chairman
Attachment
HUMAN RELATIONS AGENCY
FOR IMMEDIATE RELEASE
Sacramento, California
Contact: Spencer Williams
October 4, 1968
The following is the text of a letter from Human Relations Secretary
Spencer Williams to Governor Ronald Reagan in connection with the issuance of a
report by the State Social Welfare Board on welfare fraud:
"I have carefully reviewed the State Social Welfare Board's report
on welfare fraud which I have transmitted to you. The opinion contained in the
report that the true extent of welfare fraud in California has never been
accurately determined is a concern I share with the Board. It is imperative that
we find out.
"I therefore recommend that appropriate steps--both administrative
and legislative--be taken to:
a) determine the extent of welfare fraud in this State;
b) identify individuals suspected of fraud; and,
c) continue to encourage prosecution of these violators by the
district attorneys in the counties where the frauds are found to be committed.
"Some of the procedures contained in this report, which I believe
are necessary to accomplish these objectives, can be achieved by administrative
action. Others will require state and federal legislation. Some will require
appropriations.
"Among the steps listed in the report with which I concur are:
Establishment of traveling audit teams skilled in fraud
detection to help determine the true extent of welfare fraud in
California.
*
Development of an automated, centralized registry of all welfare
recipients. The registry would immediately detect persons who
received aid in two or more counties at the same time.
*
The negotiation of changes in existing federal guidelines so that
a protective payment plan can be developed for children of
fraudulent welfare payment recipients.
*
Stepped-up administrative action and legislative proposals by the
State Department of Social Welfare to simplify regulations,
standardize eligibility requirements and remove as much detail
as possible from published regulations.
-2-
* Greater emphasis on the social worker's role in preventing fraud
by advising individuals on welfare of the necessity of filing
accurate claims and immediately reporting any changes in their
status which would affect the amount of payments to which they
are legally entitled.
"Through the implementation of these and other steps which may be
required, I believe we can better carry out this administration's commitment to
the people of California that those truly in need will receive the assistance to
which they are legally entitled and those cheating the taxpayers by committing
welfare fraud will be detected and prosecuted under the laws of this State."
###
STATE SOCIAL WELFARE BOARD
REPORT ON WELFARE FRAUD
JULY 1968
TABLEO.CONTS
Page
The Governor's Charge
1
The State Social Welfare Board
3
Advisory Committee on Welfare Abuse
3
Study Plan
4
Roster of Witnesses
5
Definition of Fraud.
10
Forms of Fraud
10
Discussion of Major Factors Related to Welfare Fraud
11
Summary
18
Recommendations
20
State of California
OF
GOVERNOR'S OFFICE
SACRAMENTO 95814
RONALD REAGAN
GOVERNOR
July 11, 1967
Mr. Nelson A. Howard, Chairman
State Social Welfare Board
Department of Social Welfare
2415 First Avenue
Sacramento, California
Dear Chairman Howard:
Please consider this letter my formal charge to you and the members of the
State Social Welfare Board, as you assume your duties as the advisory body
to the Governor and the State Director of Social Welfare.
The principal public welfare concern to which I am now asking the Board to
address itself is the abuse of the public assistance program in California.
We are confronted with separate and distinct bodies of opinion as to the magni-
tude of welfare cheating and abuse of the program. One opinion is that cheating
is widespread among the 1, 200, 000 persons receiving cash subsistence grants
in California. The other opinion is that there is only a minimal amount of
cheating.
As long as this divisive disagreement exists, the public assistance program is
hampered in fulfilling its necessary role of aiding the needy. Until the general
public is given the facts, and all of them, this disagreement will continue. Thus,
to clear the air of this disagreement, I request that you accept the heavy responsi-
bility of gathering the facts about fraud and welfare chiseling, to check out and
weigh carefully the evidence and to report to me the full picture of the situation
as you find it. I am sure there is no need to caution against giving weight to
unsupported hearsay, rumors, claims and charges that cannot be documented.
You and I want no witch hunts. We need a thorough gathering and sifting of
factual evidence upon which valid conclusions can be based. I further ask that
in this endeavor, you work closely with a standing committee which will be
designated by the Administrator of the Health and Welfare Agency.
Yesterday, you attended the Governor's conference on the "The Role of the
Legal Profession in Public Welfare, II and I urge that you give due consideration
-1-
Mr. Nelson A. Howard, Chairman
-2-
July 11, 1967
to the conclusions reached by the Conference as you prepare to assess the extent
of fraud in public welfare.
You are authorized to hold such public hearings at various locations around the
State to call witnesses and to do all other similar things necessary for a full
and effective study of this matter. I will appreciate your advising me as to the
date that I may expect to receive your report.
In order for the Board to function as strongly and effectively as possible in its
advisory responsibilities to the State Director, John C. Montgomery, I have
authorized him to augment and broaden this charge from time to time during
the months ahead. It is Mr. Montgomery's concept and mine that the "public
forum" role of the Board can be of great advisory value to him in carrying
out his administrative authority and the policy decisions that are his responsi-
bility.
Very truly yours,
Ramer Payan
RONALD REAGAN
Governor
-2-
THE STATE SOCIAL WELFARE BOARD
Mr. J. Steve Williams, Chairman
Mrs. Dorothy D. Natland
San Bernardino, California
Rolling Hills, California
(5/10/67 - present)
(6/27/68 - present)
Mr. Nelson A. Howard, Chairman
Mr. Robert E. Mitchell
Pasadena, California
Norwalk, California
(5/8/67 - 5/17/68)
(6/27/68 - present)
Mr. Raymond E. Lee
Senator H. L. Richardson
Beverly Hills, California
Pasadena, California
(5/4/67 - 5/23/68)
(9/18/67 - present)
Walter W. Dolfini, M.D.
Senator Tom Carrell
Eureka, California
San Fernando, California
(5/4/67 - present)
(4/4/67 - present)
Col. Charles A. Bowers
Assemblyman John Veneman
Sacramento, California
Modesto, California
(3/14/68 - present)
(10/9/63 - present)
Mrs. Alexander Ripley
Assemblyman John Burton
Los Angeles, California
San Francisco, California
(5/8/67 - present)
(9/8/67 - present)
Mr. Arthur R. Tirado
Mr. Jack W. Thompson
Fresno, California
Executive Secretary
(5/11/67 - present)
Sacramento, California
(2/19/68 - present)
Mrs. Estella Dooley
San Francisco, California
(5/5/67 - 3/14/68)
THE ADVISORY COMMITTEE ON WELFARE ABUSE
Mr. Edwin C. Steckman
Mr. Leslie J. Pryde
Welfare Investigator
Supervisor - Butte County
San Diego County
Gridley, California
San Diego, California
Mr. John C. Montgomery
Mr. Granville C. Peoples
Ex-Officio Member
Director
Director
Orange County Department of
State Department of Social
Social Welfare
Welfare
Santa Ana, California
Sacramento, California
Miss Mary M. O'Neill
Mr. James M. Shumway
Deputy Director
Ex-Officio Member
Los Angeles County Department of
Assistant Administrator
Public Social Services
Health and Welfare Agency
City of Commerce, California
Sacramento, California
Mr. Louis P. Bergna, Esq.
District Attorney
Santa Clara County
San Jose, California
-3-
STUDY PLAN
In an attempt to gain authoritative insight into the subject of
welfare fraud in California, this Board convened public hearings in five
locations in the State as follows:
January 12, 1968
Redding, California
January 26, 1968
San Bernardino, California
February 3, 1968
Fresno, California
February 16, 1968
San Francisco, California
March 1, 1968
Los Angeles, California
Invitations were extended via press releases, radio, television,
letters, and personal contacts to individuals and agencies throughout
the state to present evidence on the controversial subject of welfare
fraud. In addition to those who presented verbal testimony at the
hearings, a significant number of people submitted written testimony
but did not appear. Those who testified represented recipient organiza-
tions, county welfare departments, district attorneys' offices, social
workers organizations, public legal foundations and schools of social
work as well as individual recipients and other private citizens.
-4-
INDIVIDUALS WHO PRESENTED TESTIMONY AT HEARINGS
Mr. Harold Barnett, Northern Valley Chapter, National Association of Social
Workers, Redding, California
Mr. Oran Bollinger, Director, Imperial County Welfare Department, El Centro,
California
Mr. Ronald Born, Director, San Francisco County Department of Social
Services, San Francisco, California
Dr. Scott Briar, Associate Professor, School of Social Welfare, University
of California, Berkeley, California
Dr. Thomas Brigham, Associate Professor of Sociology, School of Social
Work, Fresno State College, Fresno, California
Mr. John Cartwright, Public Administrator, County of Fresno, Fresno,
California
Mr. Reed Clegg, Director, Fresno County Department of Public Welfare,
Fresno, California
Mr. Lynn D. Compton, Chief Deputy District Attorney, Los Angeles County,
Los Angeles, California
Mr. R. C. Currier, Los Angeles, California
Mr. William C. Daly, District Attorney, Fresno County, Fresno, California
Miss Frances S. Engel, President, San Bernardino-Riverside Chapter,
National Association of Social Workers, San Bernardino, California
Mrs. Alice Escalante, Member, Committee for the Rights of the Disabled,
Los Angeles, California
Dr. Frances Feldman, Associate Professor, School of Social Work, University
of Southern California, Los Angeles, California
Mr. William F. Ferroggiaro, Jr., District Attorney, Humboldt County,
Eureka, California
Mr. Marvin Freedman, Assistant Director, Los Angeles County Department
of Public Social Services, City of Commerce, California
Mr. Hilmi Fuad, Director, Tulare County Welfare Department, Visalia,
California
Mrs. Cherie A. Gaines, Chief Attorney, Appeals Unit, Legal Aid Society
of Alameda County, Oakland, California
Mr. L. Gibbons, Deputy District Attorney, Inyo County, Independence,
California
-5-
INDIVIDUALS WHO PRESENTED TESTIMONY AT HEARINGS (Cont.)
Mrs. Susan Goodfellow, Local 535, Social Workers' Union of Alameda County
Oakland, California
Mrs. Judi Graham, Yuba City, California
Mr. Louis Gray, Social Workers' Union #535, Santa Clara County, San Jose,
California
Dr. Charles Guzzetta, Associate Professor, School of Social Work, San Diego
State College, San Diego, California
Mr. Robert Hargrove, Deputy District Attorney, San Bernardino County,
San Bernardino, California
Mrs. Bernice Holson, Eligibility Screener, Alameda County Welfare Department,
Union Representative, Local 535, Social Workers' Union of Alameda County,
Oakland, California
Dr. Donald S. Howard, School of Social Welfare, University of California
at Los Angeles, Los Angeles, California
Mrs. Nancy A. Humphreys, Los Angeles Chapter, National Association of
Social Workers, Los Angeles, California
Mrs. Catherine Jermany, President, Los Angeles County Welfare Rights
Organization, Los Angeles, California
Mr. David C. Kelly, Director, Humboldt County Department of Public Welfare,
Eureka, California
Mrs. Helen Little, Chairman, Bay Area Welfare Rights Organization, San
Francisco, California
Mr. Cirilo Lopez, Madera County Welfare Rights Organization, Madera,
California
Mr. Roscoe Lyda, Director, San Bernardino County Welfare Department,
San Bernardino, California
Sister Rosemary Markham, Sisters of Social Service, Los Angeles, California
Mr. Henry Mesple, Director, Fresno County Farm Bureau, Fresno, California
Mr. John J. Morrill, Special Investigator, Shasta County Welfare Department,
Redding, California
Mr. Myron Moskovitz, Directing Attorney, California Rural Legal Assistance,
Marysville, California
Mr. Robert M. Nelson, Social Work Consultant, Project Headstart, Long Beach,
California
-6-
INDIVIDUALS WHO PRESENTED TESTIMONY AT HEARINGS (Cont.)
Mr. J. Botello, Farm Worker, Yuba City, California
Mrs. Ollie Payne, Community Worker, El Centro Office, California Rural
Legal Assistance, Brawley, California
Mr. Richard B. Peterson, Chief, Family Support Division, Fresno County
Department of Public Welfare, Fresno, California
Mrs. Molly Piontkowski, Chairman, Committee for the Rights of the Disabled,
Los Angeles, California
Mr. Peter C. Rank, Deputy District Attorney, Contra Costa County, Martinez,
California
Professor Wallace N. Rich, School of Social Work, Fresno State College,
Fresno, California
Lt. Dwayne Smith, Bureau of Investigations, District Attorney's Office,
Los Angeles County, Los Angeles, California
Mr. Lucian Vandegrift, District Attorney, Butte County, Oroville, California
Mrs. Esther Washington, President, San Bernardino Welfare Rights Organization,
San Bernardino, California
Mr. Albert L. Wells, Deputy District Attorney, San Diego County, San Diego,
California
Mrs. Mabel G. Wells, ACSW, Fresno, California
Mrs. Atleary Williams, Welfare Rights Organization, Fresno, California
Mr. Norman Yates, Executive Director, Apartment Association of Inland
Empire, Inc., San Bernardino, California
-7-
THOSE WHO SUBMITTED WRITTEN TESTIMONY BUT DID NOT APPEAR
Mrs. Kloh-Ann Amacher, Chairman, Public Social Services Commission of
Golden Gate Chapter, National Association of Social Workers, Richmond,
California
Mr. Steven Antler, Attorney, San Francisco Neighborhood Legal Assistance
Foundation, San Francisco, California
Mr. Stephen Arian, Attorney, San Francisco Neighborhood Legal Assistance
Foundation, San Francisco, California
Mr. Lloyd Breakey, Central California Chapter, National Association of
Social Workers, Fresno, California
The Honorable Willie Brown, Assemblyman, Eighteenth District, San Francisco,
California
Mrs. Mary L. Charles, President, California Social Workers Organization,
Santa Clara, California
Dr. Milton Chernin, Dean, School of Social Welfare, University of California,
Berkeley, California
Mrs. Kathleen Dohner, Social Worker, San Francisco County Department of
Social Services, San Francisco, California
Mrs. Charlie Harris, United People Arriba Welfare Rights, Santa Clara,
California
Mr. J. V. Henry, Madera Office, California Rural Legal Assistance, Madera,
California
Mr. James Karls, Bay Area Council of Social Work Organization, San Francisco,
California
Monsignor Roger Mahony, Director, Catholic Charities, Fresno, California
Mrs. Kristin Ockershauser, Legal Aid Foundation of Long Beach, Long Beach
California
Mr. John T. O'Neill, Executive Vice President, California Apartment Association,
Anaheim, California
Mr. Antonio Pacheco, Farm Worker, Yuba City, California
Mr. Norman Ribera, Fresno Realty Board, Fresno, California
Mr. Armando Rodriguez, Attorney, Madera Office, California Rural Legal
Assistance, Madera, California
Mrs. Deloras Shaw, Hawaiian Gardens Welfare Rights Organization, Hawaiian
Gardens, California
Mr. Keith Sorenson, District Attorney, San Mateo County, San Mateo, California
-8-
THOSE WHO SUBMITTED WRITTEN TESTIMONY BUT DID NOT APPEAR (Cont.)
Dr. Harry Specht, Associate Professor, School of Social Welfare, University
of California, Berkeley, California and First Vice President, Golden Gate
Chapter, National Association of Social Workers
Mrs. Emilia Telles, Community Worker, California Rural Legal Assistance,
Santa Rosa, California
Mr. Charles Ward, Director, Del Norte County Department of Public Welfare,
Crescent City, California
Paul Weinberger, D.S.W., Associate Professor and Coordinator of Research,
Department of Social Welfare, San Francisco State College, San Francisco,
California
-9-
DEFINITION OF FRAUD
In the course of the hearings, and in the review of the written
testimony, there were encountered a variety of definitions of welfare
fraud. We interpreted the Governor's Charge as being related to recipient
fraud. For the purpose of this report the definition of welfare fraud
as contained in Department of Social Welfare Bulletin #624 (Revised) will
be used. It is as follows:
Fraud by applicants for or recipients of public assistance exists
when the applicant or recipient has:
1. Knowingly and with intent to deceive or defraud, made a false
statement or representation to obtain aid, obtain a continuance
or increase of aid, or avoid a reduction of aid.
2. Knowingly and with intent to defraud, failed to disclose a fact,
which, if disclosed, could have resulted in denial, reduction
or discontinuance of aid.
3. Accepted aid knowing he is not entitled thereto, or accepted
any amount of aid knowing it is greater than the amount to
which he is entitled.
4. For the purpose of obtaining, continuing, or avoiding a reduc-
tion or denial of aid, made statements which he did not know
to be true with reckless disregard of the truth.
FORMS OF FRAUD
There exists a variety of ways in which an individual may fail to
report a situation or event or so misrepresent these occurrences as to
constitute a suspicion of fraud. By far, the two most prevalent are
unreported income and family composition. In Los Angeles County, for
example, the referrals to the district attorney's office for investiga-
tion revealed that about 55% of these cases were for unreported income,
about 40% on the basis of family composition, most of these being an
unreported man in the home, and about 5% miscellaneous.
Aside from unreported income and family composition, some of the
other more frequently misrepresented factors are:
1. Children Living Out of the Home
2. Reconciliation with Husband
3. Concealment of Husband
4. Social Security, Unemployment and Disability Benefits
5. Child Support Payments from an Absent Father
6. Allowable Expenses
7. Assets
8. Residency
9. Private Medical Benefits
10. Use of Medical Card by Another Person
-10-
DISCUSSION OF MAJOR FACTORS RELATED TO WELFARE FRAUD
When aid is obtained by fraudulent means a crime is committed. The
number of convictions for such crimes is not necessarily the measure of the
extent. The percentage of convictions of welfare recipients for fraud
reported in this state is relatively small in relation to the total caseload.
The amount of suspected fraud presently reported to the research sta-
tistical division of the State Department of Social Welfare is not neces-
sarily accurate. The lack of uniformity of methods utilized by the 58
counties in detecting and reporting cases of suspected fraud is one reason
for this.
In the course of the inquiries, testimony was offered on a variety
of factors directly or indirectly related to fraud in California welfare
programs. Much of this material was of a subjective nature. As an example
of the extreme viewpoints developed in the testimony, a representative of
one county testified, "This reasoning results in an estimate of 4000 cases
(of welfare fraud) in one year The representative of another county
testified, but for the past five years no actual case of fraud has
been discovered in Some of the major points brought out in the testi-
mony are outlined below.
State Department of Social Welfare
One of the many forms used in the AFDC application process is:
ABCDM 200 - Application for Public Social Services. On the back of this
form there is a section entitled "Important Notice to Public Assistance
Applicants. This section is designed to alert the applicant to the
necessity for reporting income, sales of property, etc. No mention is
made of the need to report changes in family composition although as
reported by Los Angeles County, 40% of the referrals to the district
attorney's various offices in that county stem from failure to report
such changes.
The activities of the county welfare departments, the special inves-
tigation units and the district attorneys' offices with respect to the
handling of suspected fraud cases is reported to the State Department of
Social Welfare each month. This information is the subject of a quarterly
report by the State Department of Social Welfare entitled "Recipient Fraud
Report
11
There has been some criticism that the Recipient Fraud Report does
not reflect the full scope of activity, particularly within the district
attorneys' offices, and that it does not take into account those cases in
which the district attorney received independent information directly from
the community on suspected fraud rather than through the usual channel
from the public welfare department. This statistical report, however, is
compiled from information gleaned from DPA Form 266.1 submitted each month
-11-
and based on data from the county welfare departments and district attorneys'
offices. Obviously, the quarterly statistical report from the State
Department of Social Welfare is only as reliable as the input data, and
those who would take exception to the report should make certain that the
monthly report from the county reflects the true timely and accurate
picture.
The reporting form has been amended to include a section wherein a
district attorney can report those cases in which he receives fraud tips
from the community.
The Board heard testimony to the effect that increased staffing in
local agency investigation sections would result in the ferreting out of
additional fraud. Various staffing standards were suggested.
The fixing of staffing standards for county welfare department
investigative units should be accomplished by the State Department of
Social Welfare in coordination with county agencies as a regulatory
requirement.
County Welfare Departments
Many counties are taking effective steps to free social workers for
more frequent and meaningful recipient contacts. This is an effort that
should be continued, encouraged and supported. As social workers are
freed from menial tasks and given more time to function in a capacity
consistent with their training and orientation, they may be better able
to reduce the incidence of welfare fraud.
Turnover among public welfare department caseworkers amounts to an
average of approximately 30% annually. Such staff turnover creates
almost insurmountable in-service training problems not to mention the
extremely high cost of such training and the period of time when the new
caseworker is not productive. One authority estimated that it takes six
months to a year for a new caseworker to become thoroughly familiar with
the basic rules and regulations of the particular program to which he is
assigned. Administrative changes resulting in the reassignment of case-
workers further complicate this problem. In Los Angeles County which has
an average annual turnover of approximately 30% among its 3300 caseworkers
over 76% of the social workers have less than two years' experience and
41% have less than one year. The problem of orienting staff members
and attempting to interpret the complex rules and regulations of the
various welfare programs to the recipient is self evident.
Many counties are making excellent progress in developing in-service
training programs which underscore fraud prevention as an integral part
-12-
of the casework relationship. The best of such programs involve the forma-
tion of close consultative relationships with district attorneys' offices
taking full advantage of the techniques, training and experience within
the district attorneys' staff. Such training programs not only emphasize
the need for the caseworker to acquaint the recipient with his responsi-
bilities but, also, trains the caseworker to be alert for the danger signals
which, on investigation, often lead to recognition of some conflict between
the information in the record and the situation as it actually exists.
The early recognition of these danger signals and the resolution of the
conflicts is a major step in an effective prevention program.
District Attorneys
Another subject discussed in the hearings is the fact that some pros-
ecutors issue press releases following a conviction in a case of welfare
fraud. The basis for this action is given as the deterrent effect that
such publicity has on other recipients who, technically, have the poten-
tial of defrauding the taxpayer. Others contend such publicity is harmful
and degrading to recipients in general and that the alleged deterrent
effect can not be substantiated.
In the course of the hearings, the Board was beseeched by a number
of witnesses to recommend the application of a cost-benefit approach to
the investigation and prosecution of suspected fraud cases. Under the
cost-benefit approach, the case of suspected fraud would not be carried
through to its conclusion or beyond the point that the cost of investiga-
tion and prosecution exceeded the monetary benefits in the form of resti-
tution which could be expected to result from the full handling of the
case. This is an unreasonable approach, since if applied to other criminal
matters, it would indicate that, for example, a bank robber should not
be prosecuted unless the restitution justified the expense of prosecution
and the necessary investigative process. Careful pre-referral screening
to weed out those cases which do not, in fact, require more extensive
and expensive field investigation will tend to reduce investigative and
prosecuting costs.
The usual process by which a case of suspected fraud is handled from
its inception to its ultimate disposition is as follows. Ordinarily, the
trained caseworker notes a conflict between information contained in the
case record and field observation. Information may also reach the case-
worker by means of letters, telephone calls, or tips from neighbors,
friends, relatives, or occasionally, in the form of an anonymous communi-
cation. Occasionally, such contacts are made directly with the district
attorney's office which is free to initiate its own independent investi-
gation without having a formal referral from the county welfare department.
Usually the county welfare department will be informed of the information
received and the conduct of the investigation by the district attorney's
office, but in the past such referrals to that office from outside sources
have not been included in the statistical reports on fraud submitted to
the State Department of Social Welfare.
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The caseworker receiving information or observing situations in con-
flict with the case record will usually attempt to obtain clarification
from the recipient. Lacking sufficient clarification or encountering an
uncooperative attitude on the part of the recipient will result in the
caseworker referring the matter to a special investigation unit within the
welfare department. Such units are composed of staff trained in the pre-
liminary investigation of such cases to determine if, in fact, there
exists a basis for some formal action by the district attorney's office
or if the conflict can be explained in some other way.
Assuming a strong indication of the existence of fraud based upon
an omission or misrepresentation of facts or a failure to report certain
information or events, the case will then be referred to the district
attorney's office where a further investigation may ensue. Ultimately a
decision will be made as to the most appropriate course of action, depend-
ing upon the facts. At that point, the case may be returned to the county
welfare department if investigation reveals that a fraudulent act has not
been committed or there is insufficient evidence to warrant prosecution.
The special investigation unit within the welfare department may then
conduct a further investigation. Assuming the existence of a fraudulent
act with supportive evidence, the district attorney may proceed to prose-
cute as in any other criminal matter.
In the district attorney's processing of a case, it occasionally
becomes expedient to have an informal conference with the recipient involved
in a case of suspected fraud. These are called citation hearings and are
of value in helping the deputy district attorney understand all the facts
relating to the case. The results of the citation hearing may be a finding
that a fraud has not been committed, it may result in a confession, an
offer of restitution, a reprimand, or the decision to proceed with the
filing of a formal complaint. Statistical information revealing the number
of cases going to citation hearings do not make a distinction between those
cases in which no fraud has been found and the cases in which there is
fraud and the problem is resolved other than through prosecution.
Social Workers
The caseworker potentially is the single most important person in
the prevention of fraud on the part of the welfare applicant or recipient.
In spite of this potential, many caseworkers view themselves in an almost
exclusive service role in relation to the recipient. Some believe that
enforcement of regulations should be the responsibility of others.
The service-oriented caseworker and the recipient must realize that
each has certain obligations and responsibilities. The caseworker has the
responsibility to become fully acquainted with all of the various aid
programs and their governing regulations, to obtain for the prospective
recipient the maximum amount of aid to which he is entitled (Sec. 10500
Welfare and Institutions Code of the State of California) and to insure
that the recipient has a full understanding of the requirements and
restrictions imposed by regulations relating to that particular form of aid,
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The recipient, on the other hand, must be made to understand the
importance of his meeting the terms of the restrictions and the serious
consequences that may result in the event of failure on his part. In
this connection, the caseworker must find the means to overcome language
barriers and resolve problems related to the recipients' ability to com-
prehend this important information. This should not be viewed as a law
enforcement function but rather as one of the basic goals of casework
relationship; that of encouraging individual responsibility on the part
of the recipient.
Finally, however, the social worker must be mindful that he is a
guardian of a public trust, that he must guard against misuse of public
funds and, in the face of a fraudulent situation should take steps to
insure an effective and prompt investigation and cooperate in the prose-
cution of the case. From the standpoint of the social worker some relief
from their varied role seems to be in sight. The State Department of
Social Welfare has provided for separation of the eligibility and case
service functions in the old age security category and is moving in that
direction in the other aids. As this separation is accomplished on a
broader basis, more time should be available for the social worker to
provide direct service to the recipient.
Recipients
Another major factor related to the question of fraud is the ability
of the recipient to comprehend the regulatory requirements for reporting
such things as income and changes in family composition, assuming a
thorough explanation by the caseworker was given. There is ample evi-
dence that welfare regulations are quite complex and the present effort
of the State Department of Social Welfare to simplify will have some
positive effects, although many requirements result from federal mandates.
Therefore, in spite of efforts to simplify, it is of vital importance
that caseworkers exercise special care to interpret the recipient's
responsibilities into the simplest and most easily understood form, as
free as possible from administrative terminology and language. The
intent of the regulations should be explained to further impress the
recipient of the need for reporting changes that affect eligibility to
the welfare department.
General Comments
A greater emphasis placed on staff retention, in-service training,
development of close consultative liaison with the district attorney's
office and more attention given to the recipient's understanding of his
responsibilities, along with the appropriate reminders and effective
follow-up, will result in an effective welfare fraud prevention program.
In addition, such a program would help to reduce the large number of
suspected fraud referrals resulting from agency omission and errors and
further reduce the referral of cases in which there is a lack of intent
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to defraud. In recognition of the public trust shared by all individuals
and agencies involved in welfare service and enforcement, those suspected
fraud cases which remain should be promptly and effectively prosecuted.
The information contained in the Governor's Charge relating to the
opposing views on the extent of welfare fraud was certainly borne out in
the inquiries conducted by this Board. This is a highly controversial
subject, and these opposing views are contributing in a large measure to
the social stigma attached to welfare recipients and welfare programs.
The viewpoint of a segment of the public is that welfare fraud is rampant,
and in this context, virtually anyone who must in time of need turn to
one of the aid programs is suspect. Those having such negative attitudes
and suspicions should be made aware of the legislative intent of the
programs which is clearly set forth in Section 10500 of the Welfare and
Institutions Code.
''10500. Every person administering aid under any public
assistance program shall conduct himself with courtesy,
consideration, and respect toward applicants for and
recipients of aid under that program, and shall endeavor
at all times to perform his duties in such manner as to
secure for every person the maximum amount of aid to
which he is entitled, without attempting to elicit any in-
formation not necessary to carry out the provisions of law
applicable to the program, and without comment or criticism
of any fact concerning applicants or recipients not directly
related to the administration of the program."
The term welfare fraud was viewed almost universally as being synony-
mous with the program of Aid to Families with Dependent Children (AFDC).
A good deal more effort is placed on ferreting out possible fraudulent
situations in the AFDC program than in the other aid programs, and, as a
matter of fact, when a discrepancy is noted, the problem is usually resolved
in a different manner, depending upon the nature of the aid program. Such
differential treatment results from the differences in wording in chapters
of the Welfare and Institutions Code on the subject of enforcement as
related to the various aid categories.
In the AFDC program Sections 11482 provides that a person who
willfully and knowingly, with the intent to deceive, makes a false statement
or representation or knowingly fails to disclose a material fact to obtain
aid, or who, knowing he is not entitled thereto, attempts to obtain aid
or to continue to receive aid to which he is not entitled, is guilty of
a misdemeanor. Section 11483 provides that such a person shall
make restitution and all actions necessary to secure restitution may
be brought against him." The wording in Sections 13800 and 13801 in
the Aid to the Needy Disabled is similar. However, Sections 12250 and
12850 which refer to the Old Age Security program, Aid to the Blind, and
Aid to the Potentially Self-supporting Blind contain the following
qualifying paragraph:
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"It is the intent of the Legislature that restitution should
be sought by request, civil action, or other suitable means
prior to the bringing of a criminal action.
Testimony reveals that as a practical matter these differences virtually
rule out criminal prosecutions under these adult programs.
The differences noted above are reflected in Department of Social
Welfare Bulletin #624 entitled, "Criteria for Referral of Cases to the
District Attorney." This section reads in part as follows:
"When reasonable grounds exist to suspect that fraud has
occurred, the case shall be referred to the district
attorney for further action.
"Exception: In OAS, APSB and AB, attempts to obtain
restitution by request, civil action, or other suitable
means shall be used prior to referral, after which the
case shall be referred to the district attorney."
The Department of Social Welfare Recipient Fraud Report for the
period January through March 1967 lists the number of suspected fraud
cases referred to the special investigation units and to district attor-
neys. Such referrals in the AFDC categories were approximately 17 times
greater than in the adult programs, while the AFDC caseload was less than
half the adult caseload.
Many persons testified that the true extent of fraud is not known,
nor can it ever be determined. This is probably true since the total
number of criminal acts is probably not known in any area. It was pro-
posed that an "acceptable alternative" could be obtained by comparing
convictions with caseload. Such an approach is invalid since it is based
on a faulty premise. The number of convictions do not take into account
the many variables, such as:
1. differences in interpretation of regulations;
2. differences in application of regulations;
3. fraudulent situations overlooked;
4. cases of actual fraud lacking sufficient evidence to prosecute;
5. absence of witnesses;
6. cases of actual fraud resolved short of prosecution;
7. statute of limitations;
8. excessive caseloads of investigators;
9. cases which are not referred and/or not prosecuted because of
the small amount involved.
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SUMMARY
The incidence of fraud convictions within California's welfare
programs is small in relation to the caseload. The comparison of fraud
convictions with caseload leaves much to be desired. The unanswerable
question remains - how much undetected fraud exists?
Fraud can be reduced through increased public awareness and strengthened
preventive measures including:
1. better training liaison between caseworkers, investigators
and district attorneys;
2. improved orientation of caseworkers and recipients;
3. increased awareness by caseworkers of their responsibility
to detect and report suspected fraud;
4. adequate staff and reasonable caseloads for county welfare
department fraud investigating units and district attorneys
investigators; and
5. A firm and consistent prosecuting policy throughout the state.
Each individual concerned in any way with determining eligibility,
providing casework services to the recipient, conducting investigations,
or prosecuting cases of fraud, as well as the administrators of the agen-
cies involved, share a role as guardian of a public trust. Each has a
vital part to play in promoting the effectiveness of the welfare system
for the sake of the recipient and at the same time protecting the tax-
payer.
All parties must guard against the utterance of careless and
irresponsible statements for whatever motive and to clearly and accurately
interpret the facts related to welfare in an effort to correct the damaging
misconceptions that now exist.
The administrators of welfare and enforcement agencies have a res-
ponsibility to provide the simplest and most efficient administrative
and regulatory framework within which the caseworker and the enforcement
staff can function with primary emphasis being placed on the ability of
the individual to use his training and experience to the utmost.
The social worker must give full recognition to his divers responsi-
bilities. He must adequately equip himself with the knowledge necessary
to insure that each recipient receives the maximum aid to which he is
entitled and the service consistent with the recipient's needs in order to
effect his return to productive and independent living at the earliest
date. He must insure in every case that the recipient has a full under-
standing of the need to report situations and events which affect his
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grant and is prepared to assume the responsibility for doing so. The
social worker must be constantly alert for evidence of misuse of funds
and misrepresentation of situations and events. When these are encountered,
the social worker must give full cooperation in the investigation and
possible prosecution of the case, In this context, his role embodies the
elements of prevention and reporting. Neither responsibility is in con-
flict with his helping role in relation to the recipient.
The investigative and prosecuting staffs must act promptly, effectively
and with full recognition given to the rights of the individual. When all
preventive measures have been taken, there will still exist some cases of
wilful and intentional fraud and these should be prosecuted to the fullest
extent of the law for the protection of the public as well as the vast
majority of recipients on whom the gnawing suspicion of fraud by the mis-
informed has a devastating impact.
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RECOMMENDATIONS
The following recommendations relate to the points developed in
the text of this report and/or to the testimony.
1. Changes in federal guidelines be negotiated to establish a protective
payment plan for children of fraudulent recipients who lack other
resources to make restitutions.
2. In computing overpayments resulting from wilful understatement of or
wilful failure to report income, deductions for the standard allow-
ance for incidentals, travel, babysitting, uniforms, etc., related
to the income not reported should not be allowed in determining the
amount of overpayment, thus providing an incentive to abide by the
regulations.
3. The State Department of Social Welfare continue to seek through
administrative and legislative action simplification of regulations,
standardization of eligibility requirements, and should continue to
remove as much detail from published regulations as possible.
4. The State Department of Social Welfare re-evaluate the practical
usefulness of the Recipient Fraud Report now utilized. The factors
to be included should be carefully analyzed in the light of its
purpose.
5. The text on the back of form ABCDM 200 entitled "Important Notice to
Public Assistance Applicants", be changed to include the warning
that changes in family composition should also be reported to the
county welfare departments as has been done on Form CA-201.
6. The state and each county have a carefully constructed workable
plan designed to inform and educate the general public on the various
aid programs and the people they are helping and the needs they are
designed to meet. Extreme care must be used to see that only true
and accurate program statements are released.
7. The establishment of an automated centralized state registry contain-
ing information on all welfare recipients. Such register would serve
a purpose similar to the central register of parents who have deserted
or abandoned their children, as described in Section 11478.5 California
Welfare and Institutions Code, enacted in 1967. The purpose of such
a registry would be to provide a source of information enabling detec-
tion of those recipients who apply and receive aid in more than one
county at the same time. Other precedence for such a centralized
registry are those utilized by Unemployment Insurance, the Department
of Motor Vehicles and the Social Security Administration.
8. Legislation be enacted to promote uniformity in the identification
and investigation of suspected fraud in all categories of aid.
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9. Legislation be enacted to amend Sections 11482, 12250, 12850, 13800
and 11054 of the Welfare and Institutions Code to require that cases
of suspected fraud be referred to the district attorney and prose-
cuted uniformly, regardless of the category of aid involved.
10. The State Department of Social Welfare, together with appropriate
local agencies, undertake a study to determine what is a reasonable
caseload level for thorough and effective fraud investigations.
Thereafter, the department should fix standards to insure adequate
efforts to detect and investigate fraud.
11. Close liaison be developed between public welfare departments and
district attorneys' offices for the purpose of adding depth and
emphasis to orientation of new staff and in-service training for
other staff in relation to welfare fraud. State Department of
Social Welfare Bulletin #624 (Revised) should be regularly reviewed
by the staff and special investigations unit in each welfare depart-
ment and Training Aid #21 parts a and b relating to recipient fraud
should be fully utilized.
12. Efforts be made to reduce the number of unnecessary fraud referrals
to district attorneys' offices. A suggested method would be by
pre-referral screening by a deputy district attorney prior to the
time the caseworker prepares formal referral forms to avoid time
consuming paperwork.
13. The final decision as to whether cases of suspected fraud should
be prosecuted be made by a representative of the district attorney's
office and not by an employee of the welfare department.
14. Greater emphasis be placed on the social worker's role in preventing
fraud. This role should be accepted by the profession as an impor-
tant aspect of casework service to the recipient.
15. A careful and periodic examination of the duties of social workers
be accomplished in order to avoid clerical and menial tasks and to
take full advantage of their time, training and experience in the
casework relationship including fraud prevention.
16. Greater emphasis be placed on the recipient's need for special help
in understanding his responsibilities under the program. Special
attention needs to be given to the language barriers, intellectual
and educational deficiencies and to those having emotional problems.
17. The back of each grant check, while not revealing the nature of the
payment, should contain a certification to be signed by the recipient
indicating there has been no unreported change in the eligibility
status.
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We wish to thank those who gave of their time and talent during the course
of the hearings. By the submission of this report we do not imply that
we are terminating an active interest in this vital subject. Much of the
testimony and written material was not related to the Governor's Charge.
However, much of what we learned will serve as a wellspring for future
Board action.
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