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UT Austin researchers determine Lone Star Image System project did not prevent welfare fraud

Findings in a new report by The University of Texas at Austin’s Center for the Study of Human Resources (CHR) indicate that a welfare reform project initiated at a cost of $1.7 million by the Texas Department of Human Services did not significantly reduce or deter welfare fraud.

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AUSTIN, Texas — Findings in a new report by The University of Texas at Austin’s Center for the Study of Human Resources (CHR) indicate that a welfare reform project initiated at a cost of $1.7 million by the Texas Department of Human Services did not significantly reduce or deter welfare fraud.

The findings of the CHR, a research unit associated with UT’s LBJ School of Public Affairs, were released after a yearlong study conducted under contract with the DHS. The study examined a seven-month pilot of the DHS¡s Lone Star Image System (LSIS), which uses electronic finger imaging to detect and deter duplicate receipt of Aid to Families with Dependent Children (AFDC) and Food Stamp benefits in Bexar and Guadalupe counties. Implementation of the imaging technology was required under provisions of Texas House Bill 1863, which the Texas State Legislature enacted in 1995.

The emergence of biometrics, or imaging technology, as a fraud detection tool was first tried in Los Angeles County and New York City in response to a growing public concern that public assistance recipients may be receiving benefits to which they are not entitled. Based on the projected savings of these early initiatives, the Texas Comptroller of Accounts recommended to the Texas Legislature that DHS pilot a similar program.

According to the LSIS project design, all non-exempt adults, heads of households and minor parents with a dependent child who request Food Stamp or AFDC benefits must comply with an electronic finger-imaging and photographing procedure at the time of application or recertification. The refusal or failure of a non-exempt individual to be imaged results in the denial of the application or recertification for continued benefits. The imaging technology was installed and is operated by North American MORPHO Inc.

“Our study focused on the 10 DHS offices that serve residents of Bexar and Guadalupe counties and 10 comparison offices in other parts of Texas. Findings are based on an analysis of administrative caseload and cost data from October 1995 through May of 1997, as well as interviews with Food Stamp and AFDC recipients who recently exited from at least one of the programs. Because none of the caseload declines in these counties could be attributed to imaging, no savings from reduced welfare benefits occurred,” said Deanna Schexnayder, associate director of CHR and the principal investigator associated with the LSIS Project.

Schexnayder noted that while the statistical procedures applied in the study were the most powerful that could be adopted to answer the research questions, the effect of the pilot may be smaller than the effect resulting from statewide implementation because recipients in the pilot offices could have their duplicate accounts located in counties outside the pilot area.

Despite growing support for the use of electronic imaging technology across Texas and other states, the study noted a number of factors that may reduce the level of benefit savings Texas can expect to realize from the use of this technology. Those factors include:

  • Texas AFDC payments are among the lowest in the nation. Maximum monthly AFDC benefits for a three-person family in Texas are $188, compared to nearly $700 in California and a national average of $363. AFDC-related benefits deterred or denied through imaging, therefore, would be much smaller than in states with higher benefit levels.
  • Some of the benefit savings attributed to electronic imaging in the early initiatives in other states may have been caused by factors other than imaging. Rather than attempt to sort out the reasons for the declines in caseload, all such caseload declines and resulting benefit savings in these studies were inappropriately attributed to imaging.
  • Texas was aggressively pursuing the detection of fraud in its public assistance programs before the implementation of this demonstration project.

“According to the DHS Office of Inspector General (OIG), most fraud determinations do not involve receipt of duplicate benefits,” said Schexnayder. “In most fraud cases, recipients provide false information about their income, resources and household composition. The LSIS imaging technology will not prevent or uncover this type of fraud.”