Penny Wise and Pound Foolish: SSA budget cuts gave fraud a free ride

In 2009, the Orange County’s Social Services Agency (SSA) cut $2 million from its budget for fraud detection in order to compensate for overall funding shortfalls. The cuts resulted in a 34% reduction in fraud investigation staff through the elimination of 15 investigator positions. In a report released by the California State Auditor in November 2009 SSA was recognized for operating one of the most successful welfare fraud detection programs in the state, saving an estimated $1.82 for every dollar spent on finding fraud at the intake level in 2008.

The Orange County Grand Jury has released a report on the result of the decision to cut the welfare fraud investigation budget.

In the months following the layoffs, the number of fraud referrals declined by 33% and the amount of fraud found dropped by 30% resulting in an estimated $9.6 million in fraudulent payments during the last six months of 2009.

In January of 2009, a Welfare Fraud Investigator testified at a public hearing on the County’s financial crisis that Welfare Fraud Investigators prevent tens of millions of dollars in fraud each year, at a cost to the County of less than $6 million. Due to the cut based mentality of SSA administrators, these reductions happened despite the facts. The resulting decline in fraud detection has cost the taxpayers more than the cuts saved.

Findings of the Orange County Grand Jury include:

  • The Social Services Agency has performed no meaningful analyses to determine the cost effectiveness of its efforts to detect and deter fraud in the CalWORKS and food stamp programs.
  • No evidence has been found of regular, systematic fraud detection training of Social Services Agency employees after their initial training.
  • There is no reference to fraud prevention in the mission statement or vision of the Social Services Agency.
  • The staffing reduction and changes in the investigation process resulted in an estimated $9.6 million in fraudulent payments during the last six months of 2009.

Here is  the link to the complete Grand Jury Report: Fraud Made Easier.

  2 comments for “Penny Wise and Pound Foolish: SSA budget cuts gave fraud a free ride

  1. May 23, 2010 at 10:49 am


    A very good example of the Board of Supervisor’s attitude toward governing which is to “cut their nose off to spite their face.”

    No one said their job is an easy one – but making difficult decisions amongst competing interests is one task they are charged with. This Board of Supervisors seems much more willing to serve their political interests of cutting employees from government and to not concern themselves with the results of doing so.

    Public safety must be one of the primary missions for the Board of Supervisors. The Board of Supervisors has not shown much concern about the safety of the residents and citizens of Orange County and the reduction of investigative staff whose job it was to identify and eliminate fraud was a decision where the Board of Supervisors KNEW and WAS TOLD what the consequences would be if they did this and they blew it off faster that the Santa Ana winds could have done.

    With the new budget about to enter the hearings stage – one can hope that this report that highlights the real consequences of cutting public safety and the real impact upon the quality of life in this county in doing so will lead the Board of Supervisors towards making good policy decisions that protect everyone and not parochial ideological/political ones that only benefit themselves.

    Thanks for keeping this issue in the forefront.

  2. May 23, 2010 at 11:02 am

    This is just another example of how the cuts only approach to fixing the state and county budget problems simply doesn’t work. Republicans claim that people want cuts not increases in revenue to maintain funding for vital programs and services.

    Common sense budget soultions require a balanced approach. Unfortunately, common sense is the one thing most lacking among the Republicans in the state legislature and the Governor.

    With two former GOP Assemblymembers on the Board of Supervisors, there is little hope for change there.

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