Food Stamp Program: Implementation of Electronic Benefit Transfer
Systems (16-JAN-02, GAO-02-332).				 
                                                                 
The Department of Agriculture provided $15 billion in food stamp 
benefits to 17 million recipients in 2000. Until the mid-1990s,  
most recipients received paper coupons that they could use to buy
food; today, 80 percent of all benefits are provided		 
electronically. Recipients use cards, much like debit cards, to  
pay for their groceries at the checkout counter, and the costs	 
are deducted from the recipients' monthly allocation. GAO found  
that 42 of the 53 jurisdictions it studied will likely meet the  
October 1, 2002, deadline for implementing a statewide electronic
benefit transfer (EBT) system. Thirty-nine states and the	 
District of Columbia had already implemented a statewide EBT	 
system by October 2001, and six other states had signed EBT	 
contracts and were on track to meet the October 2002 deadline for
statewide implementation. GAO did not identify any technical	 
barriers to statewide implementation of EBT systems that are	 
interoperable and portable.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-332 					        
    ACCNO:   A02660						        
  TITLE:     Food Stamp Program: Implementation of Electronic Benefit 
Transfer Systems						 
     DATE:   01/16/2002 
  SUBJECT:   Electronic benefits transfers			 
	     Food relief programs				 
	     Performance measures				 
	     Program evaluation 				 
	     Food Stamp Program 				 
	     USDA Electronic Benefit Transfer System		 

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GAO-02-332
     
United States General Accounting Office

GAO Report to the Ranking Minority Member, Committee on Agriculture,
Nutrition, and Forestry, U.S. Senate

January 2002

FOOD STAMP PROGRAM

Implementation of Electronic Benefit Transfer Systems

GAO-02-332

United States General Accounting Office Washington, DC 20548

January 16, 2002

The Honorable Richard G. Lugar

Ranking Minority Member

Committee on Agriculture, Nutrition, and Forestry U. S. Senate

Dear Mr. Lugar:

This report addresses your request for information on the progress made by
states in implementing electronic benefit transfer (EBT) systems for
delivering benefits in the Food Stamp Program. In fiscal year 2001, the U.S.
Department of Agriculture (USDA) provided about $15.5 billion in food stamp
benefits to a total of about 17.3 million recipients. Until the mid-1990s,
most recipients used benefits provided in the form of paper coupons to
purchase allowable food, but currently about 80 percent of all benefits are
provided electronically. Recipients receiving their benefits electronically
use cards, much like debit cards, to pay for their groceries at the checkout
counter, and the benefits used are deducted from the recipients' monthly
allocation.

You asked us to determine (1) the status of states' efforts to implement
statewide EBT systems and to make them interoperable and portable, (2) any
barriers impeding nationwide implementation of EBT systems, and (3) any
strategies that USDA's Food and Nutrition Service (FNS) or the states have
used to overcome barriers to EBT implementation. As agreed with your office,
we examined the actions taken by the FNS and the 53 jurisdictions-the 50
states, the District of Columbia, Guam, and the Virgin Islands-that are
required to implement EBT systems to deliver food stamp benefits. We
conducted our work from August 2001 through December 2001 in accordance with
generally accepted government auditing standards. On December 18, 2001, we
briefed your staff on the results of our work. This report formally conveys
the document used at that briefing.

In summary, we found that 46 of the 53 jurisdictions will likely meet the
October 1, 2002, deadline for having implemented a statewide EBT system.
Thirty-nine states plus the District of Columbia had achieved statewide EBT
system implementation by October 2001. Six other states had signed EBT
contracts and were on track to achieve statewide implementation by October
2002. It appears that 7 jurisdictions will likely not meet the

October 1, 2002, deadline for statewide EBT system implementation.
Overall, we did not identify any principal technical barriers impeding the
statewide implementation of EBT systems that are interoperable and
portable.

We are sending copies of this report to the Chairman, Senate Committee
on Agriculture, Nutrition, and Forestry, the Secretary of Agriculture, and
will make copies available to others upon request. If you or your staff have
any questions about this report, please contact me on (202) 512-7215 or
Ron Wood on (202) 512-2608. Dan Jacobsen and Jill Yost also made key
contributions to this report.

Sincerely yours,

Sigurd R. Nilsen
Director, Education, Workforce,

and Income Security Issues

Briefing Slides

FOOD  STAMP PROGRAM:  Implementation  of  Electronic Benefit  Transfer (EBT)
Systems

Briefing   for  Minority   Staff   of  Senate   Committee  on   Agriculture,
Nutrition, and Forestry

                                  Overview

*Objectives

* Scope and Methodology

* Summary of Results

*Background

* Status of States' Implementation of EBT

* Barriers to EBT Implementation

* Strategies to Bring All States into Compliance

                                 Objectives

*Describe  the status of states' efforts to  implement statewide EBT systems
and make them interoperable and portable;

* Identify  principal barriers  impeding  nationwide implementation  of EBT
systems; and

*Identify  strategies that  the Food and  Nutrition Service (FNS)  or states
have used to overcome barriers to EBT implementation.

                            Scope and Methodology

* Analyzed laws and regulations on EBT and pertinent documents from FNS
headquarters and regional offices and from selected states.

* Interviewed FNS officials responsible for EBT implementation, officials in
states that have not yet implemented statewide systems that are
interoperable and portable, and vendors for EBT systems.

* Our work was conducted from August 2001 through December 2001 in
accordance with generally accepted government auditing standards.

                             Summary of Results

* Forty-six  of  the 53  jurisdictions  have  met or  are  on  schedule for
implementing EBT statewide by October 2002.

* Most jurisdictions  will have  interoperable and  portable EBT systems  by
October 2002.

*There are no technical barriers impeding statewide implementation of EBT.

Background: Food Stamp Program (FSP)

* The primary source of nutrition assistance for low-income Americans--7.45
million households were provided about $15.5 billion in benefits during
fiscal year 2001.

* Administered by the U.S. Department of Agriculture's FNS in partnership
with the states.

* FNS funds the full cost of food stamp benefits and pays about half the
cost of state administration, develops policies and regulations, authorizes
retailer participation, and monitors retailer compliance.

* States handle day-to-day operation and management, including certifying
eligibility of participants, delivering the benefits, and monitoring
recipients' compliance.

Background: Role of EBT Systems in Food Stamp Benefit Delivery

* EBT now delivers about 80 percent of food stamp benefits.

* With EBT, recipients use a plastic card, much like debit cards, to pay for
their food at the checkout counter at an authorized retail store.

* Each recipient must enter a unique personal identification number into a
terminal and the benefits used are deducted from the household's allocation.

Background: Statutory EBT System Deadlines for the States

* The Personal Responsibility and Work Opportunity Reconciliation Act of
1996 (Public Law 104-193) requires each state to implement a statewide EBT
system for distributing food stamp benefits by October 1, 2002.

* The EBT Interoperability and Portability Act of 2000 (Public Law 106-171)
requires that states' EBT systems be interoperable (capable of processing
each other's cards) and food stamp benefits be portable (useable in any
state) by October 1, 2002.

* These requirements apply to 53 jurisdictions--the 50 states, the District
of Columbia, Guam, and the Virgin Islands.

Status of States' Implementation of EBT

[also, see map on p. 11]

Forty-six  of the  53 jurisdictions will  likely meet  the October 1,  2002,
deadline for having implemented a statewide EBT system:

*40 (39 states plus the District of Columbia) had achieved statewide EBT
system implementation by October 2001.

*6 other states--Indiana, Mississippi, Montana, Nebraska, Nevada, and
Virginia--had EBT contracts and were on track to achieve statewide
implementation by October 2002.

Status of States' Implementation of EBT

[also, see map on p. 11]

Seven jurisdictions  will likely not meet the October  1, 2002, deadline for
statewide EBT system implementation.

*West  Virginia and California have EBT contracts and  should comply by July
2003 and November 2004, respectively.

*Virgin Islands is  negotiating an EBT contract and may or may not implement
an EBT system by the deadline.

*Delaware,  Guam, Iowa, and Maine do not yet have  EBT contracts, but intend
to implement systems after the deadline.

*All  7 jurisdictions plan to  have interoperable and portable  systems upon
statewide implementation.

                                     10

Status of States' Implementation of EBT

[also, see map on p. 14]

Of the  46 jurisdictions expected to meet the October  1, 2002, deadline for
statewide EBT system implementation:

*36 (35 states plus the District of Columbia) had interoperable and portable
EBT systems by October 2001.

*6 states--Indiana, Mississippi, Montana, Nebraska, Nevada, and
Virginia-ï¿½will have interoperable and portable EBT systems when their
systems are implemented statewide.

*4 states--Illinois, Ohio, Texas, and Wyoming--are exempt by Public Law
106-171 from having to provide interoperable and portable systems by the
deadline.

                                     12

Status of States' Implementation of EBT

[also, see map on p. 14]

Exemptions from the interoperability and portability deadline:

*Illinois and Texas are exempt because their current EBT contracts were
entered into prior to October 16, 2000. Their exemptions continue until the
current contracts expire or are extended.

*Ohio and Wyoming are exempt because they use EBT smart cards which are not
currently compatible with the EBT systems used by all other jurisdictions.

                                     13

                       Barriers to EBT Implementation

Overall, we did not identify any technical barriers impeding the statewide
implementation of EBT systems.

*In fact, 46 jurisdictions have implemented EBT systems or are on track to
do so.

*Delaware, Guam, Iowa, and Maine have made the least progress toward
achieving EBT implementation. They distribute about 1.7 percent of food
stamp benefits nationally.

*These jurisdictions have delayed their implementation, in part, due to
concerns over the higher cost of EBT over the old paper coupon system of
food stamp benefit delivery.

                                     15

                       Barriers to EBT Implementation

*EBT saves the federal government time and money because the process of
printing, safeguarding, distributing, accounting for, and destroying the
coupons is eliminated.

*Some states have stated that EBT has increased their cost to administer the
food stamp program.

*Furthermore, an EBT system creates an electronic record of each food
transaction, making it easier to identify and document instances of food
stamp fraud or abuse.

Strategies to Bring All States into Compliance

FNS is working with the five jurisdictions that lack EBT system contracts to
assure that they:

* have established reasonable plans to achieve full EBT implementation and

* are making reasonable progress toward meeting their established EBT
development milestones.

In August 2000, FNS completed a study entitled "Electronic Benefits Transfer
Alternatives Analysis" that addressed the limited competitive environment in
the EBT market. FNS is considering various options for addressing the
problems noted in the study.

                                     17

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