Many people expect their taxpayer dollars will be used for things like roads, parks, and education. What people might not expect is that some taxpayer money set aside for public assistance is actually being withdrawn inside of bars, a strip club, and a tobacco store right here in Knoxville.
For the past six months, 10News Investigates looked into the dollars at stake, why this is happening, and what's being done about it.
Millions of dollars flow every month from the state to families in need through something called Families First. That's the Tennessee version of the federal Temporary Assistance for Need Families (TANF) program.
The program is supposed to help needy children or families get back on their feet, but it's separate from food stamps.
The benefits get loaded on an EBT card, similar to a debit card, but there is a set amount of money each month. Users can swipe the card for purchases or withdraw cash from an ATM. However, the Tennessee Department of Human Services admits it does not have a way to track where that cash is spent.
"Taxpayers have a right to know where their money's being spent," said Knoxville State Representative Ryan Haynes (R).
Today's federal TANF program would not exist without taxpayer dollars. It shares the same goals and the same scrutiny as many other welfare services.
"I don't think there's any doubt that that program is going to be wrought with fraud and abuse," Rep. Haynes said.
In Tennessee, recipients get an average of $165 per month. DHS records show it handed out $2,645,955.17 in the city of Knoxville from January to July 2012. That's 62,920 transactions.
Many people use their benefits at places like Wal-Mart, Kroger or Food City, but several others caught our eye.
We discovered a $42.00 transaction on June 2, 2012 at Th' Katch Show Club. Owner Wayne Northcutt says the business does not take credit, debit or EBT cards. It's a cash only business, and there is an ATM on site.
At another spot, the Carousel II Nightclub in Fort Sanders, someone redeemed $43.00 in TANF on January 15, 2012.
At Barley's Tap Room, we found one transaction on February 4, 2012 for $62.50. We reached out to the owner but did not hear back.
And, at Discount Tobacco and Grocery in East Knoxville, there were 11 separate transactions that add up to $105.91. The manager was not available to comment.
We asked the State Department of Human Services about these transactions. Its response:
"The nature of the transactions detailed may have been from an ATM, thereby it would be the expectation that even in those circumstances that the benefits from those withdrawals would be used to benefit families, particularly children, with basic needs like food, clothing, etc."
"If they're taking out cash, there's no need to beat around the bush. We know that these people, that a lot of this money is being used in a way that taxpayers would find inappropriate," Rep. Haynes said.
This same ATM issue comes up at convenience stores across East Tennessee. Take Weigel's convenience stores for example, where there is no surcharge to withdraw cash from its ATMs.
Recipients redeemed more than $390,000 in benefits at Weigel's stores between January and July 2012. $359,520.00 of those transactions, or 92 percent, end in zero and are a multiple of $20, suggesting these are ATM transactions.
It's important to understand, the businesses are not breaking the law by allowing EBT transactions at on-site ATMs.
It's important to understand the businesses are not breaking the law by allowing EBT transactions at on-site ATMs.
"Unintended consequences of the program are what needs to be looked into, and the state needs to be doin a better job of doing that," Rep. Haynes said.
Again, there are no controls on how or where TANF recipients spend their benefits. That's also the case across the country. In February of this year, Congress passed a law requiring states to prevent EBT transactions at casinos, liquor stores, and adult-entertainment venues, like strip clubs. The law also requires the federal government to enforce states' compliance.
The Tennessee Department of Human Services tells 10News it will follow those rules, but it did not explain how it plans to do that.
Rep. Haynes says he plans to bring up this issues at the state legislature when it goes back to work in January.