More than 600,000 Louisiana residents receive food stamps, costing the federal government $600 million annually, and some believe at least $24 million of that is collected and used fraudulently.

To reduce these losses, the state implemented an investigative information system that tracks false claims and helps lead to the prosecution of offenders.

And Louisiana is not alone -- other states, such as Georgia and Texas, have turned to software systems to help track and audit potential fraud in areas such as welfare, food stamps, child care and corporate tax noncompliance to recover some of the money lost.

Uncovering Trends

Looking to take a bite out of its fraudulently collected $24 million, the Louisiana Department of Social Services (DSS) is in the initial phases of implementing a system that mines data and then graphs it with GIS to show investigators where to look for fraud. First, business intelligence software -- Information Builders' WebFOCUS system -- detects patterns inconsistent with normal commerce. Then ESRI GIS technology develops maps that show trends. Investigators say at that point it's pretty easy to detect unusual patterns.

"We're looking for the obvious to stick out," said Raymond Pease, assistant director of the Fraud and Recovery Section of the Louisiana DSS Office of Family Support. "And it usually does."

Through years of investigating fraud, DSS staff knows what to look for. How they look for it, however, has changed drastically with the new system, which is programmed to report suspicious data.

The system calculates, for instance, how far a benefit recipient travels to use food stamp benefits, which are allotted via electronic benefits transfer (EBT), a method of delivering government benefits to recipients. Louisiana recipients use the Louisiana Purchase card, which lets them access benefits at point-of-sale machines much like a credit card.

"We're going to look at clusters of stores within a certain area that a person could go to, their favorite store and why that may be inconsistent with a store even closer to them, like a large chain store, which would have cheaper prices," Pease said.

Such activity may signify that a benefit recipient is selling his or her benefit card for cash to a merchant at less than face value, instead of using it to buy food. The merchant then redeems the card for full value with the state.

Transactions that occurred before or after normal business hours may be another sign of illegal activity, which Louisiana's system can also track. Previous to the system, investigators worked from tips that certain stores were illegally trafficking EBTs.

Now investigators detect those stores themselves by looking at data displayed as clusters on maps, which are shown on a "digital dashboard" that can be accessed on a laptop or PC. When the software is programmed to look for something specific, it can flag areas where suspicious patterns are detected. Users also can feed data to the dashboard in an attempt to find trends that were previously undetected.

"We can do some reports that kind of let [evidence] float to the top by defining certain parameters," Pease said. "Or we can be more specific."

The browser-based system calculates data in seconds, said Sherwood Lemoine, an internal management consultant in the Louisiana DSS IT department. "We have some very sophisticated signatures of fraud, and that's based on some very complicated measures we built that enable you to look at the data."

Pease said his department created a measure that signifies when someone spends their entire monthly benefit amount in one transaction. "That's a fairly complicated thing to write, but with the system, as fast as you can talk, you can have a red light popping up on a PC that tells you you've got a problem," he said.

Jim McKay, Justice and Public Safety Editor  |  Justice and Public Safety Editor