Image courtesy of WSOC-TV

How Widespread is Welfare Fraud?

 

Barry Armstrong

Founder and President, Armstrong Advisory Group

 

Welfare benefits cause some of the most contentious political debates these days, and it is not difficult to see why.  By design, these benefits are an important component of a social safety net that exists as a means of assisting people when they need it most.  Although a majority of folks would not dispute the notion that these programs are necessary to ensure that our fellow citizens who are truly destitute do not go hungry or without housing, we constantly hear about cases of fraud within the welfare system.  However, there is a dispute among politicians about whether this problem is a big deal.  Is welfare fraud really a problem?

 

Yes, Welfare Fraud is an Issue

 

State Auditor Suzanne Bump does the taxpayers of Massachusetts a great service by releasing quarterly reports which outline cases of welfare fraud uncovered by her office.  The latest report provided details for the second quarter of fiscal year 2017, which ran from October 1, 2016, to December 31, 2016.  During those three months, the Commonwealth’s Bureau of Special Investigations identified welfare fraud in 211 cases, which amounted to $4.2 million1.  Over the course of fiscal year 2016, welfare fraud in Massachusetts totaled $15.45 million, which represented a year-over-year increase of 12%2.  Regardless of what politicians say, this is a big problem, especially in Massachusetts.

 

The Largest Case of Fraud in the Commonwealth’s History

 

Although welfare fraud has increased in recent years, this problem is certainly not new.  In 2015, officials charged a convenience store owner in Worcester with running a $3.6 million food stamp fraud scheme over a span of four years.  Last year, that individual received a yearlong sentence in prison for what federal prosecutors http://www.eta-i.org/provigil.html called the largest case of welfare fraud in the Commonwealth’s history.  While it is easy to identify problems, it is a far more difficult task to formulate solutions, especially since welfare waste, fraud, and abuse is clearly widespread.

 

Conclusion

 

Waste, fraud, and abuse, especially since it involves taxpayer dollars, is never acceptable.  Despite the fact that some political leaders discount the prevalence of this fraud, it is heartening to see some of them take the task of investigating it seriously.  It is also interesting to observe what other states are doing to combat the problem.  In Maine, Governor Paul LePage implemented a series of welfare reforms designed to incentivize able-bodied childless adults to work, train, or volunteer on a part-time basis in order to receive food stamps.  Because of this reform, a recent report from the state’s Department of Health and Human Services found that employment and wages increased while government dependency decreased3.  Similar solutions may be worthwhile for the Commonwealth’s leaders to consider as they work to reduce the level of welfare fraud and ensure the protection of hard-earned taxpayer dollars.

 

Barry Armstrong has over 30 years of experience in the financial industry.  He founded the Armstrong Advisory Group in 2004 and has been sharing his financial knowledge with New Englanders on a daily basis during his Boston-based radio broadcast for nearly 20 years.  Learn more about Barry and the Armstrong Advisory Group at www.armstrongadvisory.com.  Securities offered through Securities America, Inc.  Member FINRA/SIPC and Advisory Services offered through Securities America Advisors.  Barry Armstrong, Representative.  Representatives of Securities America do not offer tax advice.  Always seek the assistance of a tax professional familiar with the laws in your state.  Armstrong Advisory Group and Securities America are unaffiliated.  April 2017

______________________________

1 http://www.mass.gov/auditor/docs/bsi/2017/2017qtrreport2.pdf

2 http://www.masslive.com/politics/index.ssf/2016/11/auditor_suzanne_bump_identifie.html

3 https://www.forbes.com/sites/theapothecary/2016/05/19/new-report-proves-maines-welfare-reforms-are-working