Louisiana Stamps out Food-Stamp Fraud

Updated: Case Study: Louisiana's Department of Social Services keeps an eye on food-stamp fraud with a combination of business intelligence and geographic information technology.

In Louisiana, more than 600,000 residents have been receiving food stamps each month, at a cost of $600 million annually to the federal government.

In the wake of hurricanes Katrina and Rita in 2005, that figure swelled by an additional 500,000 households, which received more than $368 million in benefits—bringing the total outlay closer to $1 billion. But although most food stamp recipients are in legitimate need, the state of Louisianas Department of Social Services estimates that approximately 4 percent of the funds—a total of $40 million—is fraudulently received or trafficked each year.

Looking to cut its losses, the state enlisted the help of Information Builders, which specializes in business intelligence solutions, and ESRI, which focuses on GIS (geographic information systems), to work together to create a solution dubbed TINA-GIS that would help the Louisiana DSS spot, and in effect eradicate, misuse of the Food Stamp Program.

"We purchased the best commercial products available and hired a great team of contractors," said Sherwood Lemoine, internal management consultant for the Louisiana Department of Social Services in Baton Rouge.

"Using the DSS project plan proved to be a very cost-effective new way of doing business; it was as simple as getting good contractors that had proven project management skills and who know how to communicate with the DSS project team and PMO [project management office] at [the] DSS."

The Food Stamp Program, which is administered by each state individually, is funded through the U.S. Department of Agricultures Food and Nutrition Service. The funds allow recipients to purchase staples—bread, milk, meat, vegetables, canned goods and other food—but may not be used for items such as cleaning supplies, luxury items, or alcohol and tobacco. In Louisiana, recipients are given Louisiana Purchase Cards, a debit card that allows recipients to access their monthly benefits at point-of-sale machines.

In an illegal activity called trafficking or discounting, customers sometimes sell their food stamp benefits to a store for cash, often receiving only half of the face value of the benefits. The retailer buying the food stamps, meanwhile, redeems them for the full value and pockets the difference.

In the past, investigators had few tools at their disposal—relying heavily on tips called in to their office that would identify potentially thieving retailers. So, Louisianas Fraud and Recovery Section began exploring technological solutions that would lower the odds of successful swindles.

To achieve its goals, the Louisiana DSS gathered an array of technological partners to help.

"The state of Louisiana purchased a software upgrade from Information Builders that included our WebFocus software and ESRIs products," said Michael Corcoran, vice president of corporate strategies at Information Builders, based in New York.

/zimages/6/28571.gifInformation Builders "Google-izes" BI with its WebFocus Intelligent Search. Click here to read more.

"For the services portion of the contract, Information Builders partnered with IBM in response to the states RFP," Corcoran said. "Our consulting staff was able to develop the system, and we turned to IBM because of their strategic relationship with the state and their ability to manage the overall project. This was a perfect example of several vendors working synergistically to deliver the best possible solution for the customer."

As the DSS confronted the fraud problem, and it became clear that the project demanded business intelligence expertise, Big Blue subcontracted the job of creating and implementing the TINA-GIS application to IBI. The DSS implemented IBIs WebFocus application, which combined data from multiple sources across the enterprise and allowed users to quickly write reports and access information.

In 2004, though, the DSS took a giant step in stopping food stamp scams by asking ESRI to work with IBI to add a geographic dimension to its analytical arsenal. The two companies only had worked together once prior to helping the state of Louisiana.

"We were aware of Information Builders and of where our technologies intersected," said Trammell. "We wanted to get our hands around a real live opportunity [to collaborate]."

ESRI and IBI both recognized the inherent value of geographic information being added to the system, said Corcoran.

"When we were talking to the state of Louisiana, we learned early that this is a classic business problem that is difficult to analyze and solve until you map it out," said Corcoran. "When you try to spot fraudulent transactions, you can look at dozens of reports, but you dont get to see trends until you plot it out with visual capabilities."

Initially, the two companies worked together to create a proof of concept to present to the DSS, said Steve Trammell, corporate alliance representative for ESRI, in Redlands, Calif. He said the two companies mapped the locations of the stores accepting food stamps and the locations of those receiving food stamps, examining trends in where the credit was being redeemed.

Next Page: Drilling down data.