An NBC Connecticut Troubleshooters investigation has uncovered Connecticut welfare recipients using debit cards to withdraw cash from tobacco shops, strip clubs and even gambling establishments.
Thirty-seven thousand low-income households in Connecticut have access to cash benefits.
Recipients include people needing temporary family assistance, state-administered general assistance and state supplements for aged/blind/disabled.
"There are a lot of needs that need to get met with that money. The big one being housing. So people aren't operating with a lot of extra money to do extra things with," said Jane McNichol, of the Legal Assistance Resource Center of Connecticut.
The Troubleshooters investigated thousands of ATM withdrawal points in which an Electronic Benefits Transfer Card (EBT) was used to access cash benefits. The data included information from the last three months of 2011.
But it's how that cash is being accessed with the EBT cards that got our attention. Most of the withdrawal points are at banks or convenience stores, but the Troubleshooters found cash accessed from ATMs at liquor stores, tobacco shops, gambling establishments and strip clubs.
The Department of Social Services (DSS) manages the EBT cards in Connecticut.
"Some people don't have bank accounts," said DSS spokesman David Dearborn. "Some people don't have banks in their neighborhoods. So a corner cigar store may be a place where there's an ATM that a client may go to to withdraw benefits."
According to DSS, the number of tobacco shops, liquor stores, gambling establishments and adult-entertainment locations make up less than 1 percent of all withdrawal points. The state also said there is no way to prove a recipient is spending his or her benefits at those locations.
"We have not heard that there is a lot of abuse going on in the cash benefits," McNichol said.
The Troubleshooters, however, found that the state does not keep records of how much money is withdrawn with the EBT cards.
"We don't generally track it on an ongoing basis," Dearborn said. "The reason is: there's no laws, regulations governing where the clients can withdraw the benefits."
The result: no one can readily find out how welfare benefits withdrawn at Mr. Happy's strip club in Waterbury were spent.
"If someone goes in and takes out $10, maybe they're going across the street to go to Subway, but if they're going to a liquor store or they're going to a tobacco shop and they're taking out, you know, $25, they're probably buying a carton of cigarettes," said JR Romano of Americans for Prosperity.
Romano said the state's record-keeping is a concern.
"The obligation that the state should have to protect the people that are paying the bill should be greater than what they're doing now," Romano said.
The state insists the sample numbers of withdrawal points are encouraging.
"It showed that the vast, vast majority of our clients are not using ATM machines at places that the public might see as 'dubious' locations," Dearborn said.
DSS also points to recent measures passed in February by Congress and the President that limit states from letting clients withdraw benefits from ATMs at strip clubs, liquor stores and casinos.
States have two years to implement changes or they risk losing federal reimbursement. DSS said it's on track to meet those demands faster.