VA: Don’t use welfare at strip clubs and casinos — but we’ll never know if you do

By Kathryn Watson | Watchdog.org, Virginia Bureau

ALEXANDRIA, Va. — There are a few things any Virginian who signs up for welfare benefits can’t legally buy with them — lottery tickets, alcohol, tobacco and sexually explicit materials.

Purchases at places like ABC liquor stores, tattoo shops, strip clubs and casinos are off limits, too.

But it’s all an honor system when it comes to spending your hard-earned tax dollars.

That person could turn around and illegally spend his $257 monthly stipend on his pre-paid MasterCard debit card

on lap dances and booze at a local strip club, with zero accountability.

“As far as the public policy, I guess they view it as cash payment, cash assistance,” said George Strudgeon, an audit director with Virginia’s Auditor of Public Accounts. “And if you walked into my office and asked for the benefit payment in cash, I wouldn’t know what you did with it at the end of the day.”

No access to transaction records

State officials say they have no access to debit card transactions made with Temporary Assistance for Needy Families benefits, which are federal assistance dollars issued on pre-paid MasterCard debit cards. Once the money is on the card, Xerox handles the records and consumers are protected.

That prevents not only taxpayers from finding out where those tax dollars are spent, but it prevents the state from conducting its own audits on individual transactions.

A federal assistance program managed partly by the Virginia Department of Social Services, TANF benefits average $257 per family per month in Virginia, and are meant to provide families with children with a monthly cash payment to meet their basic needs.

But reviews of TANF transactions in Maine and Tennessee, which use state-accessible EBT cards rather than simple debit cards, have revealed transactions at strip clubs and Disney World, to name a couple non-“basic needs” examples.

That prompted this Watchdog.org reporter to file a request under Virginia’s Freedom of Information Act for two months’ worth of transactions made on EBT cards in Richmond, only to be told by officials at Virginia’s Department of Social Services that the state has no access to those records.

The enforcement issue

There are even more loopholes.

At this point, there aren’t even any penalties to enforce the prohibitions if someone reported an abuse. That’s something the state’s DSS is working on.

“What we’re doing is promulgating regulations through the State Board of Social Services to have penalties if we identify somebody, but it’s very difficult to identify anybody right now,” said Tom Steinhauser, director of the division of benefit programs for DSS. “Even people who look at the federal law say it’s basically a feel-good bill, but there are no real enforcement measures right now.”

The prohibitions on things like tobacco and lottery tickets took effect in 2013, thanks to a bill patroned by state Delegate Tony Wilt, a Republican from Harrisonburg. He’s up front about the reality that the law, which was fashioned after 2012 federal law, is nearly impossible to enforce.

“The hardest part is the enforcement,” Wilt told Watchdog.org. “… I even had language in there that no one, which would be the retailer, shall accept this for anything (restricted). The problem is that it’s just a plain old debit card. And so, an individual can use — like I’m sure you do and I do, because I love the convenience — a lot of grocery stores have automatic checkout now. Nobody ever sees your card.”

Right now, TANF benefits are distributed on the same debit card as other benefits like child support and unemployment benefits, making things even trickier.

To fix the records issue, Wilt filed a bill this session to issue TANF benefits through a separate electronic benefits transfer or EBT card, the same way Supplemental Nutrition Assistance Program benefits are issued.

The bulk of that bill was shot down in committee this week, leaving intact only a provision saying people can’t get their TANF benefits via checks. But people will still be able to get their benefits through direct deposit.

Even if benefits were automatically restricted at certain locations, the way SNAP benefits are, it would be nearly impossible to restrict access to all ATM machines, Wilt said.

“Other states have looked at controlling the cash access to the card because you don’t want them to use them for drugs, tattoos, all those things listed,” Wilt said. “But they can still go, they can get cash from the machine and go get a tattoo. You and I know that there’s no way to stop that.”

For now, TANF transaction records will still be handed by Xerox — and away from state and taxpayer eyeballs.

Abuse exists

Virginia hasn’t sought abuse data, but states and news organizations that have been able to access records and conduct their own investigations have coughed up some disturbing figures.

A 2010 investigation by the Los Angeles Times revealed that $1.8 million in TANF funds were withdrawn in casinos.

In Atlanta, a city roughly twice the size of Richmond, investigations raveled that $150,000 worth of TANF benefits were accessed in liquor stores and nightclubs.

A report in Michigan found that more than $87,000 was withdrawn from a Detroit casino over the course of a year.

And in Seattle, a local news station found that 13,000 TANF recipients withdrew $2 million from casinos in 2010.

Spend money to save money?

Wilt and Steinuaser are the first to admit the system has its holes.

But at this point, they say benefits in Virginia are so low that it may not be worth it to spend a few million on the system to make transactions traceable and enforceable on EBT cards, like SNAP benefits are.

“In Virginia, our benefits are so woefully low, it would be hard for anybody to be spending a lot of money at an ABC store or strip clubs,” Steinhauser said. I’m sure that some people figure out how to do it and manage it, but our benefits are 15th lowest in the nation, and that compares to per-capita income where we’re the 10th highest.”

“I’m not going to spend a dollar to save a dime,” Wilt said.

The battle for TANF integrity may be lost this time around.

Right now, it’s purely an education effort on the front end, telling welfare beneficiaries what they can and can’t buy, but Wilt said he’s going to keep working.

“I’m not looking to do any harm to any of the folks with these benefits,” Wilt said. “It is supposed to be for children, taking care of the kids and so forth. I’m not looking to cut the program. But what I am trying to do is hold a level of accountability, and make sure the money is used for its intended purpose.”

— Kathryn Watson is an investigative reporter for Watchdog.org, and can be reached at kwatson@watchdog.org.

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