The impacts of the off-line EBT demonstration on the Food Stamp Program. Vol. 1

233 Pages·1994·9 MB·English

by  Glickman, Gary L.

Historic, archived document

Do not assume content reflects current
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EEvleaclutraotnioicnBoef ntheefitsOTffr-aLninsefer
Demonstration
United States
Department of
Agriculture
_,_ The Impacts of the
Nub'_on
_" OfNine EBT Demonstration
_.o, the Food Stamp Program
Evaluation
Volume I- Impacts on
Administrative Costs
The Impacts of the Off-line EBT Demonstration
on the Food Stamp Program
April 1994
Authors:
Gary L Glickman
Eugene J. Costa
Margaret W. Melhem
W. Burleigh Seaver
Edith M. Smith
Julie E. Neafach
Submitted by: Submitted to:
Phoenix Planning & Evaluation, Ltd. U.S. Department of Agriculture
3204 Tower Oaks Boulevard Food and Nutrition Service
Rockville, MD 20852 Office of Analysis and Evaluation
3101 Park Center Drive
Alexandria, VA 22302
Project Director: Gary I_. Glickman Project Officer: Margaret Andrews
This study was conducted under Contract Number 53-3198-0-013 with the Food and Nutrition Service, U.S.
Department of Agriculture, under the authority of the Food Stamp Act of 1977, as amended. Points of view or
opinions stated in this report do not necessarily represent the official position of the Food and Nutrition Service.
THE IMPACTS OF THE OFF-LINE EBT DEMONSTRATION
ON THE FOOD STAMP PROGRAM
The evaluation of the off-line electronic benefits transfer
demonstration is presented in three volumes and an Executive Summary.
The Executive Summary presents a concise review of the
evaluation and the major findings.
Volume I provides an analysis of the economic 'impact of off-
line EBT on food stamp operations. It also looks at the financial impact
of expanding the demonstration.
Volume II describes the costs and other impacts of the off-line
EBT system on retailers, recipients, and financial institutions. This
research includes both qualitative and quantitative impacts and provides
a comparative assessment of off-line EBT versus the paper coupon
system.
Volume III describes the off-line EBT system design,
development and implementation process; system operations; and,
lessons learned. The purpose of this volume is to provide guidance for
other EBT development efforts.
TABLE OF CONTENTS
Page
Chapter 1: INTRODUCTION .......................................... I
Overview of the Off-line Demonstration .............................. 1
EvaluationHighlights- VolumeI .................................. 2
Off-line System Design, Development and Implementation ................ 10
Organizationof VolumeI ....................................... 10
Chapter 2: SYSTEM FUNCTIONALITY ................................. 12
Introduction ................................................ 12
Overview of FSP Functions ..................................... 13
AuthorizingAccessto Benefits ................................... 17
Delivering Benefits ........................................... 21
Crediting Retailers and Financial Institutions .......................... 25
Managing Retailer Participation ................................... 29
Reconciling and Monitoring the System .............................. 32
Comparison of Paper Coupon, Off-line EBT, and
On-lineEBTSystems ......................................... 39
Chapter 3: IMPACT OF THE OFF-LINE EBT SYSTEM ON
ADMINISTRATIVE COSTS ................................. 40
Introduction ................................................ 40
Summary of the Impact of the Off-line EBT
Demonstration on Administrative Costs ............................. 48
The Componentsof Cost ....................................... 53
Off-line EBT Operational Costs by Function .......................... 64
Design, Develop, and Implement the Off-llne
EBTDemonstration ........................................... 83
TABLE OF CONTENTS
(continued)
page
Chapter 4: IMPACT OF THE OFF-LINE EBT SYSTEM ON BENEFIT
LOSSAND DIVERSION.................................... 93
Introduction ................................................ 93
Benefits Authorized for the Wrong People or in
the WrongAmount ........................................... 97
Redemption Credits (Credits for Redeeming Food
Stamp Benefits) to the Wrong People or in the
WrongAmount ............................................. 103
Benefits Lost During Production and Handling ....................... 112
Benefits Lost or Stolen from Recipients ............................ 116
Recipient Use of Benefits in an Unintended Manner .................... 122
Conclusions ............................................... 137
Chapter 5: THE FEASIBILITY OF CONTINUED OR EXPANDED EBT
OPERATIONS .......................................... 145
Is Off-line Technology a Technically Viable Alternative? ................ 146
Can Other Benefit Programs be Added to the System? .................. 149
Can Off-line EBT be Economically Feasible? ........................ 153
How Does Off-line EBT Fit Within the Construct
of the Food Stamp Program EBT Regulations? ....................... 167
What are the Advantages and Disadvantages of Off-line
EBT Comparedto On-line EBT? ................................. 167
Can Off-line Technology Co-Exist With On-line Technology? ............. 171
Is There a Role for Smart Cards in the Future of
the Food StampProgram? ..................................... 172
TABLE OF CONTENTS
(continued)
Page
APPENDICES
Appendix A Current EBT Projects and Initiatives ......................... A-1
Appendix B Comparison of Montgomery County Paper
Coupon, Montgomery County Off-line EBT
and On-line EBT Systems by FSP Function ..................... B-1
Appendix C Retailer Compliance Enforcement ........................... C-1
Appendix D Supplemental Exhibits to the Administrative
CostAnalysis ......................................... D-1
Appendix E Discussion of the Application of Various
Provisions of the EBT Food Stamp Regulations
tothe Off-lineSystem ................................... E-1
Appendix F Computation of the Card Amortization Period ................... F-1
Appendix G Supplemental Exhibits to the Analysis of
EconomicFeasibility ..................................... G-1
Appendix H List of Abbreviations..................................... H-1
LIST OF EXHIBITS
Page
Exhibit 1-1 Impact of the Off-line System on
Administrative Costs .................................... 5
Exhibit 1-2 Impact of the Off-line System on
Benefit Loss and Diversion ................................ 7
Exhibit 1-3 Evaluation of Off-linc EBT -
Economic Feasibility .................................... 9
Exhibit 1-4 Costs to Design, Develop and Implement
the Off-lineEBT System ................................ 10
Exhibit 3-1 Summary of Administrative Costs per Case
Month of Alternate Food Stamp Delivery Systems ............... 49
Exhibit 3-2 EBT Operating Costs per Case Month Cost
Comparisonby Function ................................. 51
Exhibit 3-3 Total Operational Cost per Case Month
bySource........................................... 52
Exhibit 3-4 EBT Demonstration Contractor Operational Costs ................ 53
Exhibit 3-5 Calculation of Card Amortization Period ...................... 58
Exhibit 3-6 Sensitivity of Cost per Case Month to the
Card AmortizationPeriod ................................ 59
Exhibit 3-7 Montgomery County Off-line EBT
OperationalCosts...................................... 60
Exhibit 3-8 State of Ohio EBT Operational Costs ........................ 61
Exhibit 3-9 FNS Regional Office Operational Costs ....................... 62
Exhibit 3-10 Summary of Operational Costs by Component .................. 64
Exhibit 3-11 CostAllocationby Function .............................. 66
Exhibit 3-12 AuthorizingAccess to Benefits ............................ 69
Exhibit3-13 DeliveringBenefits .................................... 72
LIST OF EXItIBITS
(Continued)
Page
Exhibit 3-14 EBT Terminal Costs and Density ........................... 75
Exhibit 3-15 Crediting Retailers and Financial Institutions ................... 77
Exhibit 3-16 Reconciling and Monitoring System ......................... 79
Exhibit 3-17 Managing Retailer Participation ............................ 82
Exhibit 3-18 Summary of the Costs to Design, Develop
and Implement the Off-line EBT System ....... ............... 84
Exhibit 3-19 Costto Design the Off-line EBT System ...................... 86
Exhibit 3-20 Cost to Develop the Off-line EBT System ..................... 88
Exhibit 3-21 Cost to Implement the Off-line EBT System ................... 90
Exhibit 4-1 Summary of Food Stamp Coupon and
EBT Vulnerabilities Resulting in
Benefits Authorized for the Wrong
Peopleor in the WrongAmount ........................... 98
Exhibit 4-2 Summary of Food Stamp Coupon and
EBT Vulnerabilities Resulting in
Redemption Credits to the Wrong
Peopleor in the WrongAmount .......................... 105
Exhibit 4-3 Summary of Food Stamp Coupon and EBT
Vulnerabilities Resulting in Benefits
Lost During Production and Handling ....................... 113
Exhibit 4-4 Summary of Food Stamp Coupon and EBT
Vulnerabilities Resulting in Benefits
Lost or Stolen from Recipients............................ 118
Exhibit 4-5 Lost and Stolen Benefits ................................ 119
Exhibit 4-6 OverchargesandRefunds ............................... 120
LIST OF EXHIBITS
(Continued)
Page
Exhibit 4-7 Summary of Food Stamp Coupon and EBT
Vulnerabilities Resulting in Recipient
Use or Benefits in an Unintended Manner .................... 124
Exhibit 4-8 Retailer Perceptions of Fraud in the
Food Stamp System - Ease of Buying
Non-eligibleItems..................................... 126
Exhibit 4-9 Recipient Perceptions Regarding
Unintended Use of Food Stamp Benefits -
BuyingIneligibleItems ................... '.............. 127
Exhibit 4-10 Retailer Perceptions of Fraud in the
Food Stamp System - Ease of Trading
Food StampBenefitsfor Cash............................ 128
Exhibit 4-11 Recipient Perceptions Regarding
Unintended Use of Food Stamp Benefits -
Trading Benefitsfor Cash ............................... 129
Exhibit 4-12 Cash Change by Store Type and Payment Mode ................ 131
Exhibit 4-13 Summary of Benefit Loss and Diversion Rates ................. 139
Exhibit 4-14 Summaryof Program Loss Rates .......................... 140
Exhibit 4-15 Summary of Participant Loss Rates ........................ 143
Exhibit 4-16 Summary of Component Measures of Overall
Benefit Lossand Diversion .............................. 144
Exhibit 5-1 Sensitivity of Card Amortization Period to
Loss/Stolen Rate ..................................... 155
Exhibit 5-2 Administrative Costs - Cost by Case Month by Month ........... 157
Exhibit 5-3 Comparison of the Cost of Operations for the
Demonstration Site and Prospective Scenarios ................. 159