WIC: States Had a Variety of Reasons for Not Spending Program Funds
(Letter Report, 06/12/97, GAO/RCED-97-166).
Pursuant to a congressional request, GAO reviewed states' unspent
funding for the Special Supplemental Nutrition Program for Women,
Infants, and Children (WIC) in fiscal year (FY) 1995, focusing on: (1)
the reasons that states had unspent recoverable WIC funds; and (2)
whether unspent recoverable funds indicated that states had more WIC
funds available than necessary to meet their needs.
GAO noted that: (1) state officials identified a variety of reasons why
their states had unspent recoverable funds; (2) some of these reasons
were related to how WIC is structured; (3) for example, because the
federal grant is the only source of funds for WIC in most states, states
exercise caution to ensure that they do not spend more than their
federal grant; (4) in addition, because states use vouchers and checks
to distribute food benefits, it is difficult for them to determine the
program's food costs until the vouchers and checks have been redeemed
and processed; (5) some other reasons contributing to states' having
unspent recoverable funds relate to specific situations or circumstances
that limited program participation; (6) for example, in one state the
installation of a new computer system temporarily reduced the amount of
time clinic staff had to certify and serve new clients because they had
to instead spend time learning new software and operating procedures;
(7) having unspent recoverable funds does not necessarily indicate a
lack of need for program benefits; and (8) according to all eight WIC
directors who GAO contacted in states having FY 1995 unspent recoverable
funds, more eligible individuals could have been served by WIC had it
not been for reasons such as those identified above.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: RCED-97-166
TITLE: WIC: States Had a Variety of Reasons for Not Spending
Program Funds
DATE: 06/12/97
SUBJECT: Food relief programs
Women
Infants
Children
Unexpended budget balances
State-administered programs
Grants to states
Budget administration
IDENTIFIER: Special Supplemental Food Program for Women, Infants, and
Children
California
Florida
Illinois
Ohio
Mississippi
Texas
Montana
Wyoming
Georgia
New York
WIC
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Cover
================================================================ COVER
Report to the Chairman, Committee on the Budget, House of
Representatives
June 1997
WIC - STATES HAD A VARIETY OF
REASONS FOR NOT SPENDING PROGRAM
FUNDS
GAO/RCED-97-166
Unspent Recoverable Funds
(150269)
Abbreviations
=============================================================== ABBREV
FCS - Food and Consumer Service
WIC - Special Supplemental Nutrition Program for Women, Infants,
and Children
Letter
=============================================================== LETTER
B-276975
June 12, 1997
The Honorable John R. Kasich
Chairman, Committee on the Budget
House of Representatives
Dear Mr. Chairman:
The Special Supplemental Nutrition Program for Women, Infants, and
Children (WIC) is designed to improve the health of low-income,
pregnant, breast-feeding, and postpartum women; infants; and children
up to age 5 who are at nutritional risk. The program provides annual
cash grants to states for food, nutrition benefits, and
administrative expenses--about $3.7 billion in fiscal year 1997. The
Food and Consumer Service (FCS) of the U.S. Department of
Agriculture administers WIC.
In the past, the Congress had raised concerns about the amount of WIC
grant funds that some states did not spend by the end of the fiscal
year and returned to FCS for reallocation to states the following
fiscal year (known as unspent recoverable funds). These funds
totaled about $137.5 million of the about $3.5 billion WIC
appropriation in fiscal year 1995, the most recent year for which
data were available.
You requested that we identify the reasons that states had unspent
recoverable funds. In doing this, we also asked states whether
unspent recoverable funds indicated that they had more WIC funds
available than necessary to meet their needs. In performing our
work, we interviewed state WIC officials in 8 of the 47 states that
had unspent recoverable funds in fiscal year 1995 and 2 of the 3
states that had no unspent recoverable funds that year. The eight
states accounted for about 50 percent of the unspent recoverable
funds in fiscal year 1995.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
State officials identified a variety of reasons why their states had
unspent recoverable funds. Some of these reasons were related to how
WIC is structured. For example, because the federal grant is the
only source of funds for WIC in most states, states exercise caution
to ensure that they do not spend more than their federal grant. In
addition, because states use vouchers and checks to distribute food
benefits, it is difficult for them to determine the program's food
costs until the vouchers and checks have been redeemed and processed.
Some other reasons contributing to states' having unspent recoverable
funds relate to specific situations or circumstances that limited
program participation. For example, in one state the installation of
a new computer system temporarily reduced the amount of time clinic
staff had to certify and serve new clients because they had to
instead spend time learning new software and operating procedures.
Having unspent recoverable funds does not necessarily indicate a lack
of need for program benefits. According to all eight WIC directors
who we contacted in states having fiscal year 1995 unspent
recoverable funds, more eligible individuals could have been served
by WIC had it not been for reasons such as those identified above.
BACKGROUND
------------------------------------------------------------ Letter :2
Established in 1972, WIC provides federal grants to states for
supplemental foods, health care referrals, and nutrition education
for low-income, pregnant, breast-feeding, and postpartum women;
infants; and children up to age 5 who are at nutritional risk. To
qualify for the program, WIC applicants must show evidence of health
or nutritional risk that is medically verified by a health
professional. In addition, participants must have incomes at or
below 185 percent of the poverty level. WIC operates in the 50
states (as well as on 33 Indian reservations), the District of
Columbia, Guam, the U.S. Virgin Islands, American Samoa, and the
Commonwealth of Puerto Rico.
Federal WIC appropriations totaled $3.47 billion in fiscal year 1995
and $3.73 billion annually in fiscal years 1996 and 1997. The
program is primarily funded by federal appropriations, with some
states supplementing their federal grant with their own funds. In
fiscal years 1995 and 1996, average monthly WIC participation was
about 6.9 million and 7.2 million, respectively, and in fiscal year
1997, average monthly participation was 7.4 million participants
through February 1997.
Grants to states are divided into food grants and Nutrition Services
and Administration (NSA) grants. Food grants are allocated to states
through a formula that is based on the number of individuals in each
state who are eligible for WIC benefits because of their income. NSA
grants are allocated to states through a formula that is based on
factors such as the state's number of program participants and WIC
salary costs. Both food and NSA grants have a stability feature that
attempts to ensure that prior year funding levels are maintained.
Since 1995, food grants have represented about 74 percent of WIC
grant funds and NSA grants about 26 percent. Food grants cover the
costs of supplemental foods. NSA grants cover costs for program
administration, start-up, monitoring, auditing, the development of
and accountability for food delivery systems, nutrition education,
breast-feeding promotion and support, outreach, certification, and
developing and printing food vouchers or checks.
FCS provides preliminary grant estimates to states in October,
followed by official notification of grant amounts in January. A
state can increase its grant amount during the year by qualifying for
and requesting additional funds through FCS' reallocation process.
FCS reallocates unspent recoverable funds as well as current-year
funds that the states voluntarily return. In fiscal year 1995, FCS
reallocated funds four times: in January, April, July and August.
In fiscal year 1996, FCS reallocated funds five times: in January,
February, May, July and August. Priority for these funds in fiscal
years 1995 and 1996 was given to states that had not received funds
commensurate with their percentage of potentially eligible women,
infants, and children.
In fiscal year 1990, unspent recoverable funds totaled about $28.1
million.\1 The amount increased to about $137.5 million in fiscal
year 1995, with FCS estimating a decline to about $121.6 million in
fiscal year 1996. The unspent recoverable funds as a percentage of
the WIC appropriation for fiscal years 1990 through 1996 ranged from
about 1.3 to 4.3 percent. See table 1.
Table 1
Unspent Recoverable Funds, WIC
Appropriations, and Unspent Recoverable
Funds as a Percentage of Appropriations,
Fiscal Years 1990-96
Unspent WIC Unspent
recoverable appropriatio recoverable funds
funds ($ n as percentage of
Fiscal year millions) ($ billions) appropriation
---------------------- ------------ ------------ ------------------
1990 $28.07 $2.13 1.32
1991 73.38 2.35 3.12
1992 66.23 2.60 2.55
1993 97.26 2.86 3.40
1994 136.77 3.21 4.26
1995 137.48 3.47 3.96
1996 121.57 3.73 3.26
----------------------------------------------------------------------
Most WIC food benefits are provided to participants through vouchers
or checks. These vouchers or checks allow participants to purchase a
monthly food package designed to supplement their diets. The foods
they can purchase are high in protein, calcium, iron, and vitamins A
and C--nutrients frequently lacking in the diets of WIC's target
population. Vouchers or checks can be issued monthly, bimonthly, or
every 3 months.
Mothers participating in WIC are encouraged to breast-feed their
infants if possible, but states still spend hundreds of millions of
dollars a year for infant formula for WIC participants. Federal law
requires that states enter into cost- containment contracts for the
purchase of infant formula used in WIC. These contracts typically
involve a rebate to a state by an infant formula manufacturer for
each can of the manufacturer's formula purchased through WIC. By
negotiating contracts for rebates with formula manufacturers, states
greatly reduce average per person food costs so that more people can
be served. In fiscal year 1995, savings from rebates totaled $1.1
billion.
--------------------
\1 Besides unspent recoverable funds that states must return to FCS
for reallocation to states the next fiscal year, WIC regulations
allow states to carry a certain percentage of funds into the next
fiscal year for their spending. These funds are called spend-forward
funds.
REASONS CONTRIBUTING TO UNSPENT
RECOVERABLE FUNDS
------------------------------------------------------------ Letter :3
State officials we contacted identified a variety of reasons that
contributed to states' having unspent recoverable funds. Some of
these reasons are associated with the overall structure of WIC, while
others are due to specific circumstances that affect program
operations within individual states.
REASONS ASSOCIATED WITH
PROGRAM STRUCTURE
---------------------------------------------------------- Letter :3.1
State officials identified five reasons for having unspent
recoverable funds that were related to WIC's basic structure. First,
WIC directors pointed out that the federal grant was the sole source
of WIC funding in their states, and as a result, they needed to be
cautious to avoid overspending their WIC grant. This careful
approach to managing their WIC grant can result in a considerable
amount of unspent recoverable funds because of the size of WIC
grants. For example, in fiscal year 1995, California had unspent
recoverable funds of almost $16 million, which represented about 3
percent of its federal grant. In contrast to California, New York
had no unspent recoverable funds in fiscal year 1995. New York was
one of 12 states that provided supplemental funds that year.
According to a WIC official in New York, having the supplemental
state funds was one of the reasons the state did not have unspent
recoverable funds in fiscal year 1995. Furthermore, the group of
states that supplemented their WIC grants in fiscal year 1995
returned a smaller percentage of their combined WIC grants as unspent
recoverable funds than did the states that did not supplement their
grants (1.8 percent and 4.6 percent, respectively).
Second, states had unspent recoverable funds because the use of
vouchers and checks to distribute benefits made it difficult for
states to determine program food costs until the vouchers and checks
were redeemed and processed, according to WIC directors. Two
features of the voucher and check distribution method can contribute
to states' having unspent recoverable funds. First, some portion of
the benefits issued in the form of vouchers and checks may not be
used, thereby reducing projected food costs. Participants may not
purchase all food items specified on the voucher or check or not
redeem the voucher or check at all. Second, because of the time it
takes to process vouchers and checks, states may find after the end
of the fiscal year that their actual food costs were lower than
projected. For example, most states do not know the cost of the
vouchers and checks issued for August and September benefits until
after the fiscal year ends because program regulations require states
to give participants 30 days to use a voucher or check and retailers
60 days after receipt of the voucher or check to submit it for
payment.
The difficulty in projecting food costs in a timely manner can be
exacerbated in states that issue participants 3 months of vouchers or
checks at a time. In such states, vouchers or checks for August
benefits could be provided as early as June but not be submitted for
payment by the retailer until the end of October. Some states, such
as Texas, now issue 3 months of vouchers to reduce crowded clinic
conditions and serve more participants with available resources.
Third, some state WIC officials reported that they had unspent
recoverable funds in part because they accepted reallocated WIC funds
too late in the fiscal year to allow them to spend all of the
additional funds. According to the California WIC director, a state
with a growing caseload could have an incentive to accept more funds
during the summer than could be spent because its next fiscal year's
grant is partially based on the current year's grant, including
reallocations. However, states can be penalized if they do not spend
a certain percentage of their total food grant, including reallocated
funds. In fiscal years 1995 and 1996, this percentage, known as a
performance standard, was 96 percent, and in fiscal year 1997, it is
97 percent.
Fourth, some state WIC directors said that they had unspent
recoverable funds in part because the level of NSA funds they
received was, in their view, insufficient to support the WIC program
infrastructure needed to distribute the food grants they receive.
These infrastructure needs included new clinics, extended clinic
hours to serve working women, updated information processing systems,
and additional staff. The Illinois WIC director, for example,
reported that to meet its existing caseload, the state needs
additional clinic space that cannot be met with its current NSA
grant. To compensate for this shortage of space, Illinois now issues
3 months of vouchers at one time to reduce crowded clinic conditions.
Fifth, several WIC directors pointed out that higher-than-expected
increases in rebates on infant formula when new contracts were
negotiated contributed to states' having unspent recoverable funds.
For example, the Texas WIC director reported that one of the reasons
the state had unspent recoverable funds in fiscal year 1996 was an
increase of $19 million in rebates, from $104 million in fiscal year
1995 to $123 million in fiscal year 1996, after a new contract went
into effect. Program regulations allow states to carry forward into
the next fiscal year some of the additional funds that result from
new rebate contracts. However, the amount of additional rebate funds
Texas experienced as a result of its new contract was more than the
amount that is allowed to be carried forward. At the end of the
fiscal year, any additional rebate funds that are not spent or
allowed to be carried forward are returned to FCS as unspent
recoverable funds for reallocation in the next fiscal year.
REASONS RELATED TO SPECIFIC
STATE SITUATIONS
---------------------------------------------------------- Letter :3.2
In addition to the reasons related to the structure of WIC, some
state officials reported specific situations that contributed to
their state's having unspent recoverable funds. Several examples of
state-specific situations follow.
In Texas, installation of a new computer system contributed to the
state's having unspent recoverable funds of about $6.8 million in
fiscal year 1996. The state WIC director reported that there were
eligible individuals who were not served in part because of problems
experienced in implementing the new computer system, which is used to
certify WIC eligibility and issue WIC food vouchers. According to
the WIC director, eligible individuals were not served because it
took time for clinic managers and staff to learn new system software
and operating procedures, thereby reducing the time available for
providing services to new clients.
In Florida, a hiring freeze contributed to the state's having unspent
recoverable funds of $7.7 million in fiscal year 1995. According to
the state WIC director, although WIC funds were available to increase
the number of WIC staff at the state and local agency level, state
programs were under a hiring freeze that affected all programs,
including WIC. The hiring freeze hindered the state's ability to
hire the staff needed to serve the program's expanding caseload.
In Mississippi, changes in the health care delivery system for
Medicaid patients contributed to that state's having unspent
recoverable funds of $8 million in fiscal year 1995. The state WIC
director said that many clients "dropped through the cracks" because
the state shifted health care for Medicaid patients from public
health centers, where WIC staff certified eligibility and provided
benefits, to private health maintenance organizations that did not
provide WIC services. Under the new system, potential WIC
participants have to go to an additional location to obtain WIC
benefits. This change made it more difficult to obtain WIC benefits,
thereby reducing program participation.
UNSPENT RECOVERABLE FUNDS DO
NOT NECESSARILY MEAN ALL
STATES' NEEDS MET
------------------------------------------------------------ Letter :4
Although states had unspent recoverable funds, they reported that
they had eligible individuals who were not served. According to all
eight WIC directors that we contacted in states' having fiscal year
1995 unspent recoverable funds, more eligible individuals could have
been served by WIC had it not been for the reasons related to the
program's structure and/or state-specific situations. The Ohio WIC
director, for example, reported that although the state had unspent
recoverable funds in fiscal years 1995 and 1996, more eligible
individuals could have been served if additional NSA funds had been
available to hire more staff. The director pointed out that Ohio's
WIC reaches about 72 percent of WIC-eligible individuals, and he
believed that the state could serve 78 percent of eligible
individuals.
AGENCY COMMENTS
------------------------------------------------------------ Letter :5
We provided copies of a draft of this report to the U.S. Department
of Agriculture's Food and Consumer Service for its review and
comment. We met with Food and Consumer Service officials, including
the Director, Grants Management Division, and the Acting Director,
Supplemental Food Programs Division. They agreed with the report's
findings and provided technical corrections, which we incorporated
into the report.
SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :6
We judgmentally selected 10 states to contact regarding their reasons
for having or not having unspent recoverable funds. Using FCS
program data for fiscal year 1995, the most recent available at the
time we selected the states, we identified the six states
(California, Florida, Illinois, Ohio, Mississippi, and Texas) with
the greatest amount of unspent recoverable funds, the two states with
the highest percentage of unspent recoverable funds in relation to
their WIC grant (Montana and Wyoming), and two states that had no
unspent recoverable funds (Georgia and New York). We contacted each
state's WIC director (or representative) by telephone to discuss the
reasons that the state had or did not have unspent recoverable funds.
Because we judgmentally selected the states, the results we obtained
cannot be used to make statements about the universe of all states
participating in WIC. As agreed, we excluded Indian tribal
organizations, the District of Columbia, and the territories from our
potential sample. We also asked states whether unspent recoverable
funds indicated that their state had more WIC funds available than
necessary to meet the state's needs.
In addition to talking with state WIC officials, we reviewed WIC
regulations and FCS financial documents, and discussed program
operations with staff at FCS headquarters and the six regional
offices that monitor the 10 states we contacted. Furthermore, we
discussed WIC operations with the Executive Director, National
Association of WIC Directors; and the Executive Director and staff
from the Center for Budget and Policy Priorities, an organization
that has conducted a number of studies on WIC.
We conducted our review from December 1996 through May 1997 in
accordance with generally accepted government auditing standards. We
did not independently verify the financial information contained in
the FCS database.
---------------------------------------------------------- Letter :6.1
We are sending copies of this report to the appropriate congressional
committees and the Secretary of Agriculture. We will also make
copies available to others on request.
Please contact me at (202) 512-5138 if you or your staff have any
questions about this report. Major contributors to this report are
listed in appendix II.
Sincerely yours,
Robert A. Robinson
Director, Food and
Agriculture Issues
STATES' WIC GRANTS AND UNSPENT
RECOVERABLE FUNDS, FISCAL YEARS
1995 AND 1996
=========================================================== Appendix I
Unspent Unspent
recoverable recoverable
State WIC grant funds WIC grant funds\a
----------------- ---------------- ---------------- ---------------- ----------------
Alabama $64,611,410 $2,918,859 $61,217,277 $577,765
Alaska 14,950,896 1,180,022 16,005,387 500,772
Arizona 51,575,185 2,559,178 58,927,576 3,320,350
Arkansas 40,736,964 761,538 42,362,221 0
California 528,264,582 15,950,928 631,052,167 36,651,129
Colorado 36,958,426 1,192,418 38,360,902 2,545,461
Connecticut 38,720,671 1,778,925 36,586,494 2,282,418
Delaware 7,926,995 80,672 8,244,816 119,344
Florida 163,876,394 7,735,081 176,189,537 672,456
Georgia 107,253,724 0 109,730,495 2,603,317
Hawaii 22,089,495 3,079,333 22,652,211 33,586
Idaho 19,009,593 2,704,452 17,736,340 2,106,815
Illinois 134,576,605 7,722,076 145,988,966 783,517
Indiana 62,746,560 1,788,687 66,369,206 278,630
Iowa 31,202,554 1,304,187 33,024,358 1,906
Kansas 28,797,513 831,671 28,194,852 1,368,262
Kentucky 58,848,075 1,525,130 60,376,983 1,887,377
Louisiana 73,526,079 4,524,832 73,035,770 0
Maine 13,610,310 834,941 13,987,474 1,078,613
Maryland 44,861,177 1,348,600 48,997,345 1,901,410
Massachusetts 52,660,857 1,605,171 55,424,377 0
Michigan 106,563,052 2,538,542 112,191,242 3,463,741
Minnesota 43,027,616 0 45,264,013 0
Mississippi 57,764,023 8,000,314 55,850,694 7,342,817
Missouri 64,158,981 3,683,036 67,251,953 3,377,648
Montana 12,106,893 1,885,585 12,590,028 1,442,734
Nebraska 17,782,146 400,183 18,659,852 0
Nevada 15,723,968 1,640,476 17,467,771 515,513
New Hampshire 9,691,047 323,896 9,465,600 0
New Jersey 70,886,124 371,253 74,029,481 3,879,861
New Mexico 25,468,382 52,476 27,276,366 0
New York 237,732,790 0 253,009,178 0
North Carolina 86,156,248 3,350,351 89,939,421 2,501,167
North Dakota 8,930,948 347,061 8,767,349 25,949
Ohio 121,153,627 4,706,154 124,621,932 8,104,571
Oklahoma 41,082,326 759,306 42,418,976 0
Oregon 39,378,115 1,357,113 43,775,330 1,527,110
Pennsylvania 128,033,346 1,139,154 134,322,962 4,457,144
Rhode Island 11,837,294 509,801 11,777,659 91,985
South Carolina 58,179,048 4,031,474 59,951,078 1,617,017
South Dakota 11,545,103 1,440,989 10,968,497 119,806
Tennessee 71,592,650 2,048,077 77,232,944 211,417
Texas 290,772,155 21,238,422 290,896,733 6,787,112
Utah 29,034,990 3,230,678 30,017,807 592,300
Vermont 8,837,753 275,149 8,969,678 275,705
Virginia 66,135,980 551,490 70,872,396 3,502,451
Washington 60,412,019 1,200,000 77,160,239 6,767,714
West Virginia 28,733,148 3,287,465 29,367,162 731,539
Wisconsin 55,275,738 2,048,790 55,295,823 0
Wyoming 7,214,584 1,563,897 6,301,585 590,777
American Samoa \b \b 4,345,329 1,577,791
District of 9,183,395 0 9,793,974 415,282
Columbia
Guam 5,163,965 563,790 5,199,580 792,431
Puerto Rico 123,933,180 801,211 132,779,345 0
U.S. Virgin 5,866,193 3,896 6,025,014 456,702
Islands
Indian Tribal 40,162,705 2,702,015 45,585,584 1,693,516
Organizations
=========================================================================================
Total $3,566,323,597 $137,478,745 $3,809,562,000 $121,574,928
-----------------------------------------------------------------------------------------
\a Preliminary, subject to final reconciliation.
\b Did not participate in fiscal year 1995.
Source: U.S. Department of Agriculture's Food and Consumer Service.
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix II
Thomas Slomba, Assistant Director
Rosellen McCarthy, Evaluator-in-Charge
Natalie Herzog
Carol Herrnstadt Shulman
*** End of document. ***