November 26: Fairbanks Daily News-Miner on policing Permanent Fund dividend claims:

Posted: Monday, November 27, 2000

Alaska residency requirements and allowable absences have changed somewhat in the years since Alaska Permanent Fund earnings yielded the $386 dividends of 1983. Olympic team members and Peace Corps volunteers, for example, have joined missionaries as members of groups who might feel Alaskan at heart, but no longer qualify for a dividend if their activities take them out of state for extended periods.

Money dispensed through the Alaska Permanent Fund dividend program has increased seven fold, and now tops $1.15 billion. Dividend checks issued this year to 585,000 qualifying Alaskans approached $2,000 apiece.

''Yet, we judge the eligibility of most applications the same way we did 17 years ago,'' Deputy Commissioner of Revenue Larry Persily pointed out last month in a memo outlying the disturbing findings of a test check scrutinizing randomly selected dividend applications.

State policy has been to take the information provided on dividend applications at face value. No real verification check was conducted unless there was some obvious reason, say, the notation of an unsanctioned absence from Alaska exceeding the program's 180-day annual limit.

Concerned that this might be an inducement to fraud, the department recently spent roughly $24,000 double-checking the applications from 700 applicants who would have been otherwise routinely approved for dividends. Roughly 40 applications, or approximately 5 percent, were flagged by investigators on the basis of suspicious or unverifiable information. Those dividend applications were set aside for further review.

The test sample was heavily weighted with applications from longtime filers, a pool whose dividend eligibility has traditionally escaped even cursory review. Cases now under review include: An applicant whose home answering machine stated the family was in Minnesota for the winter; an applicant who was unreachable and whose verifiers provided out of state phone numbers; an applicant living out of state on an allowable absence, who was unable ''to think of anyone he still knew in Alaska,'' and whose verifiers lacked working numbers.

''Some of them will turn out to be fine, a person has moved and a phone number changed, something like that,'' Persily said this week. ''But my feeling is there's a strong possibility of fraud in at least a few of them.''

The findings persuade Persily that dividend program officials may need to adjust the criteria for deciding which applications merit additional scrutiny. He's recommending more random audits of longtime filers.

''Our approach is similar to how police departments confront the problem of people speeding,'' Persily noted in his Oct. 9 memo. ''They (police) know they can't catch everyone, but by catching some of the people some of the time they hope to make all of the people think about it all of the time.''

Random audits aren't sufficient to eliminate fraud, Persily concedes, but the prospect of scrutiny should remind applicants that false statements carry consequences.

Potential penalties include the loss of dividends for up to 5 years, civil fines of up to $5,000, repayment of past dividends and criminal prosecution. Charges of fraud can be applied not only to dividend applicants themselves but to verifiers proven to assist with bogus eligibility claims.

Alaska's dividend program represents the state's single most expensive activity. The annual payout made using the earnings of the state's $28 billion oil savings account results in more than a $1 billion changing hands on the basis of names signed on a form.

Given the stakes, the revenue department is shrewd to invest a bit of staff time to see that dividends go, as intended, into the pockets of qualifying Alaskans.

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