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States struggling to prevent welfare spending in bars, casinos

Ohio has no way of monitoring whether welfare recipients are cashing in their benefits at strip clubs, casinos and liquor stores. This could be a problem, according to a new federal report.

The state could lose up to lose 5 percent of its $728 million federal welfare grant if it doesn’t make changes to come in line with a law passed in February requiring every state to try to keep welfare from being accessed at such establishments.

The report from the U.S. Government Accountability Office examined the 10 states that get the most welfare money. Six already have state laws or executive orders that prohibit use of welfare money at such places, though the report says they aren’t completely effective. Four states, including Ohio, have no laws or monitoring.

Ohio was unique, the report found, in that the system it uses to disperse benefits gives it no access to information on where the benefits are used. This is because the money is loaded on a card that can be used anywhere that accepts MasterCard. And federal banking law protects that information and require it be kept private, even from the state.

Ohio Department of Job and Family Services said they are working to come into compliance by the 2014 deadline, but at this point don’t know how they’ll do that.

“There are likely to be changes, but it is too early to say exactly what those changes will be,” said ODJFS Spokesman Ben Johnson.

The federal requirement was tucked into a bill in February that extended jobless benefits and a payroll tax cut for workers .

Supporters included U.S. Rep. Steve Austria, R-Beavercreek, who said it was part of a package of reforms that took “significant steps to reduce the out-of-control federal deficit by reducing subsidies and getting rid of waste, fraud and abuse in Washington.”

The GAO found the six states that already have laws or executive orders limiting where welfare benefits can be used face “challenges.”

“These challenges included difficulties with identifying certain locations that could be prohibited and limitations in available data,” the report said.

The governor of California, for example, issued an executive order in 2010 requiring the state to block welfare cards from being used to dispense cash at ATMs in casinos, strip clubs, tattoo parlors and smoke shops after media reports found welfare benefits were being used for gambling.

This resulted in disabling access for welfare cards to 6,328 of the state’s roughly 35,400 ATM machines, according to the report. But state officials said there was simply not enough data to accurately enact the rule despite “a manual, time-intensive process that involved making judgements about the nature of retailers, which can be subjective and prone to error.”

Plus, while they can block usage at ATMs, the state does not have the technological ability to prevent people from just using the benefit card at the establishment’s cash register.

Florida officials recently reviewed welfare usage at casinos and liquor stores and found $63,000 – or .03 percent – of the transactions over a 2-year period was withdrawn at establishments with liquor licenses and .06 percent were made at casinos.

Officials there and in New York “determined that it would not be cost-effective to implement restrictions aimed at preventing a relatively small number of transactions,” the GAO report said.

Elizabeth Lower-Basch, policy coordinator for CLASP, a national advocacy group for low-income individuals, believes Congress over-estimated the problem and the measure only reinforces stereotypes about the poor.

“I think it’s a requirement on states that, as the GAO report indicates, it’s not entirely simple to do and there’s not a lot of evidence this is a problem that needs to be solved,” Lower-Basch said. “There’s a cost to society, to other recipients, if you’re going to go after the fairly small number of people who might use funds in a way you don’t think are appropriate.”

“Most adult recipients are single moms and I don’t think they’re going to strip clubs very often,” she said. “I think someone got this into their heads and it sells well politically.”

Ohio officials said they went with the Mastercard system for cash assistance — unlike food stamp benefits that are on a separate card and that can only be used at pre-approved locations for pre-approved items – to save the state money and give families more flexibility.

“The MasterCard branding allows families to use their card anywhere MasterCard is accepted,” Johnson said. “Families can pay bills online or over the phone and can take their (card) into any bank that accepts MasterCard and make a withdrawal.”

The state is in the process of rebidding both the food stamp and welfare contracts, and will work with vendors to find a way to come into compliance with the new federal rule, he said.

In May, 159,034 adults and children – including 8,557 in Montgomery County — received a combined $28.5 million through the program, officially named Temporary Assistance to Needy Families.

TANF is a temporary benefit for adults earning 50 percent or less of the federal poverty level who have dependent children and fulfill a work requirement. The average benefit is $164 per person per month or $450 per month for a family of three.

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