Welfare Fraud

Welfare fraud refers to wrongfully obtaining or using public assistance or benefits offered through government programs that are meant to assist low-income, disabled, or elderly individuals. Many states impose harsh sanctions for welfare (or public assistance) fraud, which can include criminal penalties, repayment of funds, and suspension or disqualification of benefits.

What Is Welfare Fraud?

The federal government, as well as state and local governments, provide assistance in the form of public funds to help individuals afford basic living expenses. These programs—often referred to as welfare, public assistance, or public benefit programs—provide assistance to individuals who show need based on income, age, disability, or another status. Public assistance programs generally provide money, benefits, or support in obtaining food, clothing, housing, childcare, and health care.

The following are examples of federal government benefits programs.

• Supplemental Nutrition Assistance Program (SNAP)
• Temporary Assistance for Needy Families (TANF)
• Low Income Home Energy Assistance Program (LIHEAP)
• Children's Health Insurance Program (CHIP)

States administer these federal programs and may offer their own public assistance programs as well. To ensure public funds are used for their intended purpose, a person must meet strict eligibility requirements. The states and the federal government impose criminal and other penalties on those who abuse the system. Abuse of the system constitutes welfare fraud.

What Counts as Welfare Fraud?

A person who lies about their need or eligibility for welfare benefits—whether through a falsity or an omission—commits welfare fraud.

Welfare or public assistance fraud can take many forms, including recipient fraud, billing fraud, provider fraud, and other types of fraud. This article will only address recipient fraud. (Billing and provider fraud refer to an entity overcharging or providing false billing information when seeking public funds to cover their services.)

Recipient Fraud

Welfare fraud can result in state or federal criminal charges. Typically, recipient welfare fraud occurs when an individual knowingly or intentionally:

• provides false or misleading information or omits information regarding eligibility for public assistance (lies on an application)
• fails to notify the agency of any significant changes in their income or household that might affect their eligibility or eligibility level, or
• misuses public assistance funds or benefits.

False information regarding eligibility. To qualify for public assistance, a person typically needs to fill out an application and provide information on their income, family size and composition, and sometimes citizen or disability status. A person who intentionally provides false information or omits information regarding eligibility requirements commits welfare fraud (and likely perjury). Examples include underreporting income or assets, not reporting a prior criminal record, or not reporting that another parent or caregiver resides in the family.

Failure to notify of material changes. Along with initial eligibility, a public assistance recipient must notify the government program of any material changes in their financial or household circumstances that might impact eligibility or eligibility levels. Examples of material changes that must be reported include changes in earned income or household size.

Misuse of public assistance. The federal government and many state governments place restrictions on the use of public assistance. For instance, many public assistance benefits that act like cash are now distributed through electronic benefit transfer (EBT) cards. Federal law prohibits the use of EBT cards in liquor stores, casinos or gaming establishments, and adult entertainment venues. States have also created restrictions on EBT card use; some prohibit using EBT cards to buy tobacco, lottery tickets, guns, bail bonds, and tattoos. Other public benefits have restrictions on use as well.

What Are the Penalties for Welfare Fraud?

State and federal penalties for welfare fraud vary but often include the possibility of incarceration, repayment of benefits, and suspension or disqualification from future benefits.

Criminal Penalties

All states and the federal government make welfare fraud a crime. Some states make welfare fraud a separate offense, while in other states, a person could face charges for theft, perjury, or forgery.

Criminal penalties vary and can range from a misdemeanor offense to serious felony charges. Misdemeanor penalties vary by state but typically involve jail time of less than a year. If the crime is a felony, the law generally states the penalty in the criminal statute or provides an offense level, such as second-degree felony, that carries a set punishment. Felony offenses carry prison terms ranging from a year to life imprisonment.

Many states tie the penalty to the dollar value of the benefits involved. For instance, Utah's penalties range from a class B misdemeanor, if the fraud involved less than $500 in benefits, up to a second-degree felony, if the fraud involved $5,000 or more in benefits. (Utah Code § 76-8-1206 (2020).) Illinois law follows a similar tiered approach based on the dollar value of the benefits involved, but it also creates a second tier of penalties for subsequent offenses. So a first offense for welfare fraud involving less than $150 is a class A misdemeanor, but the penalty increases to a class 4 felony for a second offense involving the same amount. (305 Ill. Comp. Stat. § 5/8A-6 (2020).) If the crime involves lying on the application under oath, a person could face additional charges for perjury.

What Is an Administrative Disqualification Hearing?

In some situations, the government might take the case through an administrative proceeding, rather than criminal court. If an agency believes a person has committed an intentional program violation, the agency may initiate an administrative disqualification hearing against the accused individual. Administrative hearings have different procedures and outcomes than criminal cases and will not be discussed here. If you receive notice of an administrative disqualification hearing, read the papers carefully and consult with an attorney.

Restitution or Repayment

A judge may order a person convicted of welfare fraud to repay the government for the value of the benefits obtained by fraud. In a criminal case, this repayment order is referred to as restitution. Depending on the state, failure to make restitution payments can land a person back in jail or can result in a civil judgment that can be sent to collections.

Suspension or Disqualification From Benefits

A person found guilty of welfare fraud, either in federal or state court or in an administrative hearing, may be suspended or disqualified from receiving benefits for a set amount of time.

Can I Repay the Benefits to Avoid Criminal Charges?

Repayment of benefits does not change the fact that the original fraud occurred. While agreeing to repay the benefits might help in negotiating a plea bargain or settlement, it doesn't stop the prosecutor from filing criminal charges. Repayment cannot be used as defense to charges either.

Reporting and Investigating Fraud

To prevent abuse of the system, many states have established welfare fraud investigation units under their social services, children and families, or human services departments. These units review public assistance applications, take complaints of possible fraud, conduct audits, and investigate leads of fraudulent activity. In some cases, investigators may conduct unannounced home visits. Often these visits are a condition of benefits eligibility. Learn more in our article on Welfare Fraud and Home Visits.

Speak to a Lawyer

If you've been accused of welfare fraud, it's best to speak with an attorney. An attorney can help you evaluate your options and explain the consequences of signing any waivers or consent agreements. In the case of criminal charges, speak to a criminal defense attorney or request a public defender.