Illegal Aliens: Extent of Welfare Benefits Received on Behalf of U.S.
Citizen Children (Letter Report, 11/24/97, GAO/HEHS-98-30).

Pursuant to a legislative mandate, GAO provided information on the
extent to which means-tested public benefits are provided to illegal
aliens for the use of eligible individuals, focusing on: (1) the extent
and the locations that selected federal means-tested benefits are being
provided to illegal aliens for use by their U.S. citizen children; and
(2) the nature and extent of fraud or misrepresentation detected in
connection with these benefits.

GAO noted that: (1) in fiscal year (FY) 1995, about $1.1 billion in Aid
to Families with Dependent Children (AFDC) and Food Stamp benefits were
provided to households with an illegal alien parent for the use of his
or her citizen child; (2) this amount accounted for about 3 percent of
AFDC and 2 percent of Food Stamp benefit costs; (3) a vast majority of
households receiving these benefits resided in a few states--85 percent
of the AFDC households were in California, New York, Texas, and Arizona;
(4) 81 percent of Food Stamp households were in California, Texas, and
Arizona; (5) California households alone accounted for $720 million of
the combined AFDC and Food Stamp caseloads; (6) although illegal aliens
also received Supplemental Security Income (SSI) and Department of
Housing and Urban Development housing assistance for their citizen
children, data to develop estimates for these two programs were not
available; (7) comprehensive national statistics on any
misrepresentation or fraud perpetrated by illegal aliens receiving
benefits on behalf of their citizen children are not available; (8) a
few California counties' studies of AFDC households indicate that the
rates and types of potential misrepresentation or fraud are similar both
for households headed by illegal aliens and for the general welfare
population; (9) in these studies, one of the most commonly cited types
of misrepresentation or fraud was the underreporting of income; (10)
income is a key factor in determining program eligibility and benefit
amounts and, when underreported, can result in overpayment of benefits;
and (11) the states visited by GAO had procedures in place to verify
income, but officials said that verifying individuals' income from
earnings obtained through the underground economy was very
difficult--for both illegal aliens and for citizens--in part because
these earnings are not documented or reported to state or federal
databases used to verify employment or earnings.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-98-30
     TITLE:  Illegal Aliens: Extent of Welfare Benefits Received on 
             Behalf of U.S. Citizen Children
      DATE:  11/24/97
   SUBJECT:  Illegal aliens
             Welfare recipients
             Public assistance programs
             Welfare benefits
             Immigration or emigration
             Cost analysis
             Children
             Fraud
             Program abuses
             Eligibility determinations
IDENTIFIER:  Aid to Families with Dependent Children Program
             HHS Temporary Assistance for Needy Families Program
             Supplemental Security Income Program
             AFDC
             Rental Housing Assistance Fund
             Food Stamp Program
             California
             Arizona
             Texas
             New York
             
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Cover
================================================================ COVER


Report to Congressional Committees

November 1997

ILLEGAL ALIENS - EXTENT OF WELFARE
BENEFITS RECEIVED ON BEHALF OF
U.S.  CITIZEN CHILDREN

GAO/HEHS-98-30

Illegal Aliens and Welfare

(106906)


Abbreviations
=============================================================== ABBREV

  AFDC - Aid to Families With Dependent Children
  HHS - Department of Health and Human Services
  HUD - Department of Housing and Urban Development
  INS - Immigration and Naturalization Service
  SSA - Social Security Administration
  SSI - Supplemental Security Income
  TANF - Temporary Assistance for Needy Families
  USDA - Department of Agriculture

Letter
=============================================================== LETTER


B-275806

November 19, 1997

The Honorable Orrin G.  Hatch
Chairman
The Honorable Patrick J.  Leahy
Ranking Minority Member
Committee on the Judiciary
United States Senate

The Honorable Henry J.  Hyde
Chairman
The Honorable John Conyers, Jr.
Ranking Minority Member
Committee on the Judiciary
House of Representatives

In recent years, public concern about illegal immigration has often
focused on the costs associated with illegal aliens' use of public
benefits and the extent to which these benefits serve as an incentive
for immigration.\1 In 1996, the Congress took steps to address these
concerns through welfare and immigration reform legislation.  The
Personal Responsibility and Work Opportunity Reconciliation Act of
1996 (P.L.  104-193) further restricted the limited access of illegal
aliens to federal public benefits and limited their access to state
and local public benefits.  In addition, the legislation established
requirements for states and selected federal agencies to report
information to the Immigration and Naturalization Service (INS) on
any individual they know is unlawfully in the United States.  In the
Illegal Immigration Reform and Immigrant Responsibility Act of 1996
(P.L.  104-208), the Congress addressed several enforcement issues,
including the need for improved border control and better ways of
deterring the use of fraudulent documents. 

The act also requires us to report on the extent to which
means-tested public benefits are provided to illegal aliens for the
use of eligible individuals.  This is most likely to occur when an
illegal alien parent not eligible for aid receives benefits on behalf
of his or her U.S.  citizen child.  A child born in the United States
to an illegal alien obtains U.S.  citizenship at birth regardless of
the parent's immigration status and, as any other citizen in need,
may receive welfare and other benefits.  When such a child receives
assistance, the aid also helps support the child's family, raising
concerns about the use of public assistance by those illegally in the
United States.  This report responds to the mandate for information
on the extent to which this occurs and, as agreed with your offices,
discusses (1) to what extent and in what locations selected federal
means-tested benefits are being provided to illegal aliens for the
use of their U.S.  citizen children and (2) the nature and extent of
fraud or misrepresentation detected in connection with these
benefits. 

Of the many federal means-tested programs, we focused on the four
largest programs--Aid to Families With Dependent Children (AFDC),\2
the Food Stamp program, Supplemental Security Income (SSI), and
Department of Housing and Urban Development (HUD) rental housing
assistance\3 --likely to provide benefits to U.S.  citizen children
through an ineligible parent rather than providing benefits or
services directly to a recipient--as is the case with Medicaid.  We
conducted fieldwork in California, New York, and Texas, which our
preliminary work showed were the principal locations where these
benefits were being provided.  In addition, we used the most recent
AFDC and Food Stamp administrative data available to develop national
estimates of the number of households with an illegal alien parent
receiving benefits for U.S.  citizen children.\4 We also identified
some cases of illegal aliens receiving SSI benefits for their U.S. 
citizen children using data from the Social Security Administration
(SSA).  To determine the extent of fraud or misrepresentation
detected, we spoke with officials at the national level for each
program and in the three states and reviewed available studies.\5
Appendix I provides more details on our methodology. 


--------------------
\1 An illegal alien is a person who is in the United States in
violation of U.S.  immigration laws.  Such a person may have entered
illegally--that is, without Immigration and Naturalization Service
inspection (undocumented) or using fraudulent documentation--or
legally under a nonimmigrant visa or other temporary condition and
subsequently violated the terms of the visa or other terms of entry. 

\2 Welfare reform legislation ended the AFDC program for all states
as of July 1997 and instead provides states with funds through
Temporary Assistance for Needy Families (TANF) block grants. 

\3 HUD housing programs generally do not provide payments directly to
recipients but do subsidize the rent a household pays. 

\4 To identify all households that potentially include an illegal
alien parent of a U.S.  citizen child, our estimate includes
households headed by (1) one illegal alien parent, (2) an illegal
alien parent with an illegal alien spouse, or (3) a parent who is not
an illegal alien but who has an illegal alien spouse. 

\5 For the purposes of this study, we use the phrase
"misrepresentation or fraud" to discuss fraud as described in three
studies of the AFDC caseload conducted in three California counties. 
These studies consider fraud to exist when previously unreported
information that should have been used to evaluate eligibility is
discovered during the investigation.  More specifically, fraud is
said to occur when an individual willfully misrepresents information
even though there is no immediate impact on the benefit amount. 
Further, a finding of fraud occurs when a recipient's willful
misrepresentation results in an overpayment of aid or total
ineligibility.  Last, fraud is found to exist if a household
voluntarily withdraws from aid or aid is terminated due to failure to
cooperate with the study and it is believed reasonable to conclude
that fraud existed.  We recognize, however, as do the California
studies, that the legal definition of fraud requires an offender to
be successfully prosecuted and convicted.  Only a small number of
cases are prosecuted, in part because it is a time-consuming and
labor-intensive process. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

In fiscal year 1995, about $1.1 billion in AFDC and Food Stamp
benefits were provided to households with an illegal alien parent for
the use of his or her citizen child.  This amount accounted for about
3 percent of AFDC and 2 percent of Food Stamp benefit costs.  A vast
majority of the households receiving these benefits resided in a few
states--85 percent of the AFDC households were in California, New
York, Texas, and Arizona; 81 percent of Food Stamp households were in
California, Texas, and Arizona.  California households alone
accounted for $720 million of the combined AFDC and Food Stamp
benefit costs, with such households representing about 10 percent of
the state's AFDC and Food Stamp caseloads.  Although illegal aliens
also received SSI and HUD housing assistance for their citizen
children, data to develop estimates for these two programs were not
available. 

Comprehensive national statistics on any misrepresentation or fraud
perpetrated by illegal aliens receiving benefits on behalf of their
citizen children are not available.  However, a few California
counties' studies of AFDC households indicate that the rates and
types of potential misrepresentation or fraud are similar both for
households headed by illegal aliens and for the general welfare
population.  In these studies, one of the most commonly cited types
of misrepresentation or fraud was the underreporting of income. 
Income is a key factor in determining program eligibility and benefit
amounts and, when underreported, can result in overpayment of
benefits.  The states we visited had procedures in place to verify
income; however, officials said that verifying individuals' income
from earnings obtained through the underground economy was very
difficult--for both illegal aliens and citizens--in part because
these earnings are not documented or reported to state or federal
databases used to verify employment and earnings. 


   BACKGROUND
------------------------------------------------------------ Letter :2

An estimated 5 million illegal aliens resided in the United States in
1996, according to INS.  Official estimates, however, are not
available on the number of children born to illegal aliens in the
United States.\6 Illegal alien parents may apply on behalf of their
children for those federal welfare benefits to which their children
are entitled as citizens.  A household composed of an illegal alien
parent and a citizen child gains access to federal welfare benefits
by virtue of the child's eligibility.  The AFDC, Food Stamp, and SSI
programs generally do not provide direct payment of benefits to
minors--children under 18--requiring that their benefits be paid
through an authorized representative payee, typically the custodial
parent.  In such cases, the citizenship status of the parent is not a
consideration in deciding who the payee should be.  The rationale is
that the parent of an eligible child is in the best position to make
decisions on how benefits should be spent on behalf of his or her
child.  For housing assistance, HUD provides funds to a public
housing authority or owner of a housing unit to subsidize the rent
for an eligible household.  Under HUD rental programs, a household
composed of an illegal alien and a citizen would be eligible for
assistance if the citizen met eligibility criteria and assistance was
available.\7

Although illegal alien parents are not eligible for assistance, their
income and assets are taken into account when determining the
eligibility of and benefit amounts for their citizen children.  Table
1 shows the average monthly benefit amounts under the various
programs.  Recipients often receive assistance from more than one
program.  In 1995, about 87 percent of AFDC households also received
Food Stamp benefits and 31 percent received housing assistance.\8 No
individual may receive both AFDC and SSI benefits. 



                                Table 1
                
                  Major Federal Welfare Programs With
                   Benefit Amounts for One Person or
                               Household

                                                      National average
                                                      monthly benefit
Program           Benefit                             amount
----------------  ----------------------------------  ----------------
AFDC              Cash assistance to needy families   $290 for
                  with dependent children who meet    households with
                  state eligibility criteria          one recipient
                                                      child\a

Food Stamp        Food assistance for needy           $71 per person\a
                  individuals who meet federal
                  eligibility criteria

SSI               Cash assistance to needy blind,     $453 per
                  disabled, or aged individuals who   disabled child\b
                  meet federal eligibility criteria

HUD rental        Public housing, tenant-based        $385 per
housing           certificates or vouchers, or        household\c
assistance        project-based rental subsidies for
                  private-market housing\
----------------------------------------------------------------------
\a AFDC and Food Stamp data were obtained from the National
Integrated Quality Control System for fiscal year 1995. 

\b The benefit amount was for September 1995, as reported in SSA
administrative data, and includes both federal and state assistance
and may include retroactive payments. 

\c The HUD average benefit is for tenant-based housing, not public
housing, and covers the 30-month period ending June 1997.  See A
Picture of Subsidized Households in 1997:  Description of a Data File
(Washington, D.C.:  HUD, Oct.  1997).  The amount of assistance for a
household comprising an illegal alien parent with an eligible child
would be prorated on the basis of the number of eligible people in
the household.  In this case, the household would receive one-half as
much rental assistance as it would if both parent and child were
eligible. 

The 1996 welfare reform legislation made sweeping changes to welfare
programs for needy families, but it did not directly affect the
eligibility of illegal aliens' citizen children.  Although TANF block
grants, which replaced AFDC, will allow states more flexibility in
structuring their programs, federal and state officials stated that
U.S.  citizen children of illegal aliens will remain eligible for
assistance.  The provision in the welfare reform law that requires
reporting of illegal aliens to INS, however, may have an impact in
the longer term.  Prior to the legislation, AFDC, SSI, and housing
assistance programs generally were not required to report illegal
aliens to INS.\9 The new provision requires that states operating
TANF programs, the Commissioner of SSA, and the Secretary of HUD
periodically provide information to INS on any individual they know
is unlawfully in the United States.  Federal officials stated that an
interagency workgroup is presently determining what level of evidence
will be required to establish that someone is known to be unlawfully
present in the United States, as well as reporting procedures.  No
time frame, however, was available for when agencies and states are
to begin reporting known illegal aliens to INS.  If the final
regulations for this reporting affect illegal aliens acting as payees
for their U.S.  citizen children, some illegal aliens could be
discouraged from seeking benefits for their eligible children.  Also,
the Congress is considering legislation that would deny citizenship
to children born in the United States to a parent who is not a
citizen or lawful permanent resident. 


--------------------
\6 We recently reported that in 1995, undocumented alien mothers
received Medicaid benefits for 78,386 births in California and 24,549
births in Texas.  These births represented 14 and 8 percent,
respectively, of all births in these states in that year.  See
Undocumented Aliens:  Medicaid-Funded Births in California and Texas
(GAO/HEHS-97-124R, May 30, 1997). 

\7 Housing benefits are limited by budgetary constraints to about
one-fourth of those who are eligible. 

\8 Almost all AFDC recipients--97 percent--also received Medicaid. 
In fiscal year 1994, the average annual Medicaid expenditure for a
child on AFDC was $1,039.  Under welfare reform legislation,
individuals who meet the eligibility requirements that existed as of
July 16, 1996, of their states' now terminated AFDC programs will
remain eligible for Medicaid. 

\9 Food Stamp program regulations regarding reporting requirements
have not changed.  They require that illegal aliens be reported to
INS.  In the states we visited, this reporting focused on illegal
aliens issued a final order of deportation by INS. 


   AN ESTIMATED $1.1 BILLION
   PROVIDED IN AFDC AND FOOD STAMP
   BENEFITS
------------------------------------------------------------ Letter :3

In fiscal year 1995, an estimated $1.13 billion--$700 million under
the AFDC program and $430 million in Food Stamp benefits--was
provided to households in which either the head of household or his
or her spouse was an illegal alien.\10 These benefits were provided
to illegal alien parents for the well-being of their U.S.  citizen
children.  The payments represent about 3 percent of total AFDC
benefit costs and about 2 percent of total Food Stamp benefit
costs.\11

Approximately 153,000 AFDC households--with 300,000 citizen
children--and 224,000 Food Stamp households--with 428,000 citizen
children--had an illegal alien as the head of household or spouse of
the head of household.  In many cases, these estimates reflect the
same households and citizen children, since 94 percent of the AFDC
households with an illegal alien parent also received Food Stamp
benefits and 65 percent of the Food Stamp households with an illegal
alien parent also received AFDC.  A summary of estimated benefits
provided to these households in fiscal year 1995, by program, is
shown in table 2. 



                                         Table 2
                         
                         Estimated Number of AFDC and Food Stamp
                         Households Headed by Illegal Aliens and
                          Benefits Provided to Citizen Children,
                                     Fiscal Year 1995

                                                            Total estimated
                                                                   benefits
                                                                provided to
                                  Estimated                      households
                        Total    households                       headed by
                   households     headed by    Percentage           illegal    Percentage
                   nationwide       illegal      of total         aliens\\a      of total
Program            (millions)      aliens\a    households        (millions)      benefits
-------------  --------------  ------------  ------------  ----------------  ------------
AFDC                      4.9     153,000\b             3              $700             3
Food Stamp               10.9     224,000\b             2              $430             2
-----------------------------------------------------------------------------------------
\a See appendix I for the sampling errors associated with these
estimates. 

\b Since households are likely to participate in both programs, the
estimated number of households should not be totaled. 

Source:  GAO estimate based on data obtained from the National
Integrated Quality Control System. 

About 77 percent of AFDC and 78 percent of Food Stamp households with
an illegal alien parent had one or two citizen children; the
remaining households had three or more citizen children receiving
benefits.  In addition, while most of the illegal alien parent
households had only citizen children in the households, a significant
portion--23 percent of AFDC and 29 percent of Food Stamp
recipients--had both eligible citizen children and noneligible
illegal alien children. 


--------------------
\10 We previously reported that for fiscal year 1992 about $479
million annually--or 2 percent of federal, state, and local AFDC
benefits--was provided to the citizen children of illegal aliens. 
See Benefits for Illegal Aliens:  Some Program Costs Increasing, But
Total Costs Unknown (GAO/T-HRD-93-33, Sept.  29, 1993). 

\11 AFDC benefit costs were shared between the federal government and
the states, with the federal share being about 55 percent nationally. 
Food Stamp benefit costs are fully federally funded. 


      DATA NOT AVAILABLE TO
      ACCURATELY ESTIMATE SSI
      BENEFITS OR HUD RENTAL
      HOUSING ASSISTANCE
---------------------------------------------------------- Letter :3.1

SSA does not have any comprehensive data on the number of U.S. 
citizen children of illegal aliens receiving SSI benefits.  Based on
the limited data available, we estimated that as of December 1996, at
least 3,450 disabled U.S.  citizen children of illegal aliens
received benefits at an annualized federal benefit cost of about
$17.6 million.  SSA officials explained that readily available data
cannot be used to accurately estimate the total number of cases in
which an illegal alien parent received benefits on behalf of citizen
children because the citizenship status of payees is not uniformly
identified in SSA's automated systems. 

Similarly, HUD does not have any data that would allow for an
estimate of the number of households in which illegal aliens are
receiving rental housing assistance for the benefit of U.S.  citizen
children.  Before June 1995, citizenship status was not considered
when determining the eligibility of individuals for HUD's various
rental assistance programs and such information was not collected or
maintained on participants.  However, recently implemented
regulations and provisions included in the immigration reform
legislation prohibit HUD from providing rental assistance to persons
other than U.S.  citizens and certain qualified noncitizens.\12 HUD
has begun redesigning its automated databases and data collection
instruments to capture information on participants' citizenship and
alien status.  However, this process is ongoing and the agency is not
yet able to report the level of assistance being provided to
households composed of both illegal aliens and eligible U.S.  citizen
children. 


--------------------
\12 Under the law, a public housing authority has the option, but is
not required, to verify the citizenship information provided by
program participants. 


      MAJORITY OF CASES LOCATED IN
      A FEW STATES
---------------------------------------------------------- Letter :3.2

Most illegal aliens receiving AFDC or Food Stamp benefits on behalf
of U.S.  citizen children are located in only a few states.  Over 85
percent of the households with children of an illegal alien parent
receiving AFDC are located in California, Texas, New York, and
Arizona.\13 (See fig.  1.) The distribution of Food Stamp households
with an illegal alien parent is only slightly different, with 54
percent of the cases in California, 23 percent in Texas, and 4
percent in Arizona.\14 In addition, the majority of SSI cases of
illegal alien payees for citizen children that records allowed us to
identify were located in California and Texas. 

   Figure 1:  AFDC Households With
   an Illegal Alien Parent
   Receiving Benefits on Behalf of
   U.S.  Citizen Children, by
   State, Fiscal Year 1995

   (See figure in printed
   edition.)

Note:  See appendix I for sampling errors. 

Source:  GAO estimate based on data obtained from the National
Integrated Quality Control System. 

In California, households composed of an illegal alien parent and
citizen children represented about 10 percent of the state's AFDC and
Food Stamp caseloads in 1995 and accounted for $720 million in AFDC
and Food Stamp benefits combined.  Other studies from the California
counties of Los Angeles and Orange estimated that these households
have constituted up to 20 percent of each county's AFDC caseload in
recent years.  In the other states for which we developed estimates,
illegal alien payee cases ranged from 4 to 7 percent of each state's
AFDC and Food Stamp caseloads.  (See app.  I for more details on the
estimated number of households and benefits provided by state and the
associated sampling errors.)


--------------------
\13 INS has estimated that most illegal aliens reside in a few
states, including California, Texas, New York, Florida, and Illinois. 
For some of these states, although they have a large number of
illegal immigrants, the sample data on which we based our estimates
did not contain enough households with an illegal alien parent for us
to develop an estimate. 

\14 We were unable to estimate the number of households or benefits
being provided under the Food Stamp program in New York because we
did not have a large enough number of these households in the sample. 


   DETECTED MISREPRESENTATION OR
   FRAUD SIMILAR FOR HOUSEHOLDS
   HEADED BY ILLEGAL ALIENS AND
   OTHER HOUSEHOLDS
------------------------------------------------------------ Letter :4

Although procedures are in place to prevent and detect fraud,
comprehensive national statistics on fraud perpetrated by illegal
aliens serving as payees on behalf of their citizen children are not
available.  However, studies of AFDC households in a few California
counties with large populations of illegal aliens serving as payees
indicate that there is little difference in the rate and type of
misrepresentation or fraud detected for them and other households
receiving benefits. 


      VARIOUS METHODS USED TO
      PREVENT AND DETECT FRAUD
---------------------------------------------------------- Letter :4.1

To prevent and detect misrepresentation or fraud, federal, state, and
local agencies use various approaches in processing applications for
benefits, ensuring the continued eligibility of recipients, and
maintaining payment accuracy for the AFDC, Food Stamp, and SSI
programs.\15 While each of these programs has different goals, all
require individuals or families to meet certain eligibility criteria. 
To establish program eligibility, proof of citizenship and a social
security number typically must be presented for all applicants,
including U.S.  citizen children of illegal aliens.\16 In addition,
since these are means-tested programs, the income and resources of an
applicant's household cannot exceed specific limits set by each
program.  Benefits, based on total household income, are then
computed for the eligible family members. 

The amount of household income and other resources are verified at
the time of application and, for successful applicants, periodically
thereafter to ensure continued eligibility and payment accuracy. 
Applicants must provide proof of income and resources such as pay
stubs, vehicle registration forms, and rental agreements.  For the
AFDC, Food Stamp, and SSI programs, officials access the Income and
Eligibility Verification System or use computer matching with other
databases to corroborate information provided by applicants.\17

In addition to the verification procedures used during the
application process and periodic reviews, some states take further
steps to aid in detecting and preventing misrepresentation or fraud. 
For instance, all AFDC applicants in New York City are required to
participate in office interviews and home visits by investigative
staff to validate application information.  As a result of these
investigations, approximately 35 percent of new applicants never
received benefits, according to city officials.  In California and
Texas, cases are referred to investigators for additional reviews,
including home visits, if fraud is suspected.  Although the officials
we spoke with generally agreed that intensive screening is effective,
it is also resource intensive and costly. 

Under the AFDC and Food Stamp programs, all states have been required
by federal regulations to conduct quality control reviews of a sample
number of cases to ensure that benefit amounts are correct.  These
reviews include verification of eligibility and income data; if fraud
is suspected, a referral for investigation is made.  Although the
quality control program is not a requirement under TANF, states may
continue the program at their option. 

In addition to the application and review procedures, some federal
agencies, states, and localities train staff to identify fraudulent
documents and provide updates on the latest counterfeit documents. 
For example, SSA staff use black light equipment to determine whether
documents submitted in support of SSI benefit claims are authentic. 
Staff are also trained to use interview techniques to better identify
misrepresentation by applicants. 


--------------------
\15 HUD's rental housing assistance programs require all applicants
to self-certify their status as either citizens or eligible
noncitizens to establish eligibility for assistance.  However,
current regulations do not require verification of an applicant's
citizenship status for all of HUD's rental housing assistance
programs. 

\16 Under the Food Stamp program, for an individual reporting to be a
U.S.  citizen, proof of citizenship is required to the extent that it
is questionable.  The determination of questionable citizenship is
left to the discretion of the state agency. 

\17 Federal law has supported using computerized systems to validate
social security numbers and identify household information, such as
earnings, assets, and receipt of other forms of aid by applicants and
recipients.  Such matches are required in TANF and were required
under the Food Stamp program until made optional in the 1996 welfare
reform legislation. 


      INCIDENCE AND TYPES OF
      MISREPRESENTATION OR FRAUD
      DETECTED SIMILAR FOR ILLEGAL
      ALIEN PAYEES AND THE GENERAL
      AFDC POPULATION
---------------------------------------------------------- Letter :4.2

National studies on the nature and extent of misrepresentation or
fraud by illegal aliens obtaining benefits for their citizen children
are not available.  However, three California counties--Fresno, Los
Angeles, and Orange--have experienced rapid growth in their AFDC
child-only cases (those without an adult recipient)\18 and, in recent
years, began conducting studies to investigate fraud among child-only
and other cases.  Although these studies used a much broader
definition of fraud and a different methodology than generally used
in AFDC and Food Stamp quality control reviews, they provide some
evidence that the types and frequency of misrepresentation or fraud
in cases where illegal aliens receive AFDC benefits for their U.S. 
citizen children are similar to that of the general AFDC
population.\19 Based on a random sample of 450 AFDC cases, a 1997
Orange County study identified potential misrepresentation or fraud
in 38 percent of the illegal alien payee cases and over 46 percent of
all other cases.\20 These findings of potential fraud were associated
with overpaid benefit amounts totaling 9 percent of combined AFDC and
Food Stamp benefits paid in a typical month to the 450 cases.  Two
additional studies based on random samples and conducted in Los
Angeles County and Fresno County identified potential
misrepresentation or fraud in 42 to 45 percent of the AFDC cases
involving illegal alien payees.\21 In these two studies, about
one-half of the cases in which misrepresentation or fraud was
identified resulted in an overpayment of benefits.  In the other
cases, the incorrectly reported information did not have an impact on
benefit amount. 

The most commonly cited types of misrepresentation or fraud
identified in all three of the California studies were misreported or
unreported income and misrepresented household composition, such as
unreported members living in a household.\22 The types found in cases
involving illegal alien payees did not differ from those of the
general AFDC population.  Officials in New York and Texas also
identified misreporting of income and household composition as the
most common types of misreporting among AFDC child-only cases and the
general AFDC population. 

According to one of the California studies, 81 percent of the
misreported income cases involved cash obtained by applicants from
sources that made verification virtually impossible because there are
no records of the financial transactions.\23 This study uses the term
"underground economy" to refer to a source of income from which
individuals are paid in cash and their earnings are not reported to
the Internal Revenue Service or the state.  In addition, officials in
California, Texas, and New York cited the difficulties of verifying
income that individuals--both illegal aliens and citizens--derived
from the underground economy.  Moreover, because illegal aliens may
not legally obtain social security numbers--which serve as the basis
for reporting through the Income and Eligibility Verification
System--verification of income for this population is difficult. 
California officials also noted that it is more difficult to obtain
evidence of fraud without a social security number. 


--------------------
\18 A child-only case is an AFDC case in which the parent or
caretaker is excluded from receiving benefits due to (1) receipt of
SSI benefits; (2) undocumented alien immigration status; (3) failure
to cooperate with program requirements, such as work or child support
enforcement; or (4) lack of need. 

\19 The studies' definition of fraud and objectives, scope, and
methodology differed from those used in AFDC and Food Stamp quality
control reviews.  The county studies defined misrepresentation or
fraud as any case in which investigators discovered unreported
information that should have been reported and used to evaluate
eligibility, even if no overpayment of benefits resulted.  Their
methods also differed.  For example, investigators in the Orange
County study made unannounced home visits and considered the entire
assistance period.  AFDC and Food Stamp quality control reviewers
generally announced their visits to households and examined data for
the one month's sample. 

\20 County of Orange Fraud Incidence Study:  A Joint Effort of the
California Department of Social Services and Orange County Social
Services Agency and District Attorney (Orange County, Calif.:  Apr. 
1997).  Food Stamp program fraud was also included in this study. 
The 450 cases were selected between August 1994 and October 1995. 

\21 Fresno County Child-Only Study:  A Joint Effort Between the
County of Fresno Department of Social Services, the Office of the
District Attorney, and the California Department of Social Services
(Fresno County, Calif.:  Jan.  1995) and Department of Public Social
Services, Welfare Fraud and Prevention Investigations Section,
Child-Only Study:  Final Report (Los Angeles County, Department of
Public Social Services, Calif.:  Jan.  1996). 

\22 Misrepresenting household composition includes situations in
which not all members of the household are reported, an absent parent
is actually living in the home, or a child is not living in the
reported residence. 

\23 County of Orange Fraud Incidence Study, Apr.  1997. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :5

We received comments from the Department of Health and Human Services
(HHS) and the Department of Agriculture (USDA).  Their comments are
included in appendixes II and III, respectively, and technical
comments were incorporated as appropriate.  HHS stated that our
report identifies the difficult and complicated policy issue of
providing food and cash assistance to families containing both
citizens and illegal immigrants.  Yet it also stated that we had not
sufficiently emphasized that citizen children of illegal alien
parents are legally eligible for benefits on the same basis as any
other citizen in need.  We believe our report clearly states that
these citizen children are eligible for assistance and, while we
acknowledge the difficult policy issues involved, this report focuses
on describing the extent to which such children receive assistance. 

USDA commented that the report provides valuable information and
emphasized that illegal aliens receive no benefits for themselves and
that their income and resources are considered in determining the
eligibility of any citizen children.  In addition, USDA was concerned
that the misrepresentation and fraud rates identified by the
California counties' studies may inadvertently be misinterpreted.  It
noted that the studies' definition of misrepresentation and fraud is
much broader than that used in Food Stamp quality control studies,
which generally focus on the percentage of benefit dollars overpaid
as a result of intentional misrepresentation.  To address this
concern, we have more clearly emphasized the amount of benefit
overpayments identified in the studies.  We also recognize that the
studies use a much broader definition of misrepresentation and fraud
than used in quality control reviews and clarified this in the
report. 

We also provided a copy of the report to SSA, which did not have
comments.  In addition, we considered and incorporated, where
appropriate, technical comments from the State of California and
Orange County, California.  HUD, Los Angeles County, New York, and
Texas did not have technical comments. 

As required by the Illegal Immigration Reform and Immigrant
Responsibility Act of 1996, we are sending copies of this report to
the Inspector General of the Department of Justice.  We are also
sending copies to the Secretaries of USDA, HHS, and HUD and the
Commissioners of SSA and INS.  We will also make copies available to
others upon request. 

Please contact me at (202) 512-7215 if you have any questions
concerning this report or need additional information.  Major
contributors to this report are listed in appendix IV. 

Sincerely yours,

Mark V.  Nadel
Associate Director,
 Income Security Issues


METHODOLOGY
=========================================================== Appendix I

To estimate the locations, number of households involved, and amount
of AFDC and Food Stamp benefits provided to illegal aliens for the
use of their U.S.  citizen children, we used administrative databases
composed of statistically valid samples of households nationwide
receiving benefits under each of these programs.  The source data
were AFDC and Food Stamp households selected for quality control
reviews from October 1994 through September 1995--the 1995 federal
fiscal year.  HHS' Administration for Children and Families for AFDC
and USDA's Food and Consumer Service for Food Stamps use sample data
that are maintained in the National Integrated Quality Control System
to estimate state error rates related to eligibility and payment
amount and for studies of populations receiving benefits. 

As part of the quality control reviews done for both the AFDC and
Food Stamp programs, the citizenship or immigration status of
household members, such as a parent of a U.S.  citizen child
receiving benefits, is obtained by program officials.  To develop our
estimates of households in which an illegal alien received benefits
on behalf of citizen children under these programs, we selected only
sample households identified as having (1) a person acting as the
head of household whose citizenship status was listed as illegal
alien due to expired visa or illegal entry into the country or (2) a
head of household whose spouse had a citizenship status listed as
illegal alien due to expired visa or illegal entry into the
country.\24 For some individuals, the data did not precisely capture
their exact immigration status.  For example, citizenship status was
listed as "not a U.S.  citizen, but exact alien/immigrant status
unknown" or "unknown." As a result, there may be additional
households with an illegal alien parent that we were unable to
identify and are not included in our estimate.  Heads of households
or their spouses whose citizenship status was listed as being
accorded refugee status, granted a stay of deportation by the INS, or
permanently residing in the U.S.  under color of law were not
included in our estimate. 

For each of the selected households headed by or whose spouse was an
illegal alien, we obtained from the sample case file information on
the dollar amount of benefits received by the recipient household for
the sample month, projected the yearly dollar amount of such benefits
received by the household, and confirmed that the benefits were
received on behalf of U.S.  citizen children in the household.\25 We
applied sample weights to develop our estimate for the nation or a
specific state.  For those states that had a large enough number of
households headed by illegal aliens in the sample, we were able to
develop an estimate for that state.  For AFDC, we were able to
estimate the number of such households and benefits received in
Arizona, California, New York, and Texas.  Under the Food Stamp
program, these states were Arizona, California, and Texas.  Although
other states, such as Florida and Illinois, also have large illegal
alien populations, not enough households with an illegal alien parent
or spouse were identified in these states' samples to allow us to
develop estimates.  This also occurred for New York in the case of
the Food Stamp program. 

Because our estimates are based on samples, they are subject to
sampling error.  Table I.1 shows each of our estimates and indicates
the extent of each estimate's sampling error by showing the
95-percent confidence interval around that estimate.  There is a
95-percent chance that the actual total falls within that interval. 



                         Table I.1
          
          Estimated AFDC and Food Stamp Households
          Headed by an Illegal Alien and Benefits
           Received (With Confidence Intervals),
                      Fiscal Year 1995

             Households headed by     Benefits received
                illegal alien            (thousands)
            ----------------------  ----------------------
                  AFDC  Food Stamp        AFDC  Food Stamp
----------  ----------  ----------  ----------  ----------
Arizona          4,700       9,200     $12,340     $16,000
                  (+/-        (+/-        (+/-        (+/-
                1,000)      2,300)     $2,700)     $4,700)
California      93,700     120,700    $512,000    $208,000
                  (+/-        (+/-        (+/-        (+/-
               15,500)     23,000)    $93,100)    $44,600)
New York        17,500        NA\a     $82,000        NA\a
                  (+/-                    (+/-
                5,000)                $24,700)
Texas           14,500      52,600     $16,000    $122,500
                  (+/-        (+/-        (+/-        (+/-
                3,500)     12,200)     $4,100)    $36,200)
National       153,000     224,000    $700,000    $430,000
                  (+/-        (+/-        (+/-        (+/-
               17,000)     27,000)   $100,000)    $60,000)
----------------------------------------------------------
\a New York did not have a large enough number of Food Stamp
households headed by an illegal alien to provide an estimate. 

Source:  GAO estimate based on data obtained from the National
Integrated Quality Control System. 

We discussed and obtained concurrence from personnel of the
Administration for Children and Families for AFDC and the contractor
for the Food and Consumer Service for Food Stamps regarding our
estimating procedures. 

Because of variances in how SSI cases composed of disabled children
with illegal alien payees are identified in SSA's automated systems,
we could not develop an accurate estimate of the number of these
cases.  However, we statistically sampled available recipient
caseload data to estimate a minimum number of disabled child cases in
which one or both parents were illegal aliens as of December 1996. 
Our sample included a sufficient number of cases from California and
Texas to allow us to provide estimates for those states.  Based on
the benefits being provided to the children in our sample, we also
estimated the dollar amount of benefits paid to the children in
December 1996. 

Because our figures are based on samples, they are subject to
sampling error.  Table I.2 shows each of our estimates and indicates
the extent of each estimate's sampling error by showing the
95-percent confidence interval around that estimate.  There is a
95-percent chance that the actual total falls within that interval. 



                         Table I.2
          
            Estimated SSI Cases With an Illegal
          Alien Payee and Benefits Received (With
            Confidence Intervals), December 1996

                         Cases with an
                               illegal
                           alien payee   Benefits received
------------------  ------------------  ------------------
California                       2,178            $947,759
                               (+/-63)        (+/-$54,536)
Texas                              755            $314,482
                               (+/-57)        (+/-$35,207)
National                         3,450        $1,466,601\a
                              (+/-101)        (+/-$74,392)
----------------------------------------------------------
\a Estimated to be an annualized federal benefit cost of about $17.6
million. 

Source:  GAO estimate based on administrative data obtained from SSA. 

Since AFDC and Food Stamp quality control data are reviewed by the
Administration for Children and Families, the Food and Consumer
Service, and the states, and SSI data are reviewed by SSA, we did not
independently examine the computer controls or verify the accuracy of
these data.  Except for this limitation, we conducted our review in
accordance with generally accepted government auditing standards
between December 1996 and July 1997. 



(See figure in printed edition.)Appendix II

--------------------
\24 In 89 and 84 percent of the AFDC and Food Stamp cases,
respectively, the head of household was specifically identified as an
illegal (undocumented) alien.  In the remaining 11 and 16 percent of
the cases, the spouse of the head of household was the illegal alien. 
The head of household in these instances was often identified as an
immigrant accorded permanent resident status, a lawful permanent
resident under provisions of the Immigration Reform and Control Act,
or a U.S.  citizen. 

\25 The head of household was identified as the parent of a citizen
child; data on the parental status of the spouse were not available. 


COMMENTS FROM THE DEPARTMENT OF
HEALTH AND HUMAN SERVICES
=========================================================== Appendix I



(See figure in printed edition.)



(See figure in printed edition.)




(See figure in printed edition.)Appendix III
COMMENTS FROM THE DEPARTMENT OF
AGRICULTURE
=========================================================== Appendix I



(See figure in printed edition.)



(See figure in printed edition.)


GAO CONTACTS AND ACKNOWLEDGMENTS
========================================================== Appendix IV

CONTACTS

Gale C.  Harris, Assistant Director, (202) 512-7235
Mario L.  Artesiano, Evaluator-in-Charge, (404) 679-1903

ACKNOWLEDGMENTS

In addition to those named above, the following individuals also made
important contributions to this report:  Carlos J.  Evora; Andrea H. 
Ewertsen; Deborah A.  Moberly; and John G.  Smale, Jr. 

RELATED GAO REPORTS

Undocumented Aliens:  Medicaid-Funded Births in California and Texas
(GAO/HEHS-97-124R, May 30, 1997). 

Illegal Aliens:  National Net Cost Estimates Vary Widely
(GAO/HEHS-95-133, July 25, 1995). 

Illegal Aliens:  Perspectives on the Issues Associated With Illegal
Aliens (GAO/T-OGC-94, June 24, 1994). 

Illegal Aliens:  Assessing Estimates of Financial Burden on
California (GAO/HEHS-95-22, Nov.  28, 1994). 

Benefits for Illegal Aliens:  Some Program Costs Increasing, But
Total Costs Unknown (GAO/T-HRD-93-33, Sept.  29, 1993). 


*** End of document. ***