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. 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. 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. No individual may receive both AFDC and SSI benefits. 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. 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. 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. 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. 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. 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. 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. 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. 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. (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. 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. 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.) 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. 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. 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. 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. 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. 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) 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. Benefits received (thousands) (+/-1,000) (+/-2,300) (+/-$2,700) (+/-$4,700) (+/-15,500) (+/-23,000) (+/-$93,100) (+/-$44,600) (+/-5,000) (+/-$24,700) (+/-3,500) (+/-12,200) (+/-$4,100) (+/-$36,200) (+/-17,000) (+/-27,000) (+/-$100,000) (+/-$60,000) 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. Cases with an illegal alien payee 2,178 (+/-63) (+/-$54,536) (+/-57) (+/-$35,207) (+/-101) $1,466,601(+/-$74,392) 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. 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. 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). The first copy of each GAO report and testimony is free. Additional copies are $2 each. 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Summary: 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.